SBM Weekly

TOP STORIES OF THE WEEK NOV 19

ECONOMIC NEWS:
India
  • India's fiscal deficit in the six months through September approached 93% of the target for the full year, limiting the scope for more tax cuts to boost economic growth, while infrastructure output, which comprises eight sectors such as coal, crude oil and electricity, accounting for nearly 40% of India's industrial output, fell 5.2% in September from a year earlier, the worst performance in years.
  • SEBI has asked banks to disclose any material divergences in their non-performing assets on a continuous basis. In a circular issued on Thursday, the market regulator said banks must disclose such information within 24 hours of the receipt of the Reserve Bank of India's risk assessment report. Currently, such divergences are disclosed by banks in their quarterly financial results. The new rules will apply to situations where the additional provisioning for NPAs assessed by the RBI exceeds 10% of the reported profit before provisions and contingencies. The disclosure rules will also apply if the additional gross NPAs identified by the central bank exceed 15% of the published incremental gross NPAs for the reference period
  • Dismal core sector data along with weak manufacturing sector may prompt the Reserve Bank of India to become aggressive at the fifth Bi-monthly Monetary Policy review in December, experts said.
GLOBAL
  • US President Donald Trump said on Thursday the United States and China would soon announce a new site where he and Chinese President Xi Jinping will sign a "Phase One" trade deal after Chile cancelled a planned summit set for mid-November, Reuters reported. Chile's decision to cancel the Nov. 16-17 Asia-Pacific Economic Cooperation summit in Chile threw a wrench in plans for Trump and Xi to sign a deal on the side-lines. US and Chinese negotiators have been racing to finalize a text of the "phase one" agreement for Trump and Xi to sign this month, a process clouded by wrangling over US demands for a timetable of Chinese purchases of US farm products.
  • The Federal Reserve on Wednesday cut interest rates for the third time this year to help sustain US growth despite a slowdown in other parts of the world, but signalled there would be no further reductions unless the economy takes a turn for the worse. Fed cut its key overnight lending rate to a target range of between 1.50% and 1.75%. Meanwhile, latest NFP data showed the US economy added 128,000 jobs to the economy, beating expectations. But, the ISM manufacturing PMI for October came in slightly worse at 48.3 compared with 48.9 market expectations. So, the data on the day is mixed viz better employment, weaker manufacturing, mixed inflation. According to the CME FedWatch Tool, there is currently only a 14% of a rate cut at the Dec 11 meeting. However, there is a lot of data remaining, including November's data for NFP and ISM
  • Britain will hold its first December election in almost a century after Prime Minister Boris Johnson won approval from parliament on Tuesday for an early ballot aimed at breaking the Brexit deadlock. After the European Union granted a third delay to the divorce that was originally supposed to take place on March 29, the United Kingdom, its parliament, and its electorate remain divided on how, or indeed whether, to go ahead with Brexit. Johnson remains frustrated in his attempts to ratify the last-minute divorce deal that he struck with the EU earlier this month.
CORPORATE NEWS:
India
  • Piramal Enterprises Ltd is seeking shareholders' nod to raise Rs 1,750 crore from a Canadian investor by issuing compulsorily convertible debentures (CCDs). In a notice for an extraordinary general meeting to be held on November 25 in Mumbai, the company said it required additional funding for various purposes, including general corporate purposes, in view of its future outlook, growth targets and prospects. On Oct 25, the company's board had approved raising of funds aggregating up to Rs 5,400 crore, subject to regulatory approvals. On the same day the company had also entered into a securities subscription agreement with the investor, Caisse de depot et placement du Quebec for raising Rs 1,750 crore.
