Money Morning…


State Bank of India likely to hold the subsidiary banks’ merger plan- Negative in short term for subsidiary banks like State Bank of Travancore, State Bank of Bikaner & Jaipur
State Bank of India, the country’s biggest lender, is likely to put on hold the plan to merge some of its subsidiary banks with itself, as it does not see “value” in the move in the current fiscal. The bank may also decide not to merge all of its five associate banks, allowing some of them to continue in their existing structure. As per media reports, SBI may seek necessary approvals and then pursue the merger plan next fiscal.

Earlier this year, the bank had in a statement to the stock exchanges said that when appropriate, it may examine the merger options afresh. SBI may have deferred the merger process taking into account its long-term capital plans under the Basel III norms. Negative in short term for subsidiary banks like State Bank of Travancore, State Bank of Bikaner & Jaipur as they were likely to benefit from the merger.

NPPA withdraws order on popular diabetic and cardiac drugs
NPPA has withdrawn the order which they had issued on 10th July, 2014, under which they had brought popular cardiac and Diabetic molecules like Gliclazide, Glimepiride, Sitagliptin, Voglibose, Amlodipine, Telmisartan and Rosuvastatin under price control. These medicines have now been brought out of the ambit of price control. Apart from Indian companies for whom there will be a marginally positive impact at the EBITDA level, it is a huge positive for companies like Sanofi and Abbott which were expecting significant impact at the EBITDA level after these products were brought under price control.

As G-sec cap nears, FIIs increase corp bond buying:
The demand is for corporate bonds in the tenure of two to three years which are issued by public sector undertakings (PSUs) and have been given the highest rating by rating agencies. FIIs have increased their purchase of corporate bonds as they near the limit they can go in government bonds. “The government bonds which are being bought are of longer tenure. The FIIs are putting money which will be beneficial for the country. But on the corporate bonds side, it is more of arbitrage funds. Till the time the view on the currency is positive, you might see this trend continuing,” The latest data shows FIIs have bought corporate bonds worth Rs 12,252 crore in September so far, the highest in calendar year 2014. The FII investment cap in corporate debt is $51 billion.

Macro indicators improving but rate cut still away: RBI Governor Raghuram Rajan:
Although no one expects an interest rate action, i.e. reduction, at the forthcoming monetary policy review coming Tuesday, the central bank may sound positive after many quarters of firm stance on inflation, according to economists who met RBI governor Rajan in a customary pre-policy meeting”Inflation is coming down,” Rajan told a bankers’ conference recently. “This is consistent with our forecast. Macro indicators are improving but still have some way to go before we can declare that we are out of the woods.” The revival could take 12 to 18 months with the economy likely to grow at 6.5% next fiscal ending March 2016. Economists expect consumer price index, or CPI, to come down to 6% by January 2016. August CPI rose to 7.8%, marginally slower than 8% in July.

Eurozone Flash PMI Signals Weak Recovery
Eurozone business activity in September expanded at the slowest pace seen so far this year, adding pressure on the European Central Bank to provide more measures to stimulate the region. The composite output index of the purchasing managers’ survey fell to a nine-month low of 52.3 in September from 52.5 in August, preliminary data from Markit Economics showed. The reading was expected to remain unchanged at 52.5.

Japan Manufacturing PMI Slows In September
The manufacturing sector in Japan continued to grow in September, albeit at a slower pace, preliminary survey results from Markit Economics revealed on Wednesday with a PMI score of 51.7. That’s down from 52.2 in August, although it remains above the line of 50 that separates expansion from contraction. Among the individual components of the survey, there was moderate improvement in business conditions, and solid growth in manufacturing output.

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