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News Highlights For 16th November

Fitch has maintained India’s sovereign rating unchanged at BBB-. This is the lowest investment grade with a stable outlook. While Fitch expects 7.8% GDP growth in 2018-19, it expects the growth to taper after that due to a combination of weak financial sector, high oil prices and tight monetary conditions. While Moody’s had raised India’s sovereign rating last year, both S&P and Fitch had maintained status quo on ratings. Fitch has also expressed worries over the widening trade deficit and the current account deficit (CAD) getting closer to 3% mark in the coming year.

Trade deficit for October bounced higher to $17.13 billion after touching a more manageable level of $13.98 billion in September this year. Exports were up 17% on a YOY basis but the pressure of a global slowdown in the aftermath of the trade war is quite visible. Imports were nearly up by 33% in rupee terms as the combination of higher import volumes and weaker rupee is taking its toll. Crude continued to be the main culprit on the back of Brent touching a high of $86/bbl before trending lower. The impact of lower crude prices should be seen in the coming couple of months. Gold importers were sharply down.

Rupee rallied to a 2-month high of 71.97/$. After touching an intraday low of nearly 75/$ in October, the rupee has shown signs of strengthening. The sharp fall in oil price and the government getting to grips with the NBFC problem has helped the rupee to stabilize. Also, the RBI has continued to support the rupee around the 74/$ mark by selling dollars in the spot and the futures market around these levels. Even technically, most exporters are more enthusiastic about selling their dollars and converting them into rupees. Importer and bank demand for dollars has also come down sharply this month.

The spectre of top management changes at Infosys continues with Jayesh Sanghrajka being appointed as the interim CFO off the company. Current M.D. Ranganath will step down on November 16th. Starting with Mr. Bansal a few years ago, Infosys has seen a huge churn at the CFO level. Since Vishal took over 4 years back, and even in the first one year of Salil Parekh, the churn in the top management continues. That is something even the board of Infosys had expressed reservations about. Analysts consider this move as right-tuning the Infosys senior DNA to the perspective of the current CEO.

In an interesting piece of statistics, foreign portfolio investors (FPIs) have cut their holdings in nearly 123 companies during the second quarter. It may be recollected hat FPIs had sold Rs.39,000 crore worth of assets in October of which Rs.29,000 crore was in equities and the balance Rs.10,000 crore was in debt. However, to be fair, this could also be a reallocation exercise since FPIs also hiked their stake in 93 companies. Some of the companies that saw aggressive FPI selling during the quarter include Balrampur Chinni, Manpasand Beverages, PC Jewellers, PNB and Vodafone Idea; most of them for obvious reasons. Some of the major companies that saw an increase in FPI stake include AU Small Finance Bank, Greaves Cotton, Mahanagar Gas, Tejas Networks and Zenzar Technologies.

 

A day after the NCLT Appellate Tribunal (NCLAT) ruled in favour of Ultratech in the Binani Cements acquisition case, the other contender Dalmia Cements has approached the Supreme Court. The hearing on the case is listed for November 19th. Actually, Dalmia Bharat had emerged as the highest bidder but subsequently, Ultratech had come back with a revised bid at a substantially higher bid of Rs.7950 crore. With the Committee of Creditors (COC) accepting the Ultratech offer and the NCLAT rejecting Dalmia’s protests, they did not have a choice. Dalmia is confident of a positive verdict in their favour. 

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