How FMPs Attract Lower Tax-The Total Investment & Insurance Solutions

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 9^th  February 2019

FMP(The Total Investment & Insurance Solutions)

Nifty, Sensex May Head Lower – Weekly Closing Report-The Total Investment & Insurance Solutions

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08 February 2019

I had mentioned in last week’s closing report that Nifty, Sensex might head higher. The major indices of the Indian stock markets were range-bound during the week and closed with minor weekly gains on Friday over last Friday’s close. The trends of the major indices in the course of the week’s trading are given in the table below:

The major indices of the Indian stock markets were range-bound on Monday and closed with gains over Friday’s close. On the NSE, there were 483 advances, 1,298 declines and 308 unchanged.

Sensex and Nifty traded on negative note during the afternoon session of the trade over concerns of fiscal slippage and owing to volatility in specific stocks. FMCG (fast moving consumer goods), healthcare and auto stocks witnessed selling pressure, while the key banking and finance stocks reversed early losses and traded in the green. 

The stock price of Reliance Communications (RCOM) declined up to 48% after it filed for bankruptcy. Market fears a fiscal slippage because of various announcements in the interim budget, like the higher borrowing programs by the government. The government's estimate of GST collection in FY19 is on the higher side. The nominal GDP growth rate of 11.5% is also difficult to achieve, according to market analysts. In addition the bond market is not happy with the Interim Budget hence having a negative impact on the investors.

The major indices of the Indian stock markets were range-bound on Tuesday and closed with minor gains over Monday’s close. On the NSE, there were 548 advances, 1,213 declines and 297 unchanged.

Ahead of a three-day RBI monetary policy review meet, set to start later in the day, Sensex and Nifty logged mild gains on Tuesday. Capital goods, FMCG (fast moving consumer goods) and metal stocks declined while energy, IT (information technology) and banking stocks surged. At 2.54 p.m., the S&P BSE Sensex traded 78.22 points or 0.21% up from its previous close of 36,582.74 after touching a high of 36,727.83 and a low of 36,495.83. The broader Nifty traded at 10,935.35, up 23.10 points or 0.21%. Stock-wise, IndusInd Bank, Bajaj-Auto, HeroMotor Corp, Mahindra and Mahindra and Maruti Suzuki gained in the range of 1% to 3%. In contrast, Tata Motors, Tata Motors (DVR), Tata Steel, Coal India and ONGC declined in the range of 1% to 3%.

Moody's downgraded the senior unsecured rating for Airtel and backed senior unsecured notes issued by subsidiary Bharti Airtel Int'l (the Netherlands) to 'Ba1', or junk rating, from 'Baa3'. The American rating agency also withdrew the company's 'Baa3' issuer rating and said the outlook was negative.

Budget airlines SpiceJet said it will launch a daily non-stop flight service between Hyderabad and Saudi Arabia's Jeddah from March 25. According to the airline, Jeddah will be its ninth international destination and third destination in the Middle East. The airline said that it will service the route using its new 189 seater Boeing 737 MAX aircraft. "The new service will enable SpiceJet to provide over 2500 seats per week on the sector," the airline said in a statement. "To mark this important launch, SpiceJet has announced a special fare of Rs13,499 (all-inclusive) for Hyderabad-Jeddah and Rs10,799 (all inclusive) for Jeddah-Hyderabad."

Exide Industries posted a net profit of Rs155.04 crore in the third quarter of the current fiscal, up marginally as against Rs154.27 crore in the same period last year. Its net turnover for the quarter under review was at Rs2,496.84 crore, up by 9.59% from Rs2,278.29 crore in the corresponding quarter of the previous fiscal. The battery maker's Managing Director and CEO G. Chatterjee said that volumes in automotive, motorcycles, UPS and solar batteries in the third quarter have grown quite well. The company is focusing on cost control and technology upgradation as strategies to improve the bottom-line.

