Midnight News Update – Jan 16th 2017
Among the various customer-facing sectors hit by the demonetization drive, the realty sector seems to be the worst hit. Most developers in key geographies have seen sales dip by nearly 50% in the last 3 months. The only hope that the developers are pinning their hopes on is that a revival in demand on the back of white money will turn the fortunes of the real estate sector. Most retail buyers are holding back their purchases of a home waiting for interest rates to fall further from current levels. In fact, with the government coming down heavily on black money and benami transactions, the secondary market for property has been really hit hard.
In a departure from previous practice, SEBI may allow mutual funds to get celebrities to create greater awareness of mutual funds and market the product to the end customer. SEBI is expected to issue new advertising code to this effect. While SEBI will permit celebrities to endorse the industry as a whole, they will not be allowed to endorse specific features of specific products. In addition, SEBI also permitted mutual funds to invest in REITS and InvITs. So while celebrities will be allowed to promote mutual funds as a concept and product to the investors, they will not be permitted to endorse specific AMCs or very micro features of the product.
There is the crucial GST Committee meet that is coming up on 16th January and Jaitley is hopeful that this meeting should help break the deadlock between the centre and the states on the subject of sharing and distribution of powers. While most of the issues have been ironed out, the committee has still not be able to agree upon who should have overriding powers in matters of GST. While states are seeking full control over clients with turnover up to Rs.1.50 crore per annum, the centre is averse to this kind of a horizontal incision.
Automobile exports for the full year 2016 were down by 5% on a YOY basis. The fall in export value was more pronounced in the two-wheeler and three-wheeler space. Among the key export markets for Indian automobiles, Africa and Latin American saw weak demand due to the pressure applied by low oil prices. Most oil economies are struggling under the onslaught of weak oil prices for over 1 year now. Also the consistent devaluation of currencies across Latin America is making it difficult for Indian auto exporters to remain competitive.
As RIL results are the next big thing for markets this week, the broad expectation is of a spurt in gross refining margins (GRM). The spurt in GRM alone is likely to give a major boost to RIL 3rd quarter earnings. The GRM is likely to slightly move up from $10.1/bbl last quarter to $11/bbl this quarter. The big question that investors in RIL will continue to ask is whether it makes economic sense to take out profits from oil and petrochemicals and divert them into telecom, an industry that has been plagued by weak margins and price competition for a long time now.
SEBI issued specific norms to prevent the listing of shares through the merger route via reverse merger with a smaller company. SEBI has notified conditions under which the company in question will be required to seek specific permission from the public shareholders of the merging company. However, not all mergers of listed and unlisted companies are done with the intent of back-door listing. Hence SEBI needs to ensure that this does not dissuade genuine such reverser merger transactions.
In the meanwhile, the government is finalizing its fund infusion into the PSU banks to recapitalize them. The government has currently allocated Rs.25,000 crore for the full year but it is very likely that the government may exceed this limit as banks have also seen a hit due to the demonetization drive. As per the 4-year roadmap for the PSU banks, the government will be infusing Rs70,000 crore during these 4 years and these banks will have to raise another Rs.110,000 crore from the open market.
If the government has its way, then it may soon permit 49% FDI in print media. Currently, considering the sensitivity of the industry, only 26% is permitted through the FDI route. Last year, the government had relaxed FDI norms for a variety of sectors including civil aviation, defence, pharma and food processing. With the rapid proliferation of the internet and news available on a 24X7 basis, the idea of limiting FDI in print media is already doubtful.
