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  • Weekly wrap-up: Market updates, news and insights for the week ending 6th July

    Publish date: 6th July, 2018


    News: Trade war fears pick up as tariffs kick in on July 06th

    Investment perspective:

    • US Tariffs on nearly $35 billion worth of Chinese imports will kick in from the midnight of 6th July unless there is a rethink on the subject by Donald Trump.
    • China is expected to respond with retaliatory tariffs on US imports to the tune of $50 billion. The impact overall will exceed $100 billion and could weaken the Yuan.

    Related reads:


    News: Tata Motors and Titan give cautious guidance for coming quarters

    Investment perspective:

    • In case of Titan the cautious guidance was more with respect to the expected slowdown in jewellery sales, which has for long been the staple of Titan’s growth and stock performance.
    • Tata Motors was spooked after Ralph Speth of JLR warned of a likely impact of £1.20 billion on annual profits if BREXIT actually kicks off and JLR has to shift its production.

    Related reads:


    News: Reliance Industries guides for a likely Golden Decade in its 41st AGM

    Investment perspective:

    • Mr. Ambani has projected the consumer segment of the Reliance Group to contribute as much as refining and petrochemicals in the coming decade.
    • Big story in the AGM, apart from Jio’s growth to 21.5 crore subscribers, was the Fibernet foray to engage small businesses across 1100 cities on the broadband platform.

    Related reads:


    News: Government Minimum Support Prices (MSP) sharply above the previous levels

    Investment perspective:

    • Government confirms 150% of cost of production covered by MSP but analysts and economists expect the higher MSP to contribute to food inflation.
    • The sharply higher MSP will be demand accretive for companies that rely on rural consumption and the stock price impact was visible in FMCG companies and auto stocks.

    Related reads:


    News: Indian Rupee slips past the Rs.69/$ mark

    Investment perspective:

    • The rupee, despite efforts from the central bank to defend the rupee around 69, has seen pressure due to the ongoing trade war, rising bond yields and capital outflow worries.
    • Rs.70/$ remains a critical tipping point for portfolio managers. Weaker rupee makes imports costlier and also puts hedging pressure on importers and dollar borrowers.

    Related reads:


    News: Infosys valuation gap with TCS touches an all-time high

    Investment perspective:

    • After the correction on Thursday, Infosys quotes at 17.5X trailing earnings while TCS quotes at 27.9X trailing earnings, a historically record valuation gap
    • TCS has widened its valuation gap in the last few quarters due to its more efficient operational metrics and a greater thrust on digital side of the IT business.

    Related reads:


    News: Indian companies announce plans to raise Rs.75,000 crore via NCDs

    Investment perspective:

    • The list of companies looking to raise funds through the NCD route includes marquee names like Tata Steel, Reliance Industries, Idea Cellular, PNB Housing, Vedanta etc.
    • This is on top of the Rs.2,45,000 crores that was already raised through this route in the first 6 months of 2018, indicating frenetic activity in the debt markets.

    Related reads:


    News: Karnataka announces Rs.34,000 crore farm loan waiver; but with riders

    Investment perspective:

    • This loan waiver was part of the promise made by the JD(U) and the Congress party ahead of elections. Mr. Kumaraswamy heads the coalition government supported by Congress.
    • This cost is being made up by imposing higher taxes on non-essentials. Liquor, fuel and electricity in the state of Karnataka will become dearer to compensate for this giveaway.

    Related reads:


    News: Asia M&A space sees deals worth $734 billion in the first half of 2018.

    Investment perspective:

    • The biggest deal in Asia was the acquisition of Shire PLC by Takeda Pharma for $62 billion. The other big deal was Wal-Mart buying a controlling stake in Flipkart for $16 billion.
    • The deal pipeline is the first half has seen significant deals even outside of China, with two of the largest contributions coming from Japan and India.

    Related reads:


    News: Bloomberg Dollar Index (DXY) rally appears to be fizzling out

    Investment perspective:

    • The dollar has touched its lowest level in 3 weeks after a massive 6.5% rally since the month of April. The trade war outcome is still not too clear to traders.
    • However, dollar bulls are worried that even as the US equity markets may outperform, dollar may come under pressure if central banks reduce their dollar holdings.

    Related reads:


    News: Gujarat Gas acquires GAIL’s stake in Vadodara Gas

    Investment perspective:

    • The 50% stake of GAIL may be acquired at a consideration of around Rs.250 crore and will help Gujarat Gas to expand its footprint in the entire state of Gujarat
    • With a view to expanding its presence in the industrial state of Gujarat, Gujarat Gas will also be participating in the city gas auctions scheduled to take place in mid-July.

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