Amid mixed global markets and healthy quarterly results of index heavyweights, key equity indices by over 1%, during the late afternoon session of the trade on Wednesday. In addition, the equity indices also gained as both the foreign institutional investors (FIIs) and domestic institutional investors (DIIs) were net buyers on Tuesday. FIIs bought stocks worth Rs420.65 crore while the DIIs bought stocks to the tune of Rs194.31 crore.

Investors will also be keeping an eye on the Reserve Bank of India's (RBI) bi-monthly monetary policy outcome scheduled on Thursday. Expectations of rate cut along with some healthy quarterly results, lifted the key equity indices on Wednesday. Tata Steel spurted by 4.08% while Bajaj Finance gained 3.54%.

Credit rating company Fitch Ratings has placed India's Tata Motors credit rating on negative watch. The rating agency pointed at increasing risks for Tata Motors’ British luxury car unit - Jaguar Land Rover (JLR) - over a potentially chaotic Brexit. “Trade barriers and logistic issues from a disorderly Brexit could have an impact on JLR’s competitive positioning and lead to significantly lower sales and profitability,” the credit rating agency said.

As a part of their asset monetisation plan to repay debt, promoters of Zee Entertainment Enterprises Ltd (ZEEL) are open to sell over 50% of their holdings in the firm and are in talks with more than two investors for the same, a senior company official said.

The Indian equity market bounced back into the green, after falling more than 140 points during the late-afternoon trade session on Thursday. The abrupt downfall in the market's trajectory came after both the indices -- S&P BSE Sensex and NSE Nifty50 -- rose on the back of a surprise move by the Reserve Bank of India (RBI) to go for a rate cut. At around 2 p.m., the BSE Sensex traded at 37,100.88 points, higher by 125.65 points or 0.34% from the previous close of 36,975.23 points. It touched an intra-day high of 37,172.18 and a low of 36,915.13. The NSE Nifty50 on the National Stock Exchange traded higher by 36.95 points or 0.33% at 11,101.55, from the previous close of 11,062.45 points. Interest sensitive auto and realty stocks gained around 1%, while the key banking stocks gained 0.50% as a policy rate cut would lead to lower interest rates for loan seekers. 

In the final monetary policy review of the current fiscal, the Reserve Bank of India (RBI) on Thursday lowered its key lending rate for commercial banks to 6.25%.The decision was guided on the basis of an assessment of the evolving macroeconomic situation wherein headline inflation is projected to soften further and the economy's growth impulses had moderated, the RBI said. The central bank was more accommodating, changing its monetary policy stance from "calibrated tightening" to "neutral".  

Private airline Jet Airways introduced a staggered framework to reward its domestic guests with substantially lower penalties in exchange for advanced intimation for changes in their bookings including cancellations, changes. The new policy would be implemented from February 7. "As part of the new policy, charges for various changes including those for flight, date, sector, booking class, cabin and others and refund penalties for ticket cancellations at least seven days prior to the date of travel would attract lower penalties compared to those who undertake booking changes within seven days," Jet Airways, said in a statement. "The dynamic penalties will reward guests who plan in advance with substantial savings," it added.

The benchmark Sensex made losses on Friday owing to a steep decline in auto stocks led by Tata Motors and broadly negative global cues. Apart from realty, teck and telecom stocks all the sectors on the BSE came under heavy selling. Auto stocks declined by 2.75%. Globally, investors reacted negatively after US President Donald Trump said he would not meet his Chinese counterpart Xi Jinping ahead of a trade deal deadline on March 2, when American tariffs on Chinese products were slated to increase. Stock-wise, Kotak Mahindra Bank, Bajaj Finance, HDFC Bank, HCL Tech and Bharti Airtel were the top gainers on Sensex. In contrast, Tata Motors slipped 17.69% while the Tata Motors (DVR) declined over 13%, after the company reported a massive loss in its third quarter results declared on Thursday. Among the other laggards were Vedanta, Larsen and Toubro, Tata Steel and ONGC.

