In a bid to boost economic growth, the government eased foreign investment norms in a plethora of sectors. The government allowed 26% FDI in digital media and 100% foreign ownership in coal mining and fuel sales. It also allowed 100% FDI in contract manufacturing and eased norms for single brand retailers. Coal mining appears to be a big shift because in the past the government had only allowed FDI into captive coal mining and now they will be permitted into general coal mining as well. Single brand retail still continues to be the controversial issue as it impacts the unorganized retail sector.
The government is at it again to handle the surplus sugar in India and to regulate the prices providing export subsidy for 6 million tonnes of sugar in 2019-20. With a much higher cost of production compared to Brazil and Thailand, Indian sugar companies had been caught between rising sugarcane prices and a glut of sugar supply in the world. The government has committed to provide export subsidy to the tune of nearly $900 million to encourage sugar exports. Global sugar producers have already complained to the WTO on this for using unfair government support for the same.
If you thought that direct plans of mutual funds were low-cost, then think again. The SEBI Chief warned Mutual Funds against additional charges on Direct Plans. Ashok Tyagi has pointed out that Direct Plans were being charged higher costs under other heads and classes defeating the very purpose of direct plans. Direct plans were officially launched in 2013 where investors can directly invest with the AMC and save on the selling commissions. This reduces the TER by over 1.25% for equity funds making a big difference to CAGR returns over the long run. The actual advantage may effectively be lower.
Downstream oil refining and marketing Companies bounced back on Wednesday on positive cues to cheer about. The stable crude oil prices globally combined with improved gross refining margins (GRMs) in the June quarter have helped OMCs to put up a good performance in trade. Earlier, the OMCs had announced that they would pass on their BS-VI investment to the tune of Rs.30,000 crore to consumers in the form of higher diesel and petrol prices from mid-2020 onwards. OMCs were among the key gainers on Tuesday on expectations that their financials should see an improvement.
British PM, Boris Johnson will suspend Parliament ahead of BREXIT deadline of October 31 in a bid to prevent MPs from derailing the BREXIT plan. The Queen of England has already approved the move. Johnson had committed to the House of Commons that England would move out of the EU on October 31, irrespective of whether there is a BREXIT deal or not. Meanwhile, the impact of BREXIT is already showing in EU after it became clear that Germany’s export slump may have been driven by BREXIT, rather than by Trump tariffs. In the June quarter, German exports to the US actually increased while it was German exports to the UK that nosedived by 15% on a YOY basis. UK alone accounts for 6% of Germany’s total exports and is 4th trade partner for Germany and that is now being hit.
Sensex snapped a 3-day winning streak to end in the red on Wednesday. The fall in the Sensex was driven by sustained FPI selling and the perception that short covering may not be able to sustain the rally. Banks, metals and autos were among the losers on Wednesday as the tapering of short covering and fears of a global slowdown had an impact. The sharp downgrades in India’s full year GDP estimates for FY-20 also had an impact on the stock markets. The June quarter GDP figure will be announced on August 30th and that is likely to be an important input for the full year growth estimates.
