RBI’s new resolution framework 2.0 for MSMEs😵
Yesterday’s Market Performance
Nifty: 15751.65 | 81.40 (0.52%)
FIIs net sell: 186.46 Cr
DAX: 15677.15 I 15.75 (0.10%)
Sensex: 52328.51 | 228.46 (0.44%)
DIIs net buy: 983.97 Cr
FTSE: 7077.22 | 8.18 (0.12%)
Howdy Toasters!
In today’s issue, we discuss; RBI’s new resolution framework- 2.0 for small business owners and MSMEs, what’s up with the institutional buyers (let’s talk numbers), bank’s performance, other important financial news, and an educative concept to help you keep learning. Read along!
Yes Bank: 15.05 | 1.30 (9.45%)
- ‘A meeting of the Board of Directors of Yes Bank will be held on Thursday, June 10, 2021 to consider and approve, seek shareholders’ approval for borrowing/raising funds in Indian/foreign currency by issue of debt securities including but not limited to non-convertible debentures, bonds, Medium Term Note (MTN),” Yes Bank said in a press release.
- After declaring a huge loss in Q4, can we expect something big from the private lender in the coming financial year?
- This is the chart of CESC Ltd on a monthly time frame. Level 700 has been acting as an important level. Any closing above 700 can lead to a good up move. This is a clear case of consolidation and breakout.
MRF Ltd: 82,400.50 | 2,518.20 (2.97%)
- The multi-bagger tire maker today reported a 51% decline in its consolidated net profit to Rs 332 crores in Q4. The results came out during the market which led to the 3% decline in the share today. Board also approved a dividend of Rs 94 per share.
RBI will be there for you ‘as long as necessary’ (jk, jk) 😛
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We referred to the MPCs action in brief in our previous note; an accommodative stance, and ample liquidity were key takeaways; inflation forecast was upped a bit to 5.1%, and FY 22 growth was trimmed to 9.5%, open-ended guidance was hinged on growth revival basis such extreme liquidity measures (not seen for a while).
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Economist consensus is more of the same please, with no major rate actions expected and policy guidance suggests the same, amid the evolving and uncertain nature of the economy (while increasing the inflation target to 5.1, talk about a new world).
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RBI acknowledged the impact of core inflation, especially seen with increasing input costs and pass-through of higher commodity prices and administered fuel taxes.
- RBI has tried to reinstate its stance on liquidity and sovereign premia, through better yield management (What?).
- The central bank stressed better liquidity management and orderly Government Security borrowings (used to pump in liquidity) under their GSAP 1.0 and is building on this mechanism by increasing the amount borrowed in GSAP 2.0.
- Given an elevated borrowing schedule for the following year, the RBI is mindful of maintaining a low sovereign risk and has therefore indicated that its mindful of treading carefully.
And, how do I benefit? 😏🤔
- RBI passed Resolution 2.0 to cover a range of borrowers, with liquidity facilities designed to benefit businesses most affected by the pandemic –
- INR 150 Bn to provide loans to contact sensitive services
- INR 160 Bn to SIDBI for on-lending to MSMEs
- Increased restructuring capabilities for MSMEs
- We seem anchored towards providing improving growth prospects, and maintaining stable financial conditions, even with the risk of inflation looming large; clearly, it’s all hands on deck towards a single-minded pursuit of economic growth (everything else comes secondary, reassuring?
What have our friends ‘The Institutions’ been up to these last couple of weeks?
- FIIs continued buying this week, with net purchases of INR 55 Bn, while DIIs were net sellers at INR 8 Bn. On a three month window, both FIIs and DIIs are net buyers.
- FIIs were massive buyers in Banks & Financial Services (USD 1 Bn of flows in the second half of May), reversing their call on the sector (were massive sellers in the first week of May)
- Materials & Utilities continued their strong run, backed by good interest from FIIs.