Automobile major Tata Motors Group reported a massive net loss of Rs26,961 crore for the quarter ended December 31, 2018. The automobile group had posted a net profit of Rs1,214.60 crore for the corresponding period of the previous year. According to the group, its net profit was impacted by an exceptional item of "Asset Impairment" in JLR (Jaguar Land Rover) worth Rs27,838 crore (3.1 billion pounds). On JLR, it said: "Performance impacted by challenging market conditions particularly in China and inventory corrections. Continue to invest in exciting products and leading edge technologies."  The Total Investment & Insurance Solutions

 

Weekly Indices (The Total Investment & Insurance Solutions)

Government plans capital dose for regional rural banks -The Total Investment & Insurance Solutions

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08 February 2019

 

Bank (The Total Investment & Insurance Solutions

The government is mulling capital infusion in regional rural banks to reduce the payout burden of the new pension scheme which threatens to derail these banks’ lending to small and marginal farmers, two people familiar with the development said. The government has approved a new pension scheme for RRBs following the Supreme Court’s order to pay higher pension and bring it at par with the pension scheme in nationalised banks.

The new scheme also covers persons already drawing pension. The Department of Financial Services has directed the National Bank for Agriculture & Rural Development (Nabard) to ascertain the size of the capital requirement, one of the persons cited earlier told ET. Nabard, in turn, has directed every RRB to appoint actuaries for the calculation. Each of these banks will create a pension corpus by transferring fund from their profit and loss account. This exercise would dampen their profit numbers and may also lead to book losses. This, in turn, could put strain on their capital as the banks will not be able to plough back profit.

 “The shortfall in their capital risk adjusted ratio (CRAR) will be made good by the government,” people involved in the process of finalising the new pension scheme told ET. While the actuarial valuation on the pension corpus will take some time, RRB union members are guessing that the cumulative size could be up to Rs 20,000 crore. A part of it—about Rs 5,000 crore— can be taken from Employees’ Provident Fund Organisation.

The government will infuse 50% of the capital requirement while public sector banks with their 35% holding in each RRB, and the respective state governments with 15% shareholding, will have to share the burden proportionately. However, doubts have been raised as to whether banks under prompt corrective action framework will able release funds. RRB employees had won a protracted legal battle in the Supreme Court for parity in pension in April last year.

 A Nabard official said that about 13 RRBs have started paying pension with effect from April 2018, while the arrear payment before the cut-off date may not be considered due to practical difficulties. There are 36 of such banks operating across the country now. Leaders of their employees association said they would move court again to fight for arrear payment. At present, about 30,000-odd retirees since 1993 are eligible for revised pension. It has been decided that RRB employees, who were in service as on September 1, 1987, will be eligible for the new pension scheme. RRB employees who joined the service after April 1, 2018 will not be eligible. The Total Investment & Insurance Solutions

GoM favours paring GST to 5% on residential properties from 12% currently-The Total Investment & Insurance Solutions

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08 February 2019

GST (The Total Investment & Insurance Solutions)

A panel of state ministers Friday favoured lowering GST on under-construction residential properties to 5 per cent, from 12 per cent currently.

The Group of Ministers, under Gujarat Deputy Chief Minister Nitin Patel, was set up last month to analyse tax rates and issues/challenges being faced by the real estate sector under the Goods and Services Tax (GST) regime.

In its first meeting, the GoM also favoured slashing GST on affordable housing from 8 per cent to 3 per cent.The Total Investment & Insurance Solutions

Direct Tax mop up in Apr-Jan at Rs 7.89 lakh cr -The Total Investment & Insurance Solutions

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08 February 2019

 

India (The Total Investment & Insurance Solutions)

Net direct tax collection during the April-January period of current fiscal stood at Rs 7.89 lakh crore, Parliament was informed on Friday.

