Contrary to their original pronouncement, the government finally did intervene and bail the telecom companies out. On Wednesday, the government announces the framework for merger of BSNL and MTNL. With a view to protecting the interests of lakhs of workers, the government finally decided to intervene and bail out the beleaguered telecom companies with an Rs.70,000 crore rescue package. The relief package also includes an Rs.15,000 crore sovereign bond issue. The government will also offer a VRS package to employees and look to monetize assets worth Rs.38,000 crore to retire debt.
At long last, Indian fund managers are also struggling to beat the index like their global counterparts. Large cap mutual funds fail to beat the benchmark index in the last one year. As per a BS report, nearly 77% of the large cap funds in India underperformed during the last one year. Over a 3 year period, this underperformance goes as high as 82%. This was the case with ELSS funds also; despite the 3 year lock in period. However, nearly 82% of the small and mid cap funds managed to outperform the indices over 1 year, but it remained an underperformer over 5 years. But large caps surely have a worry here.
The Government announced hikes in the minimum support prices (MSP) for Rabi crops. In a move that was largely anticipated, the government hiked the MSP on Rabi crops based on the recommendations of the CACP. While the MSP for wheat was hiked by Rs.85 per quintal, the MSP for pulses was hiked by Rs.325 per quintal. The idea of the MSP mechanism is to encourage cultivation of these crops and also ensure that the farmer gets a remunerative price for the produce. The government has been committed to double farm incomes by 2022 and higher MSP is integral to this goal.
You can now have gold in granular quantities and also take delivery in physical form. India’s largest commodity exchange, MCX, is offering micro gold initiating 1-gram gold futures trading with delivery. With this move, MCX has opened the doors for the small and retail investors to buy gold on margin and store it in a vault before taking delivery. According to a report in Business Standard, this is the smallest denomination of gold futures available for delivery. Like any normal commodity futures transaction, the buyer will only have to pay margin till delivery and can also trade on the contract for short term.
Sensex recovered from its one-day Infosys hiccup and bounced back on Wednesday supported by auto and PSU banking stocks. With the EU still uncertain about granting UK an extension of 3 months, stocks managed to inch up across markets despite some concerns on the earnings front. Among the indices, the Dow Jones, S&P, NASDAQ and Euro Stoxx were in positive. Meanwhile, in the biggest even risk this month, the EU has kept UK waiting on BREXIT even as Johnson prepares for fresh elections. Currently, the UK is just awaiting the response of the EU to the postponement of the deadline. With Johnson hinting at his unwillingness to support an extension, the EU has the ball in its court. Johnson indicated that if the EU offers a 3 month delay then he would prefer BREXIT on Oct-31 and call fresh elections.
Brent crude closes 246 bps higher at $61.17/bbl on US oil draw downs. The rally in oil stocks came in late on Wednesday but it did help Brent to settle decisively settle above the $60/bbl mark. There was a much larger than expected drawdown in US oil stocks indicating that demand continued to remain buoyant. At the same time, the readiness of OPEC to cut supplies beyond the current 1.2 million bpd also helped to boost oil prices on Wednesday. Oil prices have been hovering around the $60/bbl mark for a long time and it remains to be seen if Brent crude can make a decisive move this week.
