From tariff wars, Indian telecom companies may be moving towards tariff hikes as the losses begin to pinch. Vodafone Idea and Airtel expected to hike tariffs to compensate for AGR. In the light of the Rs.70,000 crore payable as AGR charges to the DOT, Airtel and Vodafone have announced hike in tariffs to recover part of the AGR. These hikes will be effective from December 01. In the September quarter, Airtel had a reported a loss of Rs.27,600 crore while Vodafone Idea had reported a loss of Rs.50,922 crore writing off their entire AGR payouts in this quarter. Even RCOM had losses of Rs.31,000 crore.
The immediate corollary would be that Indian equity fund holders are finally becoming long term in their approach. Equity mutual funds see 35% corpus staying invested for more than 2 years. According to a report by AMFI, nearly 35% of the equity corpus remained invested in equity funds for more than 2 years while 67% of the investments stayed put in equity funds for more than 1 year. This compares favourably with a corresponding figure of 40% for debt funds. The proliferation of SIPs by retail investors has built a more long term culture with respect to equity funds in the last few years.
Both the Indian and the US markets were unimpressed by the pace of the trade deal discussions. Nifty closed flat on Monday while US markets awaited trade deal confirmation. The Nifty closed flat on Monday but the three US indices were under pressure after opening in the positive. The markets had started off on a positive note on hopes that the trade deal should get through in the light of the concessions by the US government to Huawei. However, Beijing appears to be dragging its feet and traders are awaiting something more concrete on the trade deal before taking a market view.
The delay in the trade deal also hit the sentiments surrounding crude oil prices. Crude oil fell sharply by 156 bps to $63.31/bbl as trade talk delays weighed. Crude oil prices fell sharply on Monday after the trade deal appeared to be getting delayed. The oil markets had been heavily betting on an early trade deal, revival of demand in China and the US as well as a major stimulus by China. Now, only the stimulus looks likely in the immediate future. A trade deal was supposed to be a major demand booster for oil and the sentiments have weakened after Russia also hinted that it may not join in more supply cuts.
In the light of the latest NCAER report pegging the full year GDP growth at just 4.9%, a cross section of economists have called for urgent fiscal measures to boost growth. Apparently, monetary measures do not seem to be very effective in propping up growth. Economists apprehend that the combination of low growth and rising inflation could create a stagflation situation in India. Nowhere is the slowdown more evident than in auto companies and steel companies are doing their bit. They have reduced prices by 14% for auto companies to arrest slowdown. This will help the auto companies to reduce their cost of manufacturing and pass on the price cuts to the end customer with a view to boost demand. Steel does constitute a significant portion of the cost of manufacturing an automobile.
The US has decided to extend the license of Huawei by another 90 days to transact with American companies. This is seen more as a trade deal gesture. As part of the trade deal, China had asked to lift the ban on Huawei and also to unwind most of the previous tariffs. Huawei has been accused in the past of being a security threat for the US. The trade deal is now expected in early December. However, apart from the Huawei concessions, the Chinese government has also been insisting on a unilateral withdrawal of all penal tariffs imposed by the US on Chinese goods post March 2018.
