The Tata Group has approached the Supreme Court against the order of the NCLAT to reinstate Cyrus Mistry at the helm of Tata Sons. It may be recollected that Mistry was removed from the post of Chairman of Tata Sons in late 2016. He was initially replaced by Ratan Tata before N Chandrasekharan was appointed as the head of Tata Sons. Tata counsel has argued that the NCLAT decision is a blow to corporate democracy as it impinges on the rights of the board of directors. Tatas have argued that Mistry himself had not sought restoration of his position and so the NCLAT had exceeded its brief.
The ISMA has reported that the output of sugar had fallen by nearly 30% to 7.79 million tonnes for the first 3 months of the sugar cycle. However, this has resulted in a rapid rise in sugar imports with nearly 2.5 million tonnes of sugar imports already contracted by the mills. For the year 2019-20, the central government has not increased the price of sugar as a result of which the states have also not hiked the state advised price (SAP). The second largest producer of sugar in India, the state of Maharashtra, has seen a 65% fall in output due to excess rains post September, leading to severe crop losses.
For the month of December, auto sales continued to remain muted but for Bajaj Auto it was once again a case of exports saving the day. Overall sales of Bajaj Auto for December dipped by 3% to 336.055 units but exports were up by 13% which more than compensated for the steep fall in domestic sales. Bajaj Auto saw an 8% growth in commercial vehicles to 51,253 units. Over the last one year, Bajaj Auto has clearly outperformed Hero Moto as the focus on domestic markets has become a real challenge for Hero while Bajaj has gained from its export market. That dichotomy is also visible in the price.
The Nifty and the Sensex touched all time highs in tandem with global markets which did manage to scale higher levels. The first big trigger for the global markets came from the imminent trade deal that is expected to be done and dusted by 15th of January. In addition, the Chinese central bank cut reserves sharply this week releasing close to $115 billion of liquidity into the system. Most emerging markets and developed markets have been looking up to China to continue the stimulus package so that the global growth impulses can be sustained and also the risk-on flows from FPIs can be encouraged.
Air India may be getting into a tight corner with each passing day. The airline badly needs a rescue package including an early divestment of government stake as well as more private energy to revive the business. Air India unions have been remonstrating that with each passing day, Air India was being pushed closer to bankruptcy. Currently, Air India is making operational losses of Rs.20 crore on a daily basis and it is already sitting on a debt pile of Rs.60,000 crore. Unlike in the case of Jet, the government needs to show a lot more alacrity in dealing with the situation. Earlier, the government had tried selling Air India but there was limited interest without majority control. Now, the government is open to ceding majority control in Air India as well as ring-fencing the deep value assets of the airline.
After two successful rounds of Operation Twist, worth Rs.10,000 crore each, the RBI is now planning the third round of simultaneous buying of long dated bonds and selling of short dated bonds. Essentially, it is just a restructuring of the bond portfolio with the government but it is useful in keeping the long term yields in check. This type of operation is very common in the US and has been used extensively in the last five years. This will force the banks to transmit rates much faster to the end customer. In the last 1 year, the RBI cut rates by 135 bps but borrowing cost reduction was just about 50 bps.
