There appears to be new complications arising in the case of Jet Airways with Banks now seeking more elaborate forensic audit of the books of Jet Airways. Banks that lent money to Jet Airways have now approached Ernst & Young for a more elaborate forensic audit of the books of Jet Airways, according to a report in Bloomberg. The initial forensic audit had thrown up related party transactions in the form of Rs.3,000 crore loan given to Jet Lite. Banks are of the view that there could be more such transactions in the books. Banks also suspect that the promoters may have flushed funds outside India.
The long awaited Jalan Panel report may just about be ready to submit and the panel has apparently suggested a staggered transfer of funds to the government. The panel was set up under Dr. Bimal Jalan to take an objective view on how much of the annual surplus the RBI must transfer to the government each year. According to a report in Bloomberg, the Jalan Panel had originally suggested a transfer of Rs.8,000 crore which was not acceptable to the government. The modified report has reportedly spoken about a staggered transfer over a period of 3 to 5 years and the amount is likely to be larger.
The rally in the indices continued although the momentum was obviously waning. Nifty and Sensex rallied for third day in succession led by banking stocks. It was a day when the markets were driven higher by the support of banking stocks. PSU banking stocks were the principal drivers as the Union Budget announcements on the capital support front are expected to be largely positive for the PSU banks. Also the amendments to the IBC are expected to favour banks and help them realize a better price in the future IBC cases. A/D ratio was negative for the Nifty and also for the market overall.
With the US consumer data very strong, the dollar has showed signs of strengthening as evidenced by the Dollar Index (DXY). Dollar strengthened as the Indian rupee got back closer to the 69/$ mark. After going as high as 68/$, the rupee has started weakening on the back of equity outflows from FIIs. In the first two weeks of July, the overall flows from FPIs were positive but that was largely led by flows into debt even as equity outflows continue to hamper the markets on a daily basis. Forex traders have also been betting on a weakening of the rupee as the dollar strengthens on strong data from the US.
Bond yields on the benchmark bounced back on government cap on sovereign bond issues. After touching a low of 6.25%, the bond yields bounced back after the government indicated that sovereign bond issue may be capped at $5 billion this fiscal against the $10 billion mentioned in the budget. The government may look at FPI debt flows to bridge this gap as it does not entail currency risk. Meanwhile, the Bank of England expects balance sheets to halve when QE reverses, that is as and when it happens. The BOE had bought billions of pounds worth of securities after the financial crisis and currently holds a bond portfolio of £600 billion. The BOE expects that this could halve to around £275 billion once the QE is reversed. However, the BOE was not committal on whether and when the QE will reverse.
The Cabinet has cleared seven amendments to the Insolvency & Bankruptcy Code (IBC). The Cabinet cleared some important amendments to the IBC which include maximization of value of a corporate debtor as a going concern and adhering to strict time lines. These amendments are aimed at filling critical gaps in the insolvency process and at the same time maximizing value that can be realized out of the debt in the corporate insolvency process. The purpose of these amendments is to make the entire process of IBC smoother and also more meaningful from the bank and promoter perspective.
