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Posted on 20-Sep-2019 Comments  0

Weekly Capsule (Sep 16 – Sep 20) and Impact Analysis

News Announcement Impact Analysis

Finance Minister announces cut in corporate tax rates to 22% This will be the new formula that all corporates can opt for but they will have to forfeit all rebates and exemptions

This formula will not attract any MAT but the effective rate of tax will be 25.17% inclusive of surcharge and cess

FM introduces new 15% corporate tax category for new manufacturers This will be a new bracket of corporate tax applicable to new manufacturing facilities between Oct-19 and Mar-23

Even in this case, the exemptions will not be available and it is likely to provide a major boost to Make-in-India

FM clarifies on the buyback tax on pre-announced buyback offers The FM has clarified that buybacks announced before July 05th will not be liable to pay the buyback tax

However, the buyback tax at 20% of the difference between buyback price and issue price will apply to other buybacks

Derivative income of FPIs to also be exempt from additional surcharge This was a confusion as to whether the capital gains exemption was applicable to derivatives income also

While FPI s will enjoy additional surcharge exemption for all securities, retail investors will pay higher surcharge on F&O

MAT (minimum alternate tax) scrapped for companies opting for new formula For companies opting for the 22% or the 15% tax formula, there will be no MAT that will be deducted

However, for the existing tax formula users MAT will now apply at a lower rate of 15% instead of 18.5%

GST Council cuts rates with a view to boost the gems & jewellery sector The Council announced reduction on GST rates on contract work for the diamond industry

The Council also recommended reducing the GST on semi-cut stones to just 2.5% to give a boost to the industry

GST Council gives the much needed boost to the hotel industry GST rates have been reduced across all tariff brackets with rooms below Rs.1000 exempted from GST altogether

In addition, the GST on outdoor catering has also been sharply reduced in an indirect boost to the hotel industry

Essel Group gets another 6 months to fulfil obligations to mutual funds With Essel Group unable to sell the shares ahead of September 30th, MFs had little choice but to postpone

Ironically, a week before the deadline, the non-pledged shares of promoters were frozen based on a Delhi HC order

Oil shoots up during the week after drone attacks on Aramco facilities The attack led to Aramco halting nearly 50% of its production leading to a 15% spike in Brent prices on Monday

Even as Saudi Arabia has promised to get production on stream by Sep-end, falling inventories will be a worry

BSE Sensex rallied by a 10-year record 1921 points on Friday This sharp rally was led by the FM decision to cut corporate taxes sharply by over 8%

This sharp rally on Friday more than compensated for the sharp falls on Tuesday and Thursday in the indices

Fed cut rates by 25 basis points but votes for cuts in ratio of 7:3 Stock markets across the world were hardly impressed by the cautious tone of the Fed and the vote share

The tone of the Fed almost appeared to rule out another rate cut this year and that is what the CME Fedwatch also indicates

India issues a blanket ban on the production and sale of e-cigarettes With vaping becoming an addiction globally and its harmful side effects, India joins the growing list of countries

The move was immediately positive for the cigarette manufacturers, although it did not really sustain

Hopes for US-China trade talks fade after China cancels farm visits Trump was looking at a quid pro quo where the US would go slow on tariffs and China would increase farm imports

However, this cancellation of farm visits raises questions over China’s commitment to go in for a trade pact

Economists warn of fiscal slippage on the back of corporate tax cuts According to economists, the tax cuts would result in revenue loss of Rs.145,000 crore for the government

It is estimated that this could push up the fiscal deficit higher to 3.7%, something that was visible in bond yields

SBI withdraws its repo rate linked home loan product from the market This product was pioneered by SBI in India after RBI announced the shift to external benchmarks

The withdrawal comes just a week ahead of the October 01 deadline to shift to the new pricing model

RBI governor warns that scope for monetary measures were limited This was basically an indication of limited legroom for policy makers on rate cuts or liquidity

The RBI governor stressed that structural reforms were the only real option available at this point of time

Trump and Xi to meet for full-fledged trade talks in October The main agenda is likely to focus on tariff rate extension and an assurance that China would buy more US farm products

Both the US and China will not be discussing sensitive issues like intellectual property rights and Huawei

Foreign funds infuse Rs.25,000 crore into road assets in India The buyers include some of the world’s largest pension funds and sovereign funds with long holding periods

The road assets have been purchased from most of the marquee names like IRB, GMR, L&T and Dilip Buildcon

Commodity mutual funds may finally get a push from Deutsche Almost 4 months after SEBI permitted commodity funds, the progress was slow over commodity custody responsibility

However, with market leader, Deutsche applying for a commodity custodian license, there could be some progress

Microsoft Corporation approves $40 billion buyback program This will be one of the largest buyback program and will help the company to further consolidate its market value

In the last few months, MSFT has gotten the better of the high profile FAANG stocks in the market place

Morningstar survey finds Indian MF fees still among the highest On a global scale, the total expense ratio (TER) of Indian equity funds still remains among the highest

However, debt fund TERs had fallen sharply and the gap with equity fund TERs was also widening significantly



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