Technology bellwether TCS posted net profits of Rs.8,105 crore in the third quarter ended December 2018. According to a report in the Economic Times, TCS reported a 24.1% growth in net profits to an all time record of Rs.8,105 crore. The company also announced an interim dividend of Rs.4 to shareholders. While US revenues grew by 8.2%, UK revenues grew by 25% while European revenues grew by 17.6%. TCS also added 6,827 employees on a net basis during the quarter. The BFSI segment did very well with 8.6% growth even as digital revenues traction continued.
GST Council had some good news for MSMEs and small traders as it further relaxed the GST entry norms for MSME and retailers. The minimum threshold for being liable to pay GST was doubled from Rs.20 lakhs per annum to Rs.40 lakhs per annum. In addition, the limit for the composition scheme, where flat GST can be paid, has been raised from turnover of Rs.1 crore to Rs.1.50 crore. In addition, a number of services were also permitted to opt for composition scheme, which was not allowed earlier. More clarity and fine tuning by the GST Council is expected on procedural matters in the next meeting.
US drags down global markets on slow trade talks progress and weak retail data. Retail and consumer discretionary shares dragged the US markets down after reports of a retail slowdown in US consumer demand. Macy’s, Target and B&N gave a weak guidance for the coming quarters. Markets were also disappointed by the lack of tangible progress on the US-China trade talks after no concrete announcements came even a day after the talks had concluded. The markets have been betting on a concrete outcome of the trade war talks and have been bullish on the back of those hopes.
There could be further downsides on retail inflation. Reuters survey poll hints at lowest CPI inflation in 18 months. As per a poll survey conducted by Reuters, the CPI inflation for the month of December could be as low as 2.20%. This number was last seen in June 2017. The low inflation is likely to be driven by weak food prices and a sharp fall in the price of crude oil. This could bring the rate of CPI inflation very close to the lower end of RBI’s comfort range of 2-6%, according to Reuters. The only worry is that this low inflation could also be a sign of slower growth in the GDP numbers.
RBI has been in the centre of action during the week. On the one hand, the RBI decided to evaluate Q3 earnings before easing lending curbs on banks. RBI needed satisfactory progress in the third quarter results of the eleven banks that are currently under prompt corrective action (PCA). That means banks will have to wait for more than a month for any concrete measures and any revival in commercial lending. On the subject of RBI role, Bimal Jalan has underlined that the RBI has to be accountable to the government operate within the framework specified by the government. Dr. Jalan was appointed as head of the Reserves Panel to explore the feasibility of the RBI repaying part of its reserves to the government of India. There are already reports of a special $5.8 billion dividend by RBI.
The pressure of weak Chinese demand is now out in the open. Jaguar Land Rover (part of Tata Motors) is to cut nearly 4500 jobs in the UK. The decision to cut jobs in UK is a direct outcome of the slowdown in demand coming from China. This layoff represents more than 10% of the total strength of 40,000 employees that JLR has in UK. Chinese demand had earlier forced JLR to temporarily shut down its plant. However, with China expected to witness slower growth in GDP, JLR will be retrenching staff to ensure that costs are in sync. The price impact on Tata Motors should be positive.
