2. Equity View:
In the previous week, post budget, the market gained some strength on the back of stable global markets
as well as some positive developments in India. There were soothing noises from the government in
terms of strengthening public sector banks through the constitution of Bank Boards Bureau, led by Mr.
Vinod Rai. Aadhar has been tabled in the Lok Sabha as a money bill which, if passed, will lead to a
transformative change.
The overall sentiment, a week after the budget, is that the government is pushing consumption and
especially rural consumption in a big way along with infrastructure, limited to roads and railways. While
we will still have the problem of private capex on our hands, the momentum of public spending which
started last year will continue. The monsoon this year, if favourable, coupled with the pay commission
awards, will provide further impetus to consumption. The rise in consumption will be positive for
consumption driven sectors such as FMCG, Consumer Discretionary, Consumer Durables and Auto.
In the long term, there is a challenge on the business case for PSU banks. If they are acquired by a larger
PSU bank, there may be a premium for the target, but a consolidation of 4 to 5 weak PFU Banks, which is
more likely; there might not be any meaningful premium for the minority shareholders. Another
challenging factor will be the emerging of a large number of small finance banks and payment banks.
Banking licenses may be given more liberally than they have been in the past. RBI has relaxed the capital
adequacy norms, which is the ability to revalue their assets and recognize Tier 1 capital. Though this is
superficial, it will help banks, on paper, to shore up their capital adequacy to Tier 1 capital without
diluting. But to investors, this does not make any difference as it is artificial.
3. News:
DOMESTIC MACRO:
The Reserve Bank of India will wait a month to cut interest rates again, according to economists in a
Reuter’s poll who mostly said New Delhi's latest fiscal deficit target looked optimistic. Finance Minister
Arun Jaitley committed to fiscal discipline in his Feb 29 budget, lowering the deficit target further for the
fiscal year that starts next month, but offered little in the way of reforms investors have been waiting for.
India's steel imports dropped for a fourth straight month in February, provisional government data
showed, as duties and a floor price on steel products helped reduce overseas purchases hurting the sector.
The Indian government imposed a 20 percent safeguard import duty for 200 days on some steel products
in September 2015 and last month set a floor price on imports to deter countries such as China from
undercutting local mills, the first such move in more than 15 years.
GLOBAL MACRO
EURO
Euro zone finance ministers will begin discussing debt relief for Greece after once international lenders
verify that Athens has carried out promised reforms, Jeroen Dijsselbloem, the chairman of the ministers,
said on Monday. The debt talks will focus on extending the maturities of loans from the euro zone, their
grace periods and on some interest rate reductions to cap annual debt servicing costs at a manageable
level. There will be no write-off of capital.
The Bank of England took its first concrete step to keep markets running smoothly when Britain votes on
whether to remain a member of the European Union, saying on Monday it would offer extra funds to banks
as the vote nears. The central bank will hold three additional indexed long-term repo (ILTR) operations in
the weeks around the June 23 referendum.
United States
After a long wait for inflation to accelerate, U.S. Federal Reserve officials face a complex and possibly
divisive debate over whether recent evidence of rising prices is strong enough to move ahead with planned
rate hikes.
U.S. employment gains surged in February, the clearest sign yet of labor market strength that could further
ease fears the economy was heading into recession and allow the Federal Reserve to gradually raise
interest rates this year. Nonfarm payrolls increased by 242,000 jobs last month and 30,000 more jobs were
added in December and January than previously reported.
China
China Feb vehicle sales down 3.7 pct y/y - China Passenger Car Association Auto sales totaled 1.37 million,
the association said in a statement on its website. The China Association of Automobile Manufacturers
(CAAM), whose statistics are generally viewed as the benchmark for the industry, is expected to report
wholesale data for February later this month.
China's February crude oil imports jumped 20 percent on year to their highest ever on a daily basis, as
prices at their lowest in more than a decade drove buying from a group of new importers and state and
commercial stockpiling
5. Phani Sekhar Ponangi Jharna Agarwal
Nupur Gupta Rishi Ahirkar
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