Indirect tax collections have dropped sharply in the Apr-Jun quarter, which is hardly surprising in the
light of the prolonged lockdown in April and May. Taxes collected till June 15, which is the last day for
payment of taxes, was lower by 33% compared to the previous year. With most of the business activities
coming to a standstill since March 23, there was a sharp drop in GST collections as well as other forms of
indirect taxes. Even through manufacturing activities had started since the first week of May; production
was constrained at most business due to problems with raw materials, logistics and labour.
According to a report by CRISIL, 22 companies that had issued bonds to mutual funds defaulted in the
last 20 months. The total damage to mutual fund portfolios as a result of these values was to the tune of
Rs.17,700 crore and the count could increase in the months ahead. Over 90% of these defaults were
from just 4 groups viz. IL&FS, ADAG, DHFL and Yes Bank. Among the categories of funds most affected
by these defaults were credit risk funds followed by medium duration funds and aggressive hybrid
funds. However, CRISIL added that 92% of debt fund assets were in very safe assets categories.
Hindustan Petroleum, now majority owned by ONCG, reported 99% drop in net profits for the Mar-20
quarter at Rs.27 crore. The sharp fall in profits could be attributed to a sharp spike in provisions for
inventory losses due to the weakness in oil prices as of the end of March. HPCL reported a minor 2% fall
in sales revenues for the March quarter. The month of March saw only a partial impact of the lockdown
and the real impact of the pandemic would be only visible in the June and September quarters. The
sharp volatility in global crude prices also added to the problems of the oil marketing companies.
The government has asked Indian oil and gas companies to use more Indian steel in its infrastructure.
Indian oil companies plan to invest close to $160 billion by the year 2026 to expand refining capacity and
that is likely to result in a huge spurt in steel demand. The oil and gas sector is expected to consume
close to 50 million tonnes of steel in the next 15 years and a focus on domestic consumption can make a
world of difference for the Indian steel manufacturers like Tata Steel, JSW Steel and SAIL. India still relies
on imported steel for high end products, despite being the second largest producer of steel in the world.
A survey by Bank of America – BOFA, figured out that 78% of global investors found the markets
overpriced at the current juncture. This is despite the fact that risk appetite actually surged in June with
most of the fund managers reducing their cash holdings and adding more risk assets in their portfolio.
Hedge funds have increased their exposure to equities to the highest level of 52% since 2018. What
explains the dichotomy of higher investments despite perception of overvaluation? One logic appears to
be that the global liquidity glut is expected to create another round of asset price inflation and equities
and other risk classes are likely to benefit the most. An overwhelming 82% are expecting an economic
recovery. While 18% bet on a V-shaped recovery, 64% expecting U-shaped or W-shaped recovery.
The Dow Jones Index rallied on Tuesday after the May retail sales in the US hinted at a strong demand-
driven economic turnaround. Overall retail receipts were higher by 17.7% in the month of May 2020.
Most markets expect this retail spurt to be indicative of a sharp recovery in the US economy. In addition
the success of a UK-based steroid treatment for COVID-19 also resulted in the markets showing
buoyancy. The markets are also betting that in his Fed testimony, Jerome Powell would continue to hint
at dovish rates and easy liquidity via bond purchases. Most US indices were up nearly 2-3% in trade