The monsoon shortfall in India has become serious enough to warrant a separate mention by the PM in his “Mann ki Baat” broadcast. Modi called for aggressive water conservation as drought has hit crops in a big way. Prime Minister Modi underlined that there was an urgent need for water conservation at a grass root level as weak monsoons had pushed many regions to the brink of drought. Normally, only 8% of the rainfall is conserved and that gets impacted like in 2019 when the monsoon is already running at a deficit of 24%. Groundwater levels have fallen drastically across India according to Reuters.
A simplified GST may be on the cards sooner rather than later. In fact, the New GST filing system is expected to be officially launched from October 01st this year. GST 2.0 will be launched on October 01st as confirmed by Sushil Modi who heads the Group of Ministers (GOM) that is looking into GST revenue shortfall. However, the date for small taxpayers below Rs.5 crore is likely to be extended by 3 months. From the existing 36 returns per year, it will come down to just 12 for large tax payers and 4 for small tax payers. The idea is to expand the GST base, reduce compliance costs and increase revenues.
One this is clear that the FIIs are finding Indian and Indonesian banks really attractive in the current macro environment. Thanks to debt inflows, FPIs remained net buyers for the fifth month in a row in Jun-19. Foreign Portfolio Investors (FPIs) pumped in a total of Rs.10,384 crore into the Indian markets in the month of June, taking the cumulative YTD inflow in 2019 to Rs.87,313 crore. Out of the June inflow, Rs.8,112 crore flowed into debt and Rs.2,272 crore into equity. Global investors are finding the high real rates and the stable currency a major advantage in economies like India and Indonesia.
A bunch of heavyweights are actually holding up the Nifty despite a mountain of uncertainty. For the last week, five out of top-10 companies added Rs.37,000 crore in market cap. The gains in the heavyweight stocks were led by private banks, SBI and the FMCG major Hindustan Unilever during the last week of June. Technology stocks were the main pain point in the index largely on the back of a stronger rupee. For the week as a whole the Sensex was up by 200 points in anticipation of a positive outcome of the G-20 Summit at Osaka over the weekend. Sentiments turned positive.
There is good news for oil and global equities. Global markets may get a reprieve from the positive trade discussions at G-20. For China, the US and other global economies, the outcome of the G-20 Summit may come as a whiff of fresh air. Xi and Trump agreed to a temporary cessation of hostilities. The US will not impose additional tariffs on Chinese imports while China will resume import of US agricultural products. As a gesture, Trump has also eased restrictions on the Chinese telecom major, Huawei. In the meanwhile, Brent crude could get a boost from extension of supply cut deal between OPEC and Russia. The deal is expected to happen during the OPEC meeting in Vienna on July 01st and 02nd. Falih also confirmed that OPEC may stick to its 1.2 million bpd cut and was unlikely to deepen cuts.
Will Jet finally have an interested buyer? At least it seems so as the London based ADI-Group partnered with the Jet Airways Employees Union to make a bid for 75% stake in Jet Airways through the NCLT process. However, the flying license of Jet is under scrutiny and that may delay the process. Jet has outstanding debt of Rs.8,000 crore to banks and another Rs.13,000 crore to operational creditors. The airline also has another Rs.10,000 crore in terms of accumulated losses in its books. The haircut still needs to be worked out and banks may not be interested if the haircut is too high.