In a written reply to a question in the Lok Sabha, Minister of State for Finance Shiv Pratap Shukla said there were 9.92 crore direct taxpayers in Assessment Year 2016-17, which increased to 7.41 crore in 2017-18. A taxpayer is a person who either files a return of income or in whose case tax has been deducted or paid.

Total direct tax collection in 2017-18 stood at Rs 10.02 lakh crore. In April-January period of current fiscal, total direct tax collection stood at Rs 7,88,930 crore. In the revised estimates for current fiscal, the government has pegged direct tax collection at Rs 12 lakh crore.

In the 2017-18 fiscal, the Direct TaxGDP ratio stood at 5.98 per cent. The Total Investment & Insurance Solutions

China-US Tariff Concerns Stock Markets Once Again-The Total Investment & Insurance Solutions

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08 February 2019

Financial Markets (The Total Investment & Insurance Solutions)

Global stock markets drifted lower Friday after President Donald Trump said he doesn't plan to meet Chinese leader Xi Jinping before their truce on raising tariffs in a festering trade dispute ends in early March.

In Europe, France's CAC 40 fell 0.2 percent to 4,974 while the DAX in Germany was down 0.6 percent at 10.955. Britain's FTSE 100 index was 0.2 percent lower at 7,078. Wall Street was set for early losses with Dow futures and the broader S&P 500 down 0.6 percent.

The broad-based declines are largely a result of the news that Trump indicated that he would not be meeting his Chinese counterpart before March 2, which marks the end of a 90-day tariffs truce mooted after Trump and Xi met in December.

Unless American and Chinese negotiators come to a new agreement, the U.S. is expected to raise import taxes from 10 percent to 25 percent for $200 billion in Chinese goods. The trade dispute between the world's two largest economies, which has cooled in recent months, has weighed on the outlook of businesses and the global economy.

Connor Campbell, an analyst at Spreadex, said the news has "cast doubt on the chances of reaching a tariff hike-avoiding deal in time."

U.S. Treasury Secretary Stephen Mnuchin and trade representative Robert Lighthizer are to lead a delegation to Beijing next week for the next round of trade talks. Officials have reported little progress on contentious issues but are hopeful that a deal will be struck.

THE DAY IN ASIA: Japan's Nikkei 225 index closed 2 percent lower at 20,333.17. Hong Kong's Hang Seng, reopening after a Lunar New Year break, gave up 0.2 percent to 27,946.32. The Kospi in South Korea declined 1.2 percent to 2,177.05 and Australia's S&P ASX 200 was down 0.3 percent at 6,071.50.

ENERGY: U.S. crude oil fell 25 cents to $52.39 per barrel in electronic trading on the New York Mercantile Exchange while Brent crude, used to price international oils, rose 13 cents to $61.76 per barrel.

CURRENCIES: The euro was flat at $1.1337 while the dollar was steady at 109.79 yen.The Total Investment & Insurance Solutions

Nifty, Sensex May Turn Weak – Thursday closing report-The Total Investment & Insurance Solutions

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07 February 2019

I had mentioned in Wednesday’s closing report that Nifty, Sensex continued to look strong. The major indices of the Indian stock markets were range-bound on Thursday and ended flat. On the NSE, there were 1,001 advances, 730 declines and 329 unchanged. The trends of the major indices in the course of Thursday’s trading are given in the table below:

The Indian equity market bounced back into the green, after falling more than 140 points during the late-afternoon trade session on Thursday. The abrupt downfall in the market's trajectory came after both the indices -- S&P BSE Sensex and NSE Nifty50 -- rose on the back of a surprise move by the Reserve Bank of India (RBI) to go for a rate cut. At around 2 p.m., the BSE Sensex traded at 37,100.88 points, higher by 125.65 points or 0.34% from the previous close of 36,975.23 points. It touched an intra-day high of 37,172.18 and a low of 36,915.13. The NSE Nifty50 on the National Stock Exchange traded higher by 36.95 points or 0.33% at 11,101.55, from the previous close of 11,062.45 points. Interest sensitive auto and realty stocks gained around 1%, while the key banking stocks gained 0.50% as a policy rate cut would lead to lower interest rates for loan seekers. 

