The fine print of the budget had some more surprises in store. While employer contribution to CPF had been permitted in the new tax regime, the CBDT has put an upper limit of Rs.7.50 lakhs for employer contribution towards the long term retirement and superannuation facilities of the employee. This limit is the combined that is applicable for contributory provident funds, NPS (National Pension System) and the Superannuation Fund contribution by an employer during a particular fiscal year. That surely limits the leeway that employees could have enjoyed in terms of tax free long term-income.
The week starting 10th February is likely to be a data heavy week with some critical macro data coming in. The CPI inflation for January and the IIP for December will be announced on 12th February while the WPI inflation will be announced on13th Feb. In addition, the all-important Delhi election outcome will be known on the 11th of February. Apart from these macro cues, a host of mega PSU companies are expected to announce their quarterly results during the week. There are important cues from US and Euro area data. Of course, the market reaction to the Budget and Credit Policy will also continue.
It looks like Indian corporates are getting increasingly jittery about borrowing in foreign currency. Data for Dec-19 released by RBI shows that foreign borrowings during the month fell 45% YOY to $2.09 billion. Of the total borrowing of $2.09 billion, $1.20 billion came through the automatic route for ECBs while the balance was through the approval route. Most of these bonds were dollar denominated with a very small portion of Masala bonds. Some of the big foreign currency borrowers in December included HPCL Mittal Pipelines, HDFC Credila, LIC Housing Finance and Toyota Financial Services.
There was some respite on the FPI flows front, although most of the flows came in through the debt route in February. In the first week of February, FPIs pumped in Rs.6350 into debt but pulled out Rs.1177 from equities resulting in net inflow of Rs.5177 crore in the first week. The sharp inflow into debt was largely on account of the RBI maintaining an accommodative stance and the massive liquidity infusion via LTROs already pressuring yields lower. The Chinese virus pandemic also led to greater flows into India as it was least vulnerable to the pandemic compared to other South East Asian nations.
Eight of the top ten companies on the Indices added value to the tune of Rs.157,000 crore in the post budget week as the market managed to put the concerns of the Union Budget behind. The rally was driven by a consumption drive, low oil prices and hopes that the Chinese pandemic may not really hit Indian markets to the extent expected. In fact, if the FPI flows are any indication, then a lot of Asia flows have flowed into Indian debt paper. Of the major Indian companies, Reliance Industries accounted for nearly 20% of the value accretion in the market. HDFC Bank and HDFC also contributed significantly as an accommodative stance in the monetary policy gave them that much needed boost. While SBI and HUL also joined the party, the surprise package was Bharti Airtel which surged post the results.
M&M reported 73% fall in net profits for the December quarter to Rs.380 crore for the December quarter. Revenues for the quarter were also lower by at Rs.12,120 crore as the number of units sold by the company in the quarter fell by over 10% on the back of sluggish sales off-take. The main fall came from a 22% fall in the company’s exports during the quarter. Of course, the large impact on the net profit was on account of an Rs.554 crore hit on extraordinary item. The company also said that the off-take of tractors had been hit by the unseasonal rains in September which hit farm incomes.
