Good Morning !!!
Sensex: 26492 (-1.21%), Nifty: 7932 (-1.36%)
Dow: 17132 (+0.59%), S&P: 1999 (+0.75%)
Nikkei: 15930 (+0.12%)\
The Old Adage Comes True : "In national elections people vote for the Party while in local election people vote for the Candidate"
The earlier the warning the better it is. Alarms bells have rung loud and clear for the national ruling party of India that after winning with absolute majority at the Center they cant afford to rest their laurels. They had to face a humiliating defeat in Uttar Pradesh by-polls with Samajwadi Party & others wining 8 out of 11 seats. The Congress had a morale boosting wins with 3 in Gujarat which is local base of prime minister Narendra Modi. Rajasthan was the most shocking with congress wining 3 seats and BJP diminished to 1 seat.
The Indian stock market latched on to the excuse and slipped 1.4% in last 4 hours. The broader market saw even more blood with large caps declining anywhere between 4-7% and mid-caps hitting lower circuits.
Hope, the by-elections results help shed any over-confidence and lethargy set in post emphatic victory and instill a sense of urgency to bring in much awaited reforms.
Action Agenda : Use the correction to build positions in equity markets.
SBI has cut deposit rates in 1-3 year bracket by 25bps
Justifying the move with downward trending inflation, India's largest commercial bank has cut deposit rates by 25bps to 8.75% for term deposits on 1-3 year term. Though the real reason could be an act of correcting ALM mismatches or desire to lower costs sighting ALM surpluses or as a lead bank providing direction to market, more importantly it adds to our confidence of yesterdays stance - "Bet Against the Central Bank" http://newsthatmovesindia.blogspot.in/2014/09/worms-digest-16-september-2014.html
M&M eyeing for Peugeot's Scooter Business
New reports suggest that M&M is in advanced talks to acquire Peugeot's scooter business. The fact that M&M didn't out right deny the news means certainly talks are on but whether the same fructifies or not remains to be seen.
The transaction could be a win-win for both the parties as Peugeot gets rid of loss making scooter business freeing up resources to focus on its strengthening car business. It will also help Peugeot pare down Euro1.1bn debt on the books.
Mahindras, on the other hand, will gain access to a credible brand, differentiated product portfolio with distinct designs and latest world-class technology in scooter market.
Though its strategic for Mahindra 2-wheeler business, as of now it does not materially impact or change company profitability. With strong balance sheet of Mahindra acquisition price wont be burdensome for the company.
However, the smarter investors would be keenly watching M&M's execution and strategy is 2-wheeler space which if failed could raise serious questions about capital allocation policies at the Company. This is the biggest hidden danger in this acquisition as many people believe M&M has no right to be in or win in 2-wheeler space.
Stock market corrections, although painful at the time, are actually a very healthy part of the whole mechanism, because there are always speculative excesses that develop, particularly during the long bull market.
Have a Great Day and Happy Investing !!!
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