In the final monetary policy review of the current fiscal, the Reserve Bank of India (RBI) on Thursday lowered its key lending rate for commercial banks to 6.25%.The decision was guided on the basis of an assessment of the evolving macroeconomic situation wherein headline inflation is projected to soften further and the economy's growth impulses had moderated, the RBI said. The central bank was more accommodating, changing its monetary policy stance from "calibrated tightening" to "neutral".  

Along with the lower repo rate, or the RBI's short term lending rate for commercial banks, the central bank's reverse repo rate has been adjusted to 6%, and the marginal standing facility (MSF) rate and the Bank Rate to 6.5%. "Headline inflation is projected to remain soft in the near term reflecting the current low level of inflation and the benign food inflation outlook.  "Beyond the near term, some uncertainties warrant careful monitoring," RBI Governor Shaktikanta Das, who presided over his first monetary policy committee (MPC) meeting said while making the policy review announcement.  "The MPC noted that the output gap has opened up modestly as actual output has inched lower than potential. Investment activity is recovering...but the need is to strengthen private investment activity and buttress private consumption," he said following the meeting that started on Tuesday.  It is vital for the RBI to "act in a timely manner" to support growth, given that inflation continues to remain benign, and in view of the fact that investment demand has decelerated, Das added.  The RBI also revised downwards its consumer price index (CPI), or retail inflation, projection to 2.8% for the ongoing quarter, to 3.2%-3.4% in the first half of the next fiscal and 3.9% in the third quarter of 2019-20, "with risks broadly balanced around the central trajectory". The central bank projected GDP growth to be in the range of 7.2%-7.4% in the first half of the next fiscal beginning April, and at 7.5% in the third quarter "with risks evenly balanced."

Two Reliance Jio's group companies shall soon shift their registered headquarters from Maharashtra to Gujarat pursuant to the outcome of an Extraordinary General Meeting (EGM) held here on Tuesday. Reliance Jio Digital Services Ltd. and the Reliance Jio Messaging Services Ltd. - currently based at Maker Chamber IV, Nariman Point in Mumbai, will go to a new location in Gujarat, the sources explained. An EGM on February 5 passed a Special Resolution to the effect for the two companies, by which they will now apply to the Central government under Section 13 of the Companies Act, 2013.  Reliance Industries shares closed at Rs1,288.00, down 1.70% on the NSE.

Telecom major Vodafone Idea on Wednesday reported a consolidated net loss of Rs5,004.6 crore for the quarter ended December 31, 2018. This was the first full quarter results for Vodafone Idea after the merger of Vodafone India and Idea Cellular completed in August. The company had reported a net loss of Rs4,973.8 crore during the July-September quarter. 

Private airline Jet Airways on Wednesday introduced a staggered framework to reward its domestic guests with substantially lower penalties in exchange for advanced intimation for changes in their bookings including cancellations, changes. The new policy would be implemented from February 7. "As part of the new policy, charges for various changes including those for flight, date, sector, booking class, cabin and others and refund penalties for ticket cancellations at least seven days prior to the date of travel would attract lower penalties compared to those who undertake booking changes within seven days," Jet Airways, said in a statement. "The dynamic penalties will reward guests who plan in advance with substantial savings," it added. Jet Airways India shares closed at Rs237.00, up 0.06% on the NSE.

The top gainers and top losers of the major indices are given in the table below:

The closing values of the major Asian indices are given in the table below:The Total Investment & Insurance Solutions

Major Indices (The Total Investment & Insurance Solutions)

India jumps 8 places to 36th on International IP Index -The Total Investment & Insurance Solutions

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07 February 2019

 

International Intellectual Property(The Total Investment & Insurance Solutions)

India has jumped eight places to 36th position on the International Intellectual Property (IP) Index, which analyses the IP climate in 50 global economies, this year. India's eight-point jump in 2019 from 44th position in 2018 is the highest increase among 50 nations mapped by the index, a release said.

