Midnight News Update –Sep 18th2017
SEBI may permit REITS and InvIT to raise funds through the issue of bonds. While the REITS and the InvIT were permitted by SEBI in 2014, they have not attracted too much of buying interest from corporates and other investors. This relaxation is probably one more attempt to get corporates and investors more interested in this product. Both REITS and InvIT are extremely popular in the developed markets as a means of monetizing the infrastructure assets. This vehicle allows large infrastructure projects to separate the ownership of infrastructure assets and the operation of these infrastructure assets.
The government will be raising nearly Rs.15,000 crore through the sale of stake in 2 insurance companies. This will go a long way in helping the government meet its overall divestment obligations for the year. Both GIC RE and New India Assurance will be gearing up for their IPOs in the next few weeks. The government has a larger plan of divesting its stake in general insurance companies and it will make a start with the stake sale in GIC RE and New India Assurance. These are the two-profit making general insurers and the others may find it harder to get a ready market in the IPO market.
According to a report put out by HSBC, India was likely to overtake Japan and Germany by 2028 and emerge as the 3rd largest economy in the world after the US and China. However, HSBC has also warned that India needs to invest more in the social sector to ensure that the fruits of growth are more evenly distributed. HSBC has specifically pointed out that the spends on education and primary health are just too insufficient. However, positive demographic mix and the strong macros will be the main strength of the Indian economy. However, GDP growth could be a worry in the light of the GST and the note ban.
With CPI inflation coming in sharply higher at 3.36%, the RBI may choose to maintain status quo on interest rates till the end of the current fiscal year. It may be recollected that in the previous policy announcement in August, the Monetary Policy Committee (MPC) had cut the rates by 25 basis points but had refused to shift the stance of the monetary policy back from neutral to accommodative. The MPC members, at that point of time, had expressed concerns that food and oil prices could pose upside risks to inflation. That seems to have been borne out by the subsequent flow of events.
The feud between the Tata group and the Mistry family may be taking a nastier turn with the Tata group proposing to convert Tata Sons into a private limited company. That move becomes critical in the aftermath of the feud with the Mistry family because if Tata Sons converts into a private limited company then the Tata charitable trusts will be in a position to block any sale of stake by the Mistry family. The Mistry family has already objected to this move, which will go to vote on 21st September. The Mistry family feels that this move would literally put the Mistry holding at the mercy of the Tata trusts which are indirectly controlled by Ratan Tata. The only worry will be on the governance front. The holding company of the $105 billion conglomerate will become an opaque private company.
India’s forex reserves topped the $400 billion mark for the first time in its history as a constant flow of FPI flows into debt and FDI flows kept the forex reserves buoyant. In the last 4 years since the taper crisis of August 2013, the forex chest has grown by over $100 billion and even the redemption of the special FCNR bonds last year did not create any panic in the markets. Janet Yellen will be commencing the Fed taper of its bond portfolio shortly and a strong forex chest is a must for India to withstand any macro shocks that may arise. Current account deficit has already touched a 3-year high of 2.4% of GDP.
