IT companies may have a tough time against US visa policies. Trump’s immigration crackdown may mean that H1-B visas may become tougher. In fact, even Indian immigrants with specialized skills saw their visas getting rejected or getting caught up in legal delays. Many visa attorneys concede that visa approvals have become extremely difficult after Trump assumed power. Indian IT companies have long relied on filling up the annual quota of 85,000 H1-B visas and that may have just gotten tighter. This could just mean higher costs for Indian IT companies and also delays in project execution.
On the day of the POK strikes, India also decided to placate the US, which could play a key role. Indian government postponed levying of retaliatory tariffs on US imports by one month from March 02nd to April 01st. India had threatened the US with retaliatory tariffs after it had refused to exempt India from steel tariffs in August last year. That decision has since been delayed. With the border situation fluid, India may not be too keen to get into the bad books of the US. The decision came after India sought diplomatic support from the most powerful nations to isolate Pakistan on the terrorism issue.
The big challenge for the government in the next few weeks will be the soaring fiscal deficit as it touched 122% of full-year target by end of January. In a data point that could worry bond markets, India’s fiscal deficit has substantially exceeded the full year target with still two months to go. Lower revenue collections and a tepid response to the disinvestment plans have been the key reason. The interim budget has also announced an assured income scheme for farmers and that will put further pressure on the fiscal deficit. The final fiscal deficit number could impact bond yields.
There could be some more good news for the PSU banks. Post the recent capital injection by the government, the RBI has decided to remove Allahabad Bank, Corporation Bank and Dhanalaxmi Bank from the PCA list. This removal means that these banks will once again be able to build up their loan books. Normally, banks are taken off the PCA when the net NPAs go below 6%. Restrictions on dividends and branch expansion will also go. The government has already targeted to move all the PCA banks back into the banking mainstream latest by July this year.
The stock markets went into a tizzy after the IAF carried out precise strikes on terror camps in POK in the early hours of 26th Feb. The Nifty and Sensex opened deep in the red but recovered most of the losses by late afternoon before closing the day once again in the red. The pressure was visible on most rate sensitives with traders wary of taking aggressive positions. A/D ratio was 19:31. Brent Crude also had an impact on markets as it hardened by 96 bps to $65.38/bbl after OPEC said that it would stick to supply cuts. Oil prices had cracked sharply by $3/bbl on Monday after Trump had tweeted asking OPEC to go slow on supply cuts. Sanctions on Venezuela and Iran are also putting pressure on oil prices but a lot will really depend on how the future of the US-China trade talks pan out.
The RBI has proposed a new compensation structure for private and foreign banks operating in India. As per the RBI proposal, the top management of these banks will now have to agree to 50% of their income as a variable with ESOPs included as part of variable pay. Also, the overall variable pay will not be allowed to exceed 200% of the fixed pay. These norms were proposed to align the interest of the shareholders with the interests of the management and the promoter group of the bank. This has been necessitated after serious corporate governance issues emerged in a number of large private banks.
