In a highly controversial move, the US decided to impose 25% import duty on all steel imports and 10% on all aluminium imports. This has raised the spectre of a global trade with the EU already threatening to impose retaliatory tariffs on US imports into EU. For Indian companies, the volume of steel exports to the US is just about 5% and hence the impact may not really be substantial. Trump had promised to hike import duties and protect domestic US steel producers even at the risk of a trade war. How this move impacts global trade equations and global currencies in the next few days remains to be seen!
The ruling NDA put up a stellar show in the North-East assembly elections. The BJP swept Tripura, is about to form a coalition government in Nagaland and may just about tip the scales in Meghalaya. From the capital markets point of view, this will be seen as a reaffirmation of the reforms process that began in the year 2014 and has been sustained till date. With this victory, only the Southern part of India really out of bounds for the BJP. If the BJP can also put up a good show in Karnataka and Rajasthan, then they may be in with a real chance of returning to power in 2019. That would be a boost for stock markets.
The CBI is currently probing an income tax fraud that has been allegedly perpetrated by a chartered accountant in collusion with Infosys officials. The fraud was about issuing refund orders against fake documents in which officers of Infosys and the CPC are alleged to have colluded. The loss to the exchequer is estimated to the tune of Rs.5 crore. These fraudulent refunds pertain to the financial year 2014 onwards. The chartered accountant, Nagesh Shastri, the kingpin of the scam had used the revised returns methodology to make inflated claims for refunds with the connivance of officials.
A special court has issued non-bailable warrants against Nirav Modi and Mehul Choksi in the Rs.12,700 PNB scam, although their exact whereabouts are not known. Both had left India before the cases were filed and did not turn up when summoned by the investigating agency. Officials of PNB and the NIrav Modi group in India have already been taken into custody but not much progress is likely unless the CBI can lay its hands on the kingpins. It may be recollected that the Nirav Modi group had siphoned out $2 billion through the issue of fake Letters of Undertaking (LOU) by conniving officials of PNB.
The US Trump administration plan to rescind H-4 visas to the spouses of migrant workers has been delayed but the officials confirmed that in the long run this plan to rescind such visas was on. The technology industry had lobbied against the move citing that it was harmful to America’s ability to attract skilled migrant workers. The argument of the lobby was that these H-4 visas did not really impact the job opportunities for US residents. The rule was put in place by Obama but Trump wanted that rescinded to favour local Americans. The US grants nearly 85,000 H1-B visas each year to skilled migrant workers and has already issued H-4 visas to nearly 104,000 spouses. The Trump administration has already asked the DHS to limit the H1-B visas only to the most skilled of workers.
The trading week is largely likely to be impacted by Trump’s trade policy and the likelihood of any retaliation by the EU and China. The markets will be hoping that it does not escalate into an all-out trade war. Markets will also be watching the PSU banking space, especially in the aftermath of the passage of the Fugitive Economic Offenders Bill. The bill allows the government to attach properties of such offenders even if they are held in Benami or proxy names. In the Indian context, the focus will be on the PMI Services data, especially after the PMI manufacturing came in at a 4-month low.
