A few days after the controversial SC order on telecom penalties, the government formed a panel to address the woes of the Indian telecom industry. In the last few days telecom stocks like Bharti Airtel and Vodafone Idea took deep cuts after the Supreme Court ruled in favour of the government collecting Rs.92,000 crore from the telecom companies as AGC charges towards unpaid license fees and interest. The panel will look into this payment issue as well as the rising risk of telecom loan stress in the books of banks. Bharti and Vodafone have outstanding bank loans of over Rs.2 trillion between them.
While the government is yet to make a formal announcement, the markets were rife with expectations that equity mutual funds could get relief from LTCG tax and DDT on dividends. The same may apply to direct equities also. The government indicated that mutual funds could get likely exemption from LTCG tax and DDT once the current tax review is completed. Effective from April 2018, LTCG on equity funds are taxed at 10% above Rs.1 lakh per annum without indexation benefit. In addition, the dividends paid by equity funds were subject to dividend distribution tax (DDT) at 10%. Both could be largely revamped.
Indigo Airlines is getting aggressive on Indian aviation even in the midst of a challenging quarter. In a mega deal, Interglobe Aviation (Indigo) placed orders for 300 planes from Airbus. In what will eventually be a $33 billion deal, Indigo signed an agreement with European consortium, Airbus, to purchase 300 aircraft. In a way, the Boeing 737 pressures appear to have worked in favour of Airbus. Even as Indigo bets on the world’s fastest growing aviation market, it continues to reel under sharp losses in the recent quarter and a major stand-off between Bhatia and Gangwal promoter groups.
The world’s largest search engine and one of the world’s most valuable companies, Google, reported slippage in profits on higher upfront investments committed. Alphabet, the parent holding company of Google, has reported slippage in profits after huge upfront investments undertaken in the last one year. Google has been investing heavily in R&D for artificial intelligence, cloud infrastructure and even driverless cars. In addition, Google has also been heavily investing into its new Pixels phones and other hardware products to widen its offering. In the past, Google had limited success in hardware products.
Steel stocks like Tata Steel and even miners like NMDC were sharply up on Tuesday after the government hinted that it could ease captive mining rules. It has been reported that integrated steel producers may be allowed to divert part of their iron ore from captive mines for use by other JV entities. Steel stocks also rallied on hopes of a trade deal and China stimulus. Meanwhile, the Sensex enjoyed a big bang day even as global Indices react to likely delay in trade deal. In fact, Sensex ended just about 200 points short of the 40,000 mark after gaining 800 points in 2 days. Markets shot up on expectations that the government was likely to rationalize, dividend distribution tax and the tax on long term gains. Global indices came under pressure after there were signs of a delay in the US-China trade deal.
The oscillation in the crude oil market continued on Tuesday after Brent crude came under pressure as doubts surfaced over OPEC+ deal. If Brent Crude price had rallied on Monday on OPEC supply cut expectations, Tuesday was a return to reality. Russia virtually refused to become party to any further cuts in supply by the OPEC+ group beyond the 1.2 million bpd currently. In addition, rising US stockpiles of crude also put pressure on oil prices. Oil also dragged on expectations that the US-China trade deal could get delayed and the China industrial slowdown is also making oil prices tepid.