  • Mukesh Ambani-led Reliance Industries Ltd (RIL) has decided to set up a new digital services company to act as an umbrella platform for all the Reliance-owned digital businesses including Reliance Jio, MyJio, JioTV, JioCinema, JioNews and JioSaavn. The new company will fit between the parent company and the subsidiary Reliance Jio, and will make the telecom company debt-free, according to Ambani. In a press release, said the new company will be a "transformational" and "disruptive" digital service platform. He also added that the company will focus on services in healthcare, education, agriculture, commerce, government-to-citizen services, gaming and manufacturing sector among others. The company's board of directors have approved the formation and a capital infusion of Rs 1.08 lakh crore for the platform. The investment will be in the form of a rights issue of optionally convertible preference shares (OCPS). Moreover, the new platform will also acquire RIL's total equity investment of INR 65,000 crore in Jio.
  • Private sector lender YES Bank said it received a binding offer for a stake purchase in the bank from a global investor. "The bank would like to inform that it has now received a binding offer from a global investor for an investment of $1.2 billion in the bank through fresh issuance of equity shares," the bank said in a regulatory filing. According to a CNBC TV18 report, Hong Kong-based SPGP Holdings showed interest in investing around $1.2 billion in the bank.
GLOBAL
  • Fiat Chrysler and Peugeot owner PSA Group plans to merge that would create a new trans-Atlantic auto making giant with roughly 410,000 employees and combined revenues of $190 billion. Shareholders of each automaker would own 50% of the combined operation, the companies said in a joint statement. A binding agreement could be finalized within weeks, the statement said. The move comes after Fiat Chrysler withdrew from merger talks with its French rival Renault. Both companies in a statement said that the combined entity would leverage is strong global R&D footprint and ecosystem to foster innovation and meet challenges in connected, electrified, shares and autonomous mobility with speed and capital efficiency.
  • Oil giant Royal Dutch Shell registered a 15% fall in third-quarter net profit, citing lower energy prices and chemicals margins. Net income attributable to shareholders on a current cost of supplies (CCS) basis, and excluding identified items, came in at $4.767 billion for the third quarter of 2019. That compared with a profit of $5.624 billion in the same quarter a year ago and $3.462 billion in the second quarter. However, Shell managed to comfortably beat analysts' estimates of $3.91 billion.
  • Experts from international wealth management firm, Spearvest, have given an enthusiastic Saudi Aramco's forthcoming Initial Public Offering (IPO), which is due to be launched on November 3 with trading expected to start from December 11. Saudi Aramco, the world's most profitable company and largest oil producer globally, last year earned greater profits than Apple, JP Morgan, Nestle and Airbus combined ($111 billion). Aramco is looking to float a 1% to 2% stake on the kingdom's Tadawul market, in what would be one of the largest ever public offerings, worth upwards of $20 billion. Saudi Aramco produces more than one in every 10 barrels of oil produced globally, which is more than double Exxon Mobil's production, its closest competitor.
