The centre has finally released Rs.35,000 crore as state compensation of GST. GST is collected in the form of CGST, IGST and SGST and then the government assigns revenues to the state too. In the last few months, the centre had not transmitted any revenue share to the states due to weak revenue collections. In fact, there were reports that the centre may ask the states to levy additional cess on petrol and liquor to address the shortfall. This had put states under a lot of financial stress. Some states were also planning to take the centre to court over non-payment of GST dues to the states.
The benchmark 10-year bond yields in India have rallied sharply post the monetary policy announcement for December. On December 06th, the RBI had chosen to maintain status quo on repo rates at a time when market participants were expecting a 25 bps rate cut. While the RBI has kept its monetary stance at accommodative, the sharp spike in inflation in the last few months also contributed to rise in yields. With yields rising from 6.47% to 6.81% in 7 sessions, this is likely to push up cost of borrowings. Above all, it could also push up yields at the short end of the curve, despite liquidity.
India officially becomes one of the few countries in the world offering 24X7 NEFT effective from December 16th. Originally, NEFT was only available on working days up to 6.30 PM in the evening. Any NEFT transactions done after that would be processed on the next banking day. Now the NEFT transfer can be done within the normal 2-hour time frame round the clock. RBI has already made lines of credit available to banks to handle any fund shortfall in the process. In addition, the RBI has also asked the banks to waive NEFT charges in the beginning to encourage more people into digital transfer mode.
The wholesale price inflation (WPI) for the month of November came in at 0.58% as compared to 0.16% for October. The WPI inflation is roughly indicative of the producer price inflation and that is a barometer of the cost of production in the economy. In the last few months, the gap between CPI inflation and WPI inflation has widened with CPI Inflation for November touching a 40-month high of 5.54%. WPI inflation also moved up in November compared to October due to higher producer food prices. The good news is that WPI normally acts as a lead factor for CPI inflation.
Wall Street touched new highs on Monday after there were dual triggers on the China growth front and also on the trade deal front. Chinese data showed that for the month of November, the industrial output and the retail sales had shown signs of acceleration and that had added to optimism in the markets. In addition, the US Trade representative, Robert Lighthizer, even underlined that the trade deal was virtually signed and sealed. While the trade deal details are yet to be known, the USTR has hinted that it would entail some relief to China on tariff hikes and doubling of US exports to China. The big gainer of the day was Apple, which relies heavily on China for its manufacturing support. The stock was up by 1.8% in a single day. The move is likely to rub off positively on Indian markets too.
Franklin Templeton Mutual Fund has taken a 50% haircut on its holdings in Essel Group debt. The NCDs held by Templeton in the Essel Group will mature in June 2020. Templeton had subscribed to the NCD of Diligent Media (a unit of Essel Group) to the tune of Rs.412 crore. While these NCDs carry the personal guarantee of Subhash Chandra, they are not backed by pledged shares. This write-off was necessitated after ICRA had recently downgraded these NCDs on grounds of weakening financial situation of the Essel Group. It may be recollected that Templeton had also marked its holdings in Essel Infraprojects.
