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Weekly wrap-up: Market updates, news and insights for the week ending 21st September
Publish date: 21st September, 2018
Nifty cracked on Friday after a strong start on financial company woes
Our perspective:
Yes Bank was the top loser in the Nifty giving away close to 30% in a single day after most brokerages downgraded the stock on management change concerns.
Housing finance companies were spooked by the RBI order to banks to be cautious about investing in bonds of HFCs due to their exposure to IL&FS.
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 showed some signs of recovery from the 73/$ levels
Our perspective:
In the midst of all the weakness in the Indian rupee, there was a sharp bounce supported by RBI buying. However, the undertone remained weak due to rising CAD.
Bond yields showed some signs of tapering but continued to stay above the 8% mark. A lot will also predicate on the INR from current levels.
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: Brent crude gets closer to $80/bbl during the week
Our perspective:
- The US sanctions on Iran have been instrumental in creating worries of a supply shortfall in the market post November when the sanctions take effect.
- Trump has been calling upon the OPEC to further hike output but that looks unlikely with most of the economies having their own internal OPEC commitments.
Related reads:
How high oil prices and Iran dilemma will impact India?
5 indicators to gauge the intensity of the current trade war
6 effects of rising crude oil prices on the Indian economy
News: Fed appears to be all set to hike rates by 25 basis points on 26th September
Our perspective:
- Federal Reserve looks all set to again hike the Fed rates by 25 basis points on the back of higher inflation, GDP growth and lower unemployment rate.
- The CME Fed tool is already indicating at a 95% probability of a rate hike in the September meet which will take the yields to the range with the upper end at 2.25%
Related reads:
5 reasons why US Fed policy affects you
RBI hikes borrowing rates by 0.25% - What you should know
To hike or not to hike is the RBI dilemma
News: China retaliates with $60 billion worth of tariffs on US imports
Our perspective:
- This is in response to the US decision to impose tariffs to the tune of $200 billion on Chinese imports in the second round
- The trade war is hitting both the economies quite hard with US export jobs suffering and the US trade deficit with China continuing to mount.
Related reads:
Indian markets – caught in the trade war crossfire
5 indicators to gauge the intensity of the current trade war
US – India trade tariffs: which sectors will be affected?
6 effects of higher oil prices on Indian economy
News: SEBI makes some key announcements pertaining to MFs and IPOs
Our perspective:
- With a view to fine tuning the mutual fund costs further, the SEBI has announced an across the board cut in the total expense ratios. This is negative for AMCs.
- On the IPO front, the SEBI has managed to reduce the time to listing from 6 days to 3 days which will make the entire IPO process more efficient.
Related reads:
Why foreign investments matter to India?
Direct Mutual Fund plans – Why you should take note of them
Three trends in the Indian IPO markets
News: Government announces merger of BOB, Dena Bank and Vijaya Bank
Our perspective:
- The contours of the merger will be out in the next few months but it is likely to give BOB access to the stronger balance sheet of Vijaya, while Vijaya gets the BOB network
- Dena Bank is a bank that is under the RBI’s Prompt Corrective Action (PCA) which has resulted in a freeze on their lending activities. This will come as a relief.
Related reads:
Are the troubles over for the Indian banking sector
What Q1 numbers say about the health of Indian banks?
5 ways PSU banks can fund their capital needs
News: Goldman Sachs downgrades India Equity rating to “Market Weight”
Our perspective:
- This downgrade is critical because it is the first time in the last 4 years that Goldman has downgraded Indian equities.
- Apart from valuation concerns in most sectors, Goldman has also cited factors like higher crude prices and weaker rupee for the downgrade.
Related reads:
Foreign buying does not mean rally anymore
Emerging markets have taken a beating – all you need to know
6 effects of higher oil prices on Indian economy
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