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Posted on 23-Aug-2019 Comments  0

Weekly Capsule (Aug 19 – Aug 23) and Impact Analysis

News Announcement Impact Analysis

Nirmala Sitharaman announces relief for FPIs and NBFCs The government has officially announced that the capital gains will be exempt from the tax surcharge

In a push to NBFCs, the government gave another Rs.30,000 crore to HFCs and agreed to lenient lines of credit

Finance Minister also provides a boost to the automobile sector Automobiles get higher depreciation of 30% as against current 15% plus assurance of easy funding from NBFCs

Government also considering a scrappage policy as well as commencing purchase of cars by government departments

Trade war rhetoric sharpens between China and the United States China triggered the war this time around by announcing higher import tariffs on US imports worth $75 billion

In response, Trump has asked US companies manufacturing in China to look out for alternative options

Wall Street drops by 2% as the trade war intensified on Friday Ahead of a tentative weekend, Wall Street indices cracked sharply after Trump promised to retaliate

The US and China have a combined GDP of $36 trillion and the world cannot really afford these countries sparring

Oil prices in the Brent Market slide sharply on worsening trade war With the trade war looking to worsen, the Brent Crude prices fell decisively below the $60/bbl mark on Friday

The renewed trade war has again raised concerns of a real slowdown in the world GDP and that is negative for oil

Rupee touches a low of Rs.72/$ during the week but bounces back The rupee corrected sharply during the week after China dropped the Yuan mid-point for the second time

With Chinese Yuan falling to nearly CNY7.10/$, the Indian rupee came under pressure, losing 6% in August

In a boost to start-ups, the government announced a slew of measures The government has now confirmed that Section 56 (2)B pertaining to angel tax has been scrapped

Government has also instructed CBDT to set up a separate start-up cell to handle tax related issues quickly

Jerome Powell maintains cautious stance at Jackson Hole The Fed Chairman, in his address to the Jackson Hole Symposium stopped short of committing to rate cuts

Obviously, Trump has not been too happy with the cautious attitude of the Fed and is looking at more aggressive cuts

Chris Wood of CLSA cuts India overweight by 100 bps due to Kashmir Wood pointed out that the ongoing situation in Kashmir was creating geopolitical risk in the South Asian region

However, CLSA continues to be overweight on India vis-à-vis the model portfolio created by the MSCI EM index

Indian rupee emerges the worst performing EM currency in Asia Indian rupee corrected more than 6% versus the dollar since the beginning of August on FPI selling and dollar strength

The correction in the INR was the worst among EMs; sharper than the Philippine Peso and the Korean Won too

IndusInd Bank touches a 30-month low on asset quality concerns Asset quality concerns have grown on worries that the worst of bad assets in the books may have not emerged yet

Analysts have cautioned that the Bharat Fin acquisition may not pay dividends till this asset quality issue is sorted out

Shapoorji Pallonji group looks at assets sales to cut down on its debt With weakness in the construction business, Pallonji Group is looking to cut its total debt by Rs.4000 crore

The corporate construction business of the group took a hit after Tata Group orders started reducing after the fiasco

OPEC market share in crude market touches a multi-decade low of 30% This is one of the lowest market share that the OPEC had in all its years; although market share has been falling

The status of swing producer has shifted from Saudi Arabia to the US and Russia virtually dictates terms to the OPEC

63 Moons (formerly FT) gets relief from the Mumbai High Court Mumbai High Court rejected the plea by Mumbai Police to attach the assets of 63 moons against NSEL liabilities

HC pointed out that under the arms-length rule, they were separate entities and it could set a wrong precedent

Macron rules out a new BREXIT deal for Britain for its October exit Macron of France has refused to give any fresh deal to UK on BREXIT considering the limited time available

However, Merkel has prevailed upon the EU to grant Britain another 30 days time to come up with a viable deal

New STT model on options will kick in from the first of September Under the new STT model for options, ITM options will only be charged STT on moneyness and not on notional value

This moves is likely to reduce the costs and also reduce the discount that options currently trade to the intrinsic value

Minutes of the MPC reveal that the RBI Governor strongly favoured 35 bps cut Clearly, the higher than expected rate cut in the August policy was with the growth impulses in view

The MPC did express some concern over inflation with two members voting for just a 25 bps rate cut

SEBI board meeting announces slew of benefits for FPIs The regulator has simplified the KYC norms for FPIs and also reduced the number of FPI categories to two

In addition, the FPIs will also be allowed to do off market transfer of shares; something hitherto barred for FPIs

Government panel in favour of cut in corporate taxes to 25% The panel is also in favour of an across the board cut in corporate taxes to 25% from the current 30%

This rate cuts were originally promised by Arun Jaitley but was implemented only up to a threshold of profits

Gold prices internationally crosses the $1500/oz mark during the week Rising global uncertainty is leading to a major increase in demand for gold as a risk-off asset class

In the last five years, gold holdings with ETFs has gone up by nearly 1000 tonnes to a level of 2425 tonnes

Dewan Housing defaults on commercial paper worth Rs.1571 crore This default includes a 70% share of principal and a 30% share of interest payouts by Dewan Housing Finance

With total debt of Rs.92,000 crore, Dewan Housing presents a major systemic risk for the economy as a whole.



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