Value Investing
Value Investing (Part 2)

In the last edition, we discussed the different factors investors can look for when making an investment decision (both quantitative and qualitative factors) using value investing. In Part II, we will discuss following two things:

The core tenet of value investing is that the investor:

  • Psychology of a value investor
  • Recent performance of Value Investing

To continue reading about value investing,
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Macroeconomic
Indicators		 Latest Release Number Release Date Data For Previous Release Number Previous Release Date Data For
INDIA
CPI Inflation 3.99 14-Oct-19 Sep '2019 3.28 12-Sep-19 Aug '2019
Core CPI 4.20 14-Oct-19 Sep '2019 4.25 12-Sep-19 Aug '2019
IIP -1.10 11-Oct-19 Aug '2019 4.6 12-Sep-19 Jul '2019
GDP 5.00 30-Aug-19 Apr-Jun FY20 5.80 31-May-19 Jan-Mar FY19
Manufacturing PMI 50.6 1-Nov-19 Oct '2019 51.4 1-Oct-19 Sep '2019
Services PMI 48.7 4-Oct-19 Sep '2019 52.4 4-Sep-14 Aug '2019
Trade Deficit (USD Billion) -10.86 15-Oct-19 Sep '2019 -13.45 16-Sep-19 Aug '2019
Current Account Deficit (% of GDP) -14.3$ Bln (2% of GDP) 30-Sep-19 Apr-Jun FY20 -4.6$ Bln (0.7% of GDP) 28-Jun-19 Jan-Mar FY19
FDI inflow (USD Billion YTD) 16.329 5-Sep-19 Apr-Jun 2019 12.752 4-Aug-19 Apr-Jun 2018
FII/FPI Net Equity Investments (INR Cr Financial YTD) 71543 1-Nov-19 So far 2019 60847 25-Oct-19 So far 2019
FII/FPI Net Debt Investments (INR Cr Financial YTD) 32709 1-Nov-19 So far 2019 27722 25-Oct-19 So far 2019
Foreign Currency Reserves (USD Billion) 442.583 1-Nov-19 25-Oct-19 440.751 25-Oct-19 18-Oct-19
GLOBAL
US Non-Farm Payroll 128000 1-Nov-19 Oct '2019 136000 4-Oct-19 Sep '2019
US Unemployment Rate 3.60 1-Nov-19 Oct '2019 3.50 4-Oct-19 Sep '2019
US CPI 1.70 10-Oct-19 Sep '2019 1.70 9-Sep-19 Aug '2019
US GDP 2.00 30-Oct-19 Apr-Jun 2019 2.30 25-Aug-19 Jan-Apr 2019
EU CPI 0.80 16-Oct-19 Sep '2019 1.00 18-Sep-18 Aug '2019
EU GDP 1.10 31-Oct-19 Q3 2019 1.10 6-Sep-19 Q2 2019
China PMI 51.70 1-Nov-19 Oct '2019 51.40 30-Sep-19 Sep '2019
China GDP 6.00 17-Oct-19 Q3 2019 6.20 14-Jul-19 Q2 2019
Market Indices Latest Release Number Release Date Previous Release Number Previous Release Date Change
INDIA
S&P BSE Sensex 40165.03 1-Nov-19 39058.06 25-Oct-19 1106.97
Nifty 50 11890.60 1-Nov-19 11583.90 25-Oct-19 306.70
GLOBAL
S&P 500 3066.9100 1-Nov-19 3022.5500 25-Oct-19 44.3600
DJIA 27347.3600 1-Nov-19 26958.0600 25-Oct-19 389.3000
Nikkei 225 22850.7700 1-Nov-19 22799.8100 25-Oct-19 50.9600
Hang Seng 27100.7600 1-Nov-19 26667.3900 25-Oct-19 433.3700
FTSE 100 7302.4200 1-Nov-19 7324.4700 25-Oct-19 -22.0500
Market Indicators Latest Release Number Release Date Previous Release Number Previous Release Date Change
RATES - INDIA
RBI Policy Repo Rate 5.15 4-Oct-19 5.40 7-Aug-19 -0.25
Overnight MIBOR 5.25 1-Nov-19 5.25 25-Oct-19 0.00
