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Weekly wrap-up: Market updates, news and insights for the week ending 14th September
Publish date: 14th September, 2018
Nifty closes at 11,515; recovers most of its losses of the first two days of the week
Our perspective:
The sharp bounce on Wednesday and Friday was driven by a mix of short covering and hopes of a positive rupee revival package over the week end.
Nifty is still below the peaks it had touched recently. In fact, the Sensex had lost close to 1000 points on the back of heavy selling on Monday and Tuesday.
Related reads:
Major Milestones – Nifty from 1000 to 11,000
Major Milestones – Sensex from 100 to 38,000
Everything you need to know about the longest US bull market
News: Rupee bounces back sharply and Bond Yields also taper during the week
Our perspective:
After touching a low of Rs.72.915/$, the rupee bounced back by over Rs.1 to trade around Rs.71.825/$ on Friday on hopes of a rupee rescue package by the government.
With the rupee strengthening, the 10-year bond yields also softened from a high of 8.23% to 8.12% as fears of aggressive rate hikes to stem the rupee fall started receding.
Related reads:
4 questions you may have about Rupee Depreciation
Rupee at 70 – What should you do?
How does the Turkish currency crisis impact India?
News: Brokers request SEBI to delay the extension of derivative timings
Our perspective:
- SEBI had recently proposed extension of derivatives timings till 11.30 PM to ensure that India’s derivative volumes do not get exported to foreign exchanges.
- Domestic and foreign brokers have raised concerns over the logistical implications and also the fact that key India trading markets like Hong Kong are 2.5 hours ahead of India.
News: CPI inflation falls sharply for to 3.69% in August but IIP stays constant at 6.6%
Our perspective:
- Inflation at 3.69% for August was much lower than the street anticipated on the back of a sharp fall in food inflation. However, fuel inflation continues to remain buoyant.
- The strong IIP number was still driven by a robust performance by manufacturing. But markets are sceptical if these would matter in the light of a falling rupee.
Related reads:
Economy – Subdued inflation to provide comfort to RBI
Economy – IIP hints at gradual recovery
Economy update – Monetary Policy
News: Institutional investors are beginning to worry about the crisis at IL&FS
Our perspective:
- With a liquidity shortfall of $475 million, the recent downgrade by rating agencies into the “Junk” category becomes a hassle for the domestic investors.
- ILFS has total debt outstanding of close to $12.5 billion with most of its assets locked up in illiquid road and toll assets. LIC holding 25% stake in IL&FS is another systemic worry.
Related reads:
IL&FS downgrade create ripples among banks and fund houses
May Day in the Indian mid Cap story
News: Sugar stocks rally as government hikes procurement price of ethanol by 25%
Our perspective:
- With an annual output of 35.50 million tonnes, sugar industry is already facing a major glut. Encouraging ethanol blending will be a major boost for sugar companies.
- By permitting ethanol blending and extraction of ethanol directly from the sugar cane juice rather than from molasses, it is a big boost for sugar companies in India.
Related reads:
6 effects of higher oil prices on Indian economy
News: Global funds have been selling Indian bonds at the fastest pace in 4 months
Our perspective:
- The FPIs have sold close to $1 billion worth of bonds in the first two weeks of September on worries over rising yields and a falling rupee.
- The possibly of a rate hike in the US and weak rupee in India was already propelling a risk-off trade in bond markets and it only got accentuated in September.
Related reads:
How does the Turkish currency crisis impact India?
6 things to know about China currency devaluation
What can you learn by tracking bond price movements?
News: Iran has issued 2 tenders to purchase total 30,000 tonnes of rice from India
Our perspective:
- The purchase order is timed at a time when India has been looking to cancel the imports of oil from Iran in the light of the US sanctions
- It remains to be seen how India handles this delicate situation since Iran is a preferred trade partner and diplomatically India may not want to antagonize the US.
Related reads:
How do the US sanctions on Iran impact India?
How high crude prices and the Iran dilemma will impact India
3 reasons rising oil prices bother India
News: Yes Bank opts for a massive retail push in the next 2 years
Our perspective:
- With NPAs continuing to be a problem in the corporate book, Yes Bank plans to increase its retail book by 75% to Rs.56,000 crore in the next couple of years
- Yes Bank is timing its aggressive foray into retail with a thrust on its retail broking and mutual funds business to make the best of the synergies.
Related reads:
Why we have a Sell call on Yes Bank
Banks – Retail loan growth in top gear
5 reasons why bank loan data matters
News: Amitabh Chaudhry appointed the next CEO of Axis Bank
Our perspective:
- Amitabh, former CEO of HDFC Life, will take charge on January 01st 2019, after Shikha Sharma demits office.
- The primary challenge for Amitabh Chaudhry will be to rectify the infra lending book, which has been the cause of the sharp rise in bad assets of Axis Bank.
Related reads:
Why we have an Add call on Axis Bank
Insurance – Picking up gradually
Power sector bad loans – all you need to know
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