Markets closed with a sharp rally on Monday with the Nifty settling above the 12,070 mark and the Sensex also at an all time high. The rally was largely driven by telecom stocks as well as heavyweights like Reliance and SBI. On the global front, there was perceptible progress on the trade deal front with both the nations agreeing to seal the deal by the first week of January. That also added to the positive sentiments in the Indian markets. The Nifty has finally settled decisively above the 12,000 mark, something it had been struggling to break. Metals also gained on China stimulus hopes.
Tax collections have been fairly disappointing in the first 8 months of the year. Total GST collections stood at Rs.326,000 crore, almost half of the full year target for share of the centre. There have also been shortfalls in the direct tax collections for the first 7 months of the fiscal year with just about 40% of the full year collections being managed. The government has been counting on meeting its revenue targets this year to avoid the fiscal deficit shooting beyond a level. Already, the government has relied on the RBI to transfer Rs.176,000 crore from its reserves during the year.
The UK Pound gained on Monday after pre poll estimates clearly indicated that the Conservatives were ahead in the election sweepstakes. Boris Johnson has been seeking re-election on the promise that he would ensure a time bound BREXIT. On the other hand, Labour leader, Corbyn has been promising that they would get a BREXIT deal favouring UK before exiting from the Union. While the Conservatives may have lost some of their early lead, they continue to have a clear advantage over Labour as they go into polls. For the global markets, this at least puts an end to the uncertainty surrounding BREXIT.
Moody’s considers IBC for NBFCs as credit positive for the banking system in particular and for the market as a whole. In the past, NBFCs had been kept out of the ambit of IBC but post the amendment on November 15th, the RBI made an exception and referred Dewan Housing to IBC for resolution. This will ensure that the liquidation is conducted in an organized manner and the proceeds distributed. The government’s worry has been that some of the NBFC that are currently under stress, like IL&FS and DHFL, are systemically important due to the huge exposures that banks have to their books.
Subhash Chandra stepped down from the chairmanship of Zee Entertainment after their stake in the company fell to just about 5%. Out of this 5%, nearly 1.1% is still pledged. The problems at the Essel group first came to light in early March this year when they asked for more time to repay the mutual funds. Many funds had issued FMPs that had invested heavily in Essel group bonds that were backed by shares of Subhash Chandra as a pledge. However, in March Chandra managed to enter into a standstill agreement with the funds not to sell pledged shares with a promise to repay all the loans by September. Since only part of the loan was paid by September, Chandra had to sell more of his stake to global investors leading to substantial erosion in his holdings.
The Supreme Court will be issuing its final order in the Maharashtra assembly formation issue on Tuesday. The matters came to a head on Saturday after the Governor invited Devendra Fadnavis to form the government with the purported support of Ajit Pawar. However, things took a turn this week after the opposition consisting of Shiv Sena, NCP and the Congress managed to put up a show of strength. The final order of the Supreme Court will be of special importance as it will determine the direction of the case. The governor has given Fadnavis 14 days time to prove his majority on the floor.