- Telecom Services (price hiker is a little further down the line), Food & Beverage (understandable, supply-side issues have been felt keenly) and Tobacco (higher taxation?) saw the highest-selling from FIIs in the second half of May.
- On a regional basis in Asia, India saw the second-highest foreign inflow at USD 750 mn, and most major Asian indices closed in the green (what pandemic?).
- We highlighted this last week as well, but implied volatility continues to taper, with India VIX is near its lowest level since Feb 2020 (start of the pandemic).
- Materials, NBFCs & Energy, and Utilities were the best performing sectors this week, with NBFCs (weird given the shorter term pain in collections, highlighted previously) seeing an 11% rise in OI, indicating a long position build-up in the contracts.
- Automobiles and Components also saw a marginal build-up in OI (weird given the near-term struggles, maybe the tide is turning?).
What else caught our eye? 👀
Twitter launches its first subscription service, testing the functionality in Australia and Canada
- Called Twitter Blue, the new functionality allows users to undo tweets, 30 seconds after posting, better bookmark features to manage your links better, a reader mode, to manage those long threads better and is priced at USD 2 per month (apparently).
- Aimed at decreasing their dependence on ad revenue, which still makes up ~80% of their top-line, Twitter is the first to test a subscription feature (although the expectation is that the network will continue to remain free) but with the overall ethos for networks always geared towards maximum eyeballs (to attract advertisers) a sub-feature that removes ads…..will be interesting.
Covid hit Airlines industry expected to struggle for the near term
- Indian airlines are expected to lose USD 4.1 billion in the ongoing fiscal FY 2022, split equally between full service and low cost carriers.
- 2 years of the pandemic are going to cost the airline industry a total of USD 8 Billion, with Indigo and Air India expected to shoulder ~50% of this loss.
- The industry is expected to require ~USD 5 Billion in capitalization to service cash flows, with Indigo already passing a resolution to raise funds through a QIP.
Banks avoid lending to lesser rate applicants, for fear of non-repayment
- Banks are okay not lending, and showing minimal growth for the fear of rising NPAs in a challenging environment.
- In this note we cover the liquidity features extended by RBI, however limited uptake by the banking industry will threaten the implementation, although the results could be worse.
- The addition in deposits at Rs.13.4 lakh crore over the last 12 months ended May 21, 2021, was more than double the Rs. 6.1 lakh crores of credit outstanding during the same period, data from the RBI shows.
TATA Sons plans to rejig its board, bring on-board strategic expertise, in tune with the next phase of growth
- Independent Directors & board members are expected to step down post completion of 5-year terms and/or reach the mandatory retirement age of 70 in the coming months; the expectation is to include professionals from diverse backgrounds, in order to augment the board’s expertise as the group forays towards its next leg of growth (see our earlier note);
- The chairman’s five-year term also ends next year, with a renewal for another 5 expected
- TATA Group companies have managed the pandemic, with 23 of the 29 listed entities, beating the benchmark index (if you count stock performance as fairing well?)
China has stepped up its crackdown on bitcoin trading & mining
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Last month, China’s state council vowed a crackdown on bitcoin mining & trading, after industry bodies banned cryptocurrencies.
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The government banned crypto accounts on its twitter-like platform, Weibo over the weekend, with state media amping up the pressure and reporting heavily on illegal crypto trading & related activities.
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Weirdly enough (?) the crackdown has come as the financial regulator has started testing their own digital currency (of course right?)
NR4 and NR7 Trading Strategy Setup
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A narrow Range Trading Strategy is a strategy in which we expect a breakout after a certain pattern formation.
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For NR7 the default period is 7 days which means that if the price range of any particular days is lowest as compared to the last 7 days then that day is NR 7 day; similarly for NR4.
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The day after the NR 7 or NR 4 day acts as the confirming day on where the price will move further.
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If the breakout happens at the high of the NR 7 candle then indicates bullishness whereas If the breakout happens at the low of the NR 4 candle then indicates bearishness.
Toast – Quote of the Day 📜
Warren Buffett
