During the previous week, the Nifty flattered but only to deceive as it closed below the psychological 11,000 mark. What is more is that nearly 16 stocks in the BSE-500 plunged by 60% in a single week. The Nifty had decisively crossed the 11,000 marks last week after a people-friendly budget and a credit policy that surprised the street with a 25 bps rate cut on top of a softening stance. However, global growth worries and massive losses by select Indian companies did the Nifty in. Some recent concerns over business groups like ADAG, Indiabulls, Dewan Housing and Zee have also spooked markets.
If you have not got your income tax refund, then you are not alone because the Income Tax Department has held back refunds to the tune of Rs.1 trillion. This was nearly 10% of the total direct tax collections for 2017-18 were of Rs.10 trillion. In some cases, the refunds extended back to 4 years. The CBDT has not approved tax refunds to large corporates. It may be recollected that delayed refunds beyond 90 days attracts interest at the rate of 6%. The government appears to be holding back on to refunds purely as a liquidity management measure considering revenue shortfalls.
The cold war may be back between the US and Russia and this time the standoff point appears to be Venezuela. Even as the US imposed sanctions on Venezuela, it is shifting banking relations to Russia. The Venezuelan state oil company, PDVSA, has told customers of its JV to deposit oil sales proceeds into a Russian bank, Gazprombank AO. The US imposed sanctions to block the flow of oil money to current president, Nicolas Maduro. Russia and China have been supportive of Maduro continuing as the president of Venezuela. This could be an interesting issue to keep a watch on.
ADAG group company boards recommend legal action against financers to whom the promoters had pledged shares. A few days after the sharp fall in the prices of ADAG stocks, the boards of group companies have recommended legal action against these financers for destroying wealth for nearly 72 lakh shareholders. In a statement to the exchanges, the two financers have admitted to selling shares but justified that the sale was as per normal practice. When shares are pledged and prices fall, the financers call for additional margin failing which the pledged shares are sold in the open market.
In a surprising move, the US has decided to withdraw zero-tariff benefits for India even as the US and China go into trade talks. Currently, Indian exports to the tune of nearly $5.6 billion are eligible for zero-tariffs in the US. This is part of the General System of Preferences, which has been operational since the 1970s. Indo-US bilateral trade stands at $126 billion annually. In a related move, Indian Forex Reserves got back above the $400 billion mark in the week to February 01st. The forex reserves got back above the $400 billion mark with an accretion of $2 billion. Forex reserves had fallen from a high of $427 billion in April 2018 to the $390 billion mark after the RBI had intervened aggressively to support the rupee by selling dollars. The RBI intervenes in the currency market through the spot and the futures market.
IMF’s Christian Lagarde has warned that oil exporters were yet to recover from the 2014 oil shock. Between mid-2014 and early 2016, the price of Brent crude fell from $115/bbl to $28/bbl. While prices have stabilized since, Lagarde has opined that these exporters may take much longer to recover from the shock. Specifically, she has cautioned the oil exporting nations of the Middle East against taking on massive White Elephant projects as it would make debt untenable. This warning came in the light of the massive investment plans undertaken by some of the Middle East nations.
