Even as the WHO has declared the Chinese Corona Virus as a health emergency, the toll continues to mount. According to last reports, the death toll has already crossed 450 with more than 20,000 officially infected with the virus. The spread of the virus led to an 8% correction in the Chinese markets on Monday. The price of crude oil has already crashed with the pandemic expected to lead to a fall in the demand for oil. The Chinese government was supposed to infuse $174 billion to stabilize markets but obviously they are waiting for the pandemic to settle down. Asian markets were under pressure.
The abolition of dividend distribution tax (DDT) and the introduction of withholding tax on dividends led to most high dividend yield stocks falling sharply post the budget. However, experts point out that this shift out of DDT could create an arbitrage for dividend yield funds over dividend yield stocks. For example, a large investor with a substantial dividend income will now end up paying nearly 43.5% taxes on the dividend income. A better arbitrage would be to opt for the growth plan of a high dividend yield fund since mutual funds, being pass through trusts, do not get taxed on the dividend receipt.
The Union Budget 2020 has left most mutual funds confused about the interpretation of TDS on mutual fund income distribution. The budget has stipulated that all incomes distributed by the mutual fund must be paid after deducting TDS at the rate of 10% for resident investors and 20% for NRI investors. The confusion is whether such distributions only include dividends or capital gains too. The AMFI is not too clear at this point of time and has sought greater clarity from the CBDT on this issue. If that is the case, then the mutual funds will be required to deduct TDS on all redemptions by investors.
Manufacturing Purchase Manager’s Index (PMI) touched an 8-year high of 55.3 for the month of January 2020. For the PMI, the level of 50 is the cut-off between an expanding manufacturing sector and a contracting manufacturing sector. A sharp spike in PMI to 55.3 means that the manufacturing sector is expanding and also gathering momentum. For January, the spike in manufacturing was driven by new orders and also higher factory output. To an extent, this can also be explained by the low base on which this growth is being seen. It needs to be seen if the positive trend in PMI can be sustained in the future.
Just three days after BREXIT, UK has officially announced the terms of trade it expects from the EU. According to Johnson, one model was a deep trade relationship on the lines of what UK had signed with Canada. The other option was to have a relationship purely within the ambit of the BREXIT Withdrawal Agreement. Johnson has underlined that they would expect the trade agreement with Europe to cover comprehensive free trade, agreement on fisheries, cooperation on internal security and technical agreements on aviation and nuclear cooperation. Technically, UK loses out its special status in the EU post BREXIT but it has been trying to negotiate for a parallel agreement with the EU nations. Eventually, UK may get a sweetened deal considering its centrality of EU relations with the US.
TCS has bagged a $1.5 billion deal from Wal Green Boots Alliance of the US. This contract will be spread over a period of 10 years. TCS will provide managed services including application maintenance and support as well as the required infrastructure and security operations. Wal Green is a global leader in retail and wholesale pharmacy and the contract is intended to transform the latter’s IT model. TCS will blend artificial intelligence, machine learning and advanced software engineering to enhance operational resilience and boost productivity for the client.