PSU CD 12 M 5.95 1-Nov-19 5.95 25-Oct-19 0.00
Manufacturing CP 12 M 6.10 1-Nov-19 6.15 25-Oct-19 -0.05
1 Yr. T-Bill 5.25 1-Nov-19 5.28 25-Oct-19 -0.03
5 Yr. Benchmark GSEC 6.2268 1-Nov-19 6.2696 25-Oct-19 -0.0428
10 Yr. Benchmark GSEC 6.4498 1-Nov-19 6.5004 25-Oct-19 -0.0506
2 Yr. AAA Bond PSU 6.50 1-Nov-19 6.74 25-Oct-19 -0.24
3 Yr. AAA Bond PSU 6.58 1-Nov-19 6.77 25-Oct-19 -0.19
5 Yr. AAA Bond PSU 6.85 1-Nov-19 7.00 25-Oct-19 -0.15
10 Yr. AAA Bond PSU 7.56 1-Nov-19 7.62 25-Oct-19 -0.06
RATES - GLOBAL
FED Fund Rate 1.75 30-Oct-19 2.00 19-Sep-19 -0.25
USD LIBOR 3M 1.8905 1-Nov-19 1.9281 25-Oct-19 -0.0376
USD LIBOR 6M 1.9024 1-Nov-19 1.9333 25-Oct-19 -0.0309
USD LIBOR 12M 1.9253 1-Nov-19 1.9558 25-Oct-19 -0.0305
US Treasuries 2 Yr. 1.56 1-Nov-19 1.63 25-Oct-19 -0.0700
US Treasuries 10 Yr. 1.73 1-Nov-19 1.80 25-Oct-19 -0.0700
CURRENCY Open High Low Close Date
USD/INR SPOT 70.9800 70.9850 70.8100 70.8100 1-Nov-19
USD/INR 1 Year FWD Premium (Annualized %) 4.0436 4.1001 4.0108 4.0800 1-Nov-19
USD/INR NSE FUT 71.1000 71.1675 70.9600 70.9725 1-Nov-19
EUR/INR NSE FUT 79.5425 79.6500 79.2300 79.3125 1-Nov-19
GBP/INR NSE FUT 92.2475 92.2500 91.9450 91.9700 1-Nov-19
JPY/INR NSE FUR 65.8500 65.9375 65.7375 65.7375 1-Nov-19
COMMODITY & OTHER INDICATORS Latest Release Number Release Date Previous Release Number Previous Release Date Change
BRENT 61.55 1-Nov-19 61.98 25-Oct-19 -0.43
NYMEX Crude Oil 56.23 1-Nov-19 56.66 25-Oct-19 -0.43
Gold MCX Spot Price 38703 1-Nov-19 38630 25-Oct-19 73.00
Dollar Index 97.12 1-Nov-19 97.84 25-Oct-19 -0.72
UPCOMING EVENTS
Date Event
INDIA
Monday
10:30-12pm RBI to auction 42-day CMB worth Rs 20,000 cr
11:00-11:30pm RBI to conduct overnight variable rate reverse repo auction for Rs 3 Lakh cr
11-12pm IRFC invites bids on BSE-EBP to raise Rs 3000 cr via 10-yr bond
11:00-11:30pm RBI to conduct 42-day variable rate reverse repo auction for Rs 25,000 cr
05:30pm RBI to announce details of weekly bond auction
n.a. Tata Capital Fin Ser invites bids on NSE-EBP to raise Rs 100 cr via 10-yr bond
Tuesday
10:30am Nikkei India Services PMI
10:30-12pm RBI to auction seven states loan worth Rs 7,800 cr
Wednesday
10:30-12pm RBI to auction 3 Treasury bills worth Rs 16,000 cr (Details will be released later today by the RBI)
RBI to release Reserve Money data (Nov 1)
11-12pm Manappuram Fin invites bid on BSE-EBP to raise Rs 250 cr via 3-yr bond
Thursday
12-12:30pm RBI to conduct 35-day variable rate reverse repo auction for Rs 25,000 cr
Friday
05:00pm RBI to release FX Reserve data (Oct 25)
5:00pm RBI to release bank's credit, deposit growth data (Oct 25)
5:00pm RBI to release WMA (ways and means advance)
- to central govt (Rs bln) (Nov 1)
- to state govt (Rs bln) (Nov 1)
UPCOMING EVENTS
Day/Time Country Event
GLOBAL EVENTS
Monday
05:30am Japan Culture Day (observed)
06:00am Australia ANZ Job Advertisements (Oct); Retail Sales s.a. (MoM) (Sep)
06:30am Australia TD Securities Inflation (YoY) (Oct);TD Securities Inflation (MoM) (Oct)
01:45pm Spain Markit Manufacturing PMI (Oct)
02:15pm Italy Markit Manufacturing PMI (Oct)
02:20pm France Markit Manufacturing PMI (Oct)
