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Weekly wrap-up: Market updates, news and insights for the week ending 5th October
Publish date: 26th October, 2018
News: Nifty closes the week marginally above the 10,000 mark
Our perspective:
- Even as domestic cues stabilized during the week, the global cues continued to play havoc due to a combination of trade wars and the fears of a global slowdown.
- Banks and metal stocks continued to be under pressure as global growth concerns and weak Chinese demand raised some hard questions on the demand side.
Related reads:
What is dampening the Indian stock market?
Reasons why the Nifty is walking a tightrope
Everything you need to know about the longest US bull market
News: Rupee and bond yields show stability and strength during the week
Our perspective:
- The rupee traded through the week well below the 74/$ mark as a lower trade deficit and reduced demand from importers kept the rupee stable at around the 73.36/$ mark.
- The 10 year bond yields also settled below the 7.90% mark after the MPC minutes clearly hinted that further rate hikes may not happen this year and crude stayed below $80/bbl.
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: Bharti Airtel profits come under pressure; global investors give thumbs up
Our perspective:
- Bharti results faced some pressure on heightened price wars in the telecom sector even as the company managed to report net profits better than street expectations.
- A day prior to the results, Bharti had received commitments from global investors like Temasek and Softbank for investments into its Africa operations.
- Bharti is planning an IPO for its African operations to monetize its global assets to fund its India business. The anchor investors will provide a boost to the Africa franchise.
Related reads:
Why we have an Add call on Bharti Airtel
Five things to know about Reliance Jio’s impact on Indian telecom
4 things to know about telecom auctions
News: Essar promoters make a bizarre offer to exit from NCLT proceedings
Our perspective:
- The Ruia family, promoters of Essar Steel made an offer of Rs.54,389 crore to retain its stake in the Essar Steel business.
- Earlier, the NCLT had already approved the sale of Essar Steel to Arcelor Mittal, which had turned out to be the highest bidder in this case.
- The Committee of Creditors (COC), however, rejected the offer from the Ruia family on Friday as an attempt to recoup the company through the back door.
Related reads:
5 things to know about RBI’s push for Bankruptcy Code
5 key challenges faced by Indian banks
5 important changes to India’s bankruptcy laws
News: NBFCs buy back commercial paper (CP) to boost market sentiments
Our perspective:
- After IIFL Holdings and JM bought back their commercial paper to the tune of Rs.2,600 crore, Edelweiss was next in line buying back its CPs to the tune of Rs.1,000 crore.
- Cash rich NBFCs are now using this buyback of CPs to make a statement to their shareholders and to the markets about their healthy cash flow position.
Related reads:
Why we have a Sell on IIFL Holdings?
5 things to know about stock market risks
News: Indigo Airlines reports first quarterly loss since its listing
Our perspective:
- Indigo Airlines reported the first loss in the last 12 quarters since listing in the second quarter of the year. Indigo had listed on the bourses in November 2015.
- While Indigo’s position is nowhere as bad as that of Jet Airways, Indigo is also getting hit by a combination of price completion on one side and ATF prices on the other.
- Relatively, Indigo Airlines still has one of the healthiest spreads between the RASK and the CASK and continues to enjoy a market share of nearly 42% in the Indian market.
Related reads:
Why we have a Buy call on Interglobe Aviation (Indigo)
The curious case of the Indian aviation industry
7 things to know about Indian aviation industry
News: RBI refuses any relaxation in its PCA framework
Our perspective:
- With many PCA banks continuing to get deposits, the government had tried to make a case to the RBI to relax the PCA framework to allow these banks to lend
- However, the RBI has refused to give any concessions to the PCA banks. Dr. Viral Acharya had already spoken about the need to respect the stringency of the PCA norms.
Related reads:
Are the troubles over for the banking sector?
5 ways PSU banks can fund their capital needs
5 things to know about RBI’s push for Bankruptcy Code
5 key challenges faced by Indian banks
News: Amarchand Mangaldas withdraws clean chit to Chanda Kochhar of ICICI Bank
Our perspective:
- This clean chit was given by the legal firm to Chanda Kochhar in 2016 when the allegations of conflict of interest had first surfaced in the public domain
- The contention of Amarchand Mangaldas was that considering the changed circumstances and the Srikrishna Commission, the clean chit was being withdrawn.
Related reads:
Why we have a Buy call on ICICI Bank
6 things to know about corporate debt borrowings
News: European Commission asks Italy to rework its budget along EU guidelines
Our perspective:
- In a very rare event, the EC asked Italy to rework its complete budget which had not included any of the austerity measures suggested by the EU guidelines
- Italy has been signalling its intent to walk out of the Euro, which could be disastrous considering that Italian bonds are worth $2.27 trillion, mainly held by their banks.
Related reads:
5 things to know about the crisis in Italy and its impact
The positive side of rupee depreciation
Contagion effect on world markets
Is India decoupling from the global market trend?
News: Tata Sons took a write-off of Rs.28,652 crore on its telecom investments
Our perspective:
- This write-off was the total investment that Tata Sons had put into Tata Tele over the last 18 years since its inception
- It may be recollected that last year Tata Sons had sold the Tata Tele business to Bharti Airtel with only the enterprise business transferred to Tata Communications
Related reads:
Why we have a Reduce call on TCS?
4 things to know about TCS results
4 things to know about the Tata Steel – Thyssen Krupp merger
News: RBI sees sharpest weekly fall in forex reserves in last 7 years
Our perspective:
- RBI forex reserves fell by $5.14 billion during the second week of October to a level of $394 billion, nearly $30 billion below the peak levels touched earlier this year
- While much of the reserves were spent on defending the rupee, the good news is that foreign remittances have gone ups sharply in the last one year
Related reads:
Why RBI’s surprising decision to not hike rates made sense?
To hike or not to hike – The RBI dilemma
How does the RBI defend the falling rupee
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