The US, the UK, Sweden, France and Germany remained the top five economies on the intellectual property index in 2019 retaining their spots from the last year. The index brought out by the US Chamber of Commerce's Global Innovation Policy Center (GIPC) ranks countries based on 45 indicators that are critical to an innovation-led economy supported by robust patent, trademark, copyright, and trade secrets protection.

 "The improvement reflects important reforms implemented by Indian policy-makers towards building and sustaining an innovation ecosystem for domestic entrepreneurs and foreign investors alike," the release said. India's overall score has also increased substantially from 30.07 per cent (12.03 out of 40) in the previous edition to 36.04 per cent (16.22 out of 45) in the present edition.

"For the second year in a row, India's score represents the largest gain of any country measured on the Index, which covers over 90 per cent of global gross domestic product," said Patrick Kilbride, senior vice president of GIPC.

The US Chamber International IP Index provides an IP report card for the world and a blueprint for policymakers in countries like India that wish to bolster economic growth and jobs, innovation, and creativity.The Total Investment & Insurance Solutions

RBI raises collateral-free farm loan limit to Rs 1.6 lakh-The Total Investment & Insurance Solutions

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07 February 2019

RBI (The Total Investment & Insurance Solutions)

RBI Governor Shaktikanta Das today announced that the limit of collateral free agricultural loans has been increased from one lakh to 1.6 lakh. Addressing the post monetary policy announcement in Mumbai today, Mr. Das said the decision has been taken in view of the overall inflation and rise in the agricultural input costs since 2010 when the limit was last revised. Mr. Das said this move will enhance coverage of small and marginal farmers in the formal credit system.

Earlier today, in his maiden bi-monthly policy review, the Monetary Policy Committee headed by Mr. Das reduced the policy repo rate by 25 basis points from 6.5 percent to 6.25 percent and also changed the policy stance from calibrated tightening to neutral. 


The RBI Governor said he expects banks to transmit the rate cut benefit to customers and will have an interaction with all the banks in this regard within the coming fortnight. On the liquidity front, Mr. Das said that RBI is constantly and continuously monitoring the liquidity situation and based on the requirement, will ensure that there is no liquidity scarcity.

On the unexpected rate cut, Mr. Das said the MPC has factored in the possibility of fiscal slippage post various budget proposals and also the inflation outlook. Stating that the primary objective of RBI remains price stability, Mr. Das said that inflation is likely to touch the figure of 3.9 percent by the end of this year. 


RBI Governor said the expenditure to be incurred on the announcements made in the interim budget will not affect inflation in the short term. He added that RBI expects GST revenue to pick up considering that all the systems and procedures have now been streamlined.   

On the PM Kisan Scheme, the RBI Governor said the measure may result in boosting rural demand in certain pockets and it would aid rural purchasing power, especially agricultural products like seeds, fertilizers, etc.

Talking about the speculated dividend payment to the government, Mr. Das said RBI is duty-bound to pay the dividend to the government as per the norms of RBI Act. He said the RBI board will examine the Bimal Jalan Committee report on excess surplus once it is submitted and decide accordingly. He, however added that the decision of RBI board in this regard will be as per the highest principle and accounting norms and practices of central bank.

On the Prompt Corrective Action -PCA framework and the recent lifting of restrictions on three PSU banks, Mr. Das said RBI is continuously monitoring the performance to banks under PCA and examining their benchmark indicators. He said other banks will be taken out of PCA as soon as there is sizeable improvement in their performance.


When asked about ICICI Bank’s former CEO Chanda Kochhar’ indictment by the Srikrishna panel, the RBI Governor said it is for the investigating agencies to take further action. The Total Investment & Insurance Solutions