Weekly Capsule (May 04 – May 08) and Impact Analysis

weekly cap Weekly Capsule (May 04 – May 08) and Impact Analysis

News AnnouncementImpact Analysis
Reliance sells additional stake in Jio Platforms to global PE investorsWhile 1.15% stake was sold to Silver Lakes, another 2.3% was sold to Vista Equity Partners.
Both the deals valued Jio Platforms at around $65 billion, a 12% premium to the valuations given by Facebook deal.
RIL, Infosys and Hindustan Unilever accounted for 50% of Nifty bounceThe sharp bounce in Nifty from the lows of March 23rd was driven by just 3 stocks with most banks still tepid.
RIL has recovered most of its losses after a series of deals gave hints that RIL could monetize and become zero debt by 2021.
Franklin Templeton MF issues an apology to SEBI over its remarksThis was after Templeton global CEO, Jennifer Johnson, had remonstrated about SEBI’s rules on unlisted holdings.
SEBI had pointed out that there was a grandfathering clause and an extended time limit for such a shift.
April sees fall in equity fund flows and negative flows in credit risk fundsEquity flows were still positive but nearly 47% lower on a MOM basis; largely supported by robust SIPs.
Credit risk funds saw outflows of Rs.19,300 crore, most of the outflows coming after the Franklin Templeton fiasco.
Government raises the borrowing limit for the year to Rs.12 trillionThis is a sharp spike from the original budgetary target of Rs.7.8 trillion. Rs. 6 trillion will now be the target for H1.
This is a clear indication that revenues are likely to be tepid in the fiscal and fiscal deficit could be sharply higher.
Trump threatens end to trade deal but trade officials move aheadTrade representatives from the US and China are working overtime on ensuring that the deal does not break.
Earlier Trump had threatened China that he would call off the deal if China did not honour its $200 billion of US imports.
Moody’s warns India of a rating downgrade soonMoody’s had recently lowered the outlook for Indian implying that any upgrades were entirely ruled out for now.
With the huge impact on growth, as evident from the PMI, and the spiralling fiscal deficit, downgrade looks a possibility.
May issue of Sovereign Gold Bonds priced at Rs.4590/gramThis is slightly lower than the April tranche that was priced at Rs.4639/gram with rebate for digital investment.
The SGB Series 2 will open for subscription on May 11 and will close on May 15 and offer a good equity hedge.
India sees 7.57% growth in pharma exports in fiscal 2019-20For FY20, the pharma sector achieved record exports of $20.58 billion; slightly short of the $22 billion target.
Pharma exports are expected to get a further boost in FY21 as the US has substantially relaxed its FDI policy.
Bond yields are expected to see a sharp spike on higher borrowing targetsWith borrowing target raised by more than 50% this year, the rush for government borrowing could spike bond yields.
This is likely to largely neutralize the impact of the RBI rate cuts and push up the cost of borrowing for corporates.
Government raising huge monies from RBI via Ways and Means advancesThe centre’s WMA from RBI stood at Rs.1.66 trillion compared to just Rs.1.10 trillion in the previous week.
The WMA of state governments combined has also spiked from Rs.10.63 bn to Rs.38.23 bn in a span of just one week.
Export contraction in April 2020 could be worse than March numbersMinistry of Commerce had reported 25% contraction in exports for March and April could be sharper.
Apart from the lockdown in most sectors, April exports are also likely to be hit by labour and logistical reasons.
India eyes a major increase in share of the global plastic exportsCurrently India’s share of the annual plastics exports of $1 trillion just 1% while China is 10%.
With Coronavirus undermining China’s credibility, India is ramping up capacities to bridge the gap.
Moody’s pegs India’s FY21 GDP growth at 0% on COVID-19 lag effectMoody’s has provided a best case scenario of flat GDP growth assuming growth recovers sharply in Q3 and Q4.
Moody’s has also retained the negative outlook and warned that India could be downgraded to Junk status.
US unemployment spikes to 14.7%; the highest since the Great DepressionThis is largely on the back of severe job losses on the back of a spate of shutdowns in US businesses.
The unemployment rate was as low as 4% just one year back and now more than 30 million are availing jobless benefits.
PFC could be sitting on potential bad loans to the tune of $6.5 billionThis was pointed out by a detailed study of the power sector by an independent research body.
Nearly 20% of the loans give by PFC and REC to thermal power companies are likely to become bad in the next one year.
Reliance may look to exit its $1 billion stake in Asian PaintsThis was held by RIL as an investment via its group company, Teesta Retail and is nearly 4.9% of APIL capital.
This is part of RIL’s larger plan to monetize all non-core assets to bring Reliance Group to zero net-debt by March 2021.
SBI extends loan moratorium to NBFCs by another 3 monthsWith the moratorium expiring on May 31, it would not really make sense as the lockdown is likely to extend longer.
With SBI taking the lead, other banks are expected to follow, giving the much needed respite for NBFCs.
PMI manufacturing and PMI Services for April crash to all-time lowsFor the month of April, PMI Manufacturing fell vertically to 27.2 while PMI Services fell sharply to 5.4 levels.
This is clearly indicative of an economy at standstill with most sectors shut or operating at 50% capacity utilization.
Banks may trying hard to find a buyer for the assets of Future GroupThe group is already deep in debt and has been making consecutive defaults on its debt repayments.
Rising interest costs, steep rentals and zero footfalls have brought that Future group to the virtual brink.
MSME sector in India may be staring at 10 crore job losses in the near futureMSMEs account for 25% of GDP output and nearly 40% of the total exports going out of India.
MSMEs have been asking for direct transfers for payment of wages and salaries; but government has not responded.

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