02:25pm Germany Markit Manufacturing PMI (Oct)
02:30pm Eurozone Markit Manufacturing PMI (Oct)
03:00pm UK Markit Construction PMI (Oct)
03:00pm Eurozone Sentix Investor Confidence (Nov)
08:15pm US ISM - NY Business Conditions Index (Oct)
08:30pm US Factory Orders (MoM) (Sep)
Tuesday
03:00am Australia AiG Performance of Services Index (Oct)
03:30am Australia Commonwealth Bank Services PMI (Oct)
05:31am UK BRC Like For Like Retail Sales (Oct)
07:15am China Caixin Services PMI (Oct)
09:00am Australia RBA Interest Rate Decision; RBA Rate Statement
01:30pm Spain Unemployment Change (Oct)
03:00pm UK Markit Services PMI (Oct)
03:30pm Eurozone Producer Price Index (YoY) (Sep)
07:00pm US Trade Balance (Sep)
07:25pm US Redbook Index (YoY) (Nov 1); Redbook Index (MoM) (Nov 1)
08:15pm US Markit Services PMI (Oct)
08:30pm US ISM Non-Manufacturing PMI (Oct); JOLTS Job Openings (Sep)
Wednesday
03:00am US API Weekly Crude Oil Stock (Nov 1)
05:20am Japan BoJ Monetary Policy Meeting Minutes
06:00am Japan Jibun Bank Services PMI (Oct)
12:30pm Germany Factory Orders (Sep)
01:30pm Spain Industrial Output Cal Adjusted (Sep)
01:45pm Spain Markit Services PMI (Oct)
02:15pm Italy Markit Services PMI (Oct)
02:20pm France Markit Services PMI (Oct)
02:25pm Germany Markit Services PMI (Oct)
03:25pm Germany Retail Sales (Sep)
02:30pm Eurozone Markit Services PMI (Oct)
03:30pm Eurozone Retail Sales (Sep)
07:00pm USD Nonfarm Productivity (Q3) PREL; Unit Labor Costs (Q3) PREL
08:30pm USD EIA Crude Oil Stocks Change (Oct 25)
Thursday
03:00am Australia AiG Performance of Construction Index (Oct)
05:30am Eurozone Eurogroup Meeting
06:00am Australia Imports; Exports; Trade Balance (Sep)
10:30am Japan Vehicle Sales (Oct)
12:30pm Germany Industrial Production (Sep))
01:15pm France Individual Investment (Current Year) (Q4)
01:30pm China Foreign Exchange Reserves (MoM) (Oct)
02:00pm UK Halifax House Prices (Oct)
02:30pm Italy Retail Sales (Sep)
03:30pm Eurozone European Commission releases Economic Growth Forecasts
05:30pm UK BoE Interest Rate Decision
06:00pm UK BoE's Governor Carney speech
07:00pm US Continuing Jobless Claims (Oct 25); Initial Jobless Claims (Nov 1)
Friday
01:30am US Consumer Credit Change (Sep)
05:00am Japan Labor Cash Earnings (YoY) (Sep); Overall Household Spending (Sep)
05:20am Japan JP Foreign Reserves (Oct)
06:00am Australia RBA Monetary Policy Statement
10:30am Japan Coincident Index (Sep) PREL; Leading Economic Index (Sep) PREL
12:30pm Eurozone EcoFin Meeting
12:30pm Germany Exports (Sep); Trade Balance (Sep); Current Account (Sep)
12:30pm China Exports CNY (Oct); Imports CNY (Oct); Trade Balance (Oct)
01:15pm France Exports (Sep); Current Account (Sep); Industrial Output (Sep); Trade Balance (Sep)
08:30pm US Wholesale Inventories (Sep); Michigan Consumer Sentiment Index (Nov) PREL
10:30pm US USDA WASDE Report
11:30pm US Baker Hughes US Oil Rig Count

SBM Weekly Issue 3: For week ended 1 November 2019

Disclaimer: The content provided in this newsletter has been sourced from TickerPlant Limited and Vested Finance Inc. SBM Bank (India) Ltd. does not take responsibility or liability for the provision or accuracy of the content provided.