Brent crude prices fell to a one year low below the level of $53/bbl on Wednesday as the risk of the Coronavirus spreading raised the fears among the oil traders. There were reported cases of the virus in Europe and the Middle East and the IMF has already warned of a distinct slowdown in global growth if the pandemic was not contained immediately. China has already seen its oil demand fall by 25% in the last few weeks and the sharply weak auto sales in China in January are only indicative of the same. Oil has fallen despite indications from OPEC and Russia that they may be looking at steeper supply cuts.
The two day visit by Donald Trump did not materialize in any trade deal but the mandate was clear that India had to rethink about its tariff regime if the trade deal had to happen. Trump has complained that India has one of the highest levels of tariffs in the world. The US has been worried that America runs a huge trade deficit with India while China runs a massive trade surplus with India. India had been looking at a free trade agreement (FTA) with the US but Trump has indicated that it could only happen towards the end of the year. However, the multi-tier tariff structure and market access could be the key issues.
IN a move to bring greater transparency to the mutual fund buying process, the regulator SEBI has permitted investors to directly purchase and redeem mutual funds from the stock exchange. Currently, the exchange mutual fund platforms like the BSE STAR can only be accessed by brokers and Registered Investment Advisors (RIA). Now investors in mutual funds will be allowed to directly access the MF platform. They must use it prudently and not to trade in MFs. The big advantage of this move is that now it would become possible for investors to buy Direct Plans also from the exchange platform.
According to a report put out by SBI Research, the GDP for the third quarter ended December 2019 is estimated to have grown by 4.5%. This is the same rate of growth reported for the second quarter. The actual GDP growth rate for the December quarter will be announced by MOSPI on 28th February although most of the economists are expecting the GDP growth to be in that range. Interestingly, SBI has upgraded the full year growth rate for FY20 from 4.6% to 4.7%. This is despite the fact that Q3 growth will be lowest GDP growth seen in the last 26 quarters. Chinese virus could impact Q4 growth.
The biggest challenge for BREXIT could arise in the next few days as they get into trade negotiations with the EU. The EU has remained the largest trading partner for UK and the concessional access till last year had given a major preferential advantage to UK. Now, with BREXIT happening on January 31, UK will have to look at signing a fresh trade deal with the EU. That is where the real challenge comes. Both sides differ on the scale and scope of the likely trade deal. UK wants a simple free trade agreement of the kind it has signed with Canada and Japan. The EU, on the other hand, does not want Britain to continue to get trade advantages as it would undercut the value of EU membership. EU does not want to give any concessions to Britain unless it has guarantees of fair competition. That could be the issue.
The big $16 billion deal between Flipkart and Wal-Mart may have run into tax troubles. A number of global investors that owned Flipkart have moved the Authority of Advance Rulings (AAR) for clarity on capital gains tax on the $16 billion deal. Wal-Mart, apparently, deducted capital gains tax from foreign shareholders including Accel Partners, Softbank and Naspers to pay the withholding tax to the government as per extant rules. Wal-Mart had deposited TDS of Rs.7439 crore with IT department. Sellers need to get a certificate under Section 197 for DTAA, which had apparently been rejected.
