Midnight News Update – Aug 21st 2017
Foreign portfolio investors (FPIs) pulled out a little over $1.2 billion from Indian equities in the first couple of weeks of August. Geopolitical tensions have impelled FPIs to look at other geographies with more reasonable valuations. During the same period, FPIs actually infused $1.5 billion into Indian debt due to the attractive real returns on Indian debt. Domestic mutual funds have also more than compensated for the FPI sell-off in equities. With Indian retail inflation staying around the 2% mark; both domestic and international money has been gravitating towards Indian debt paper.
Even as the Sikka era comes to an end in Infosys, it is the shadow of Murthy that is likely to loom large when the new CEO is selected. According to sources, the next candidate may either be an internal candidate or somebody from the promoter group. While Nandan Nilekani’s name is doing the rounds, it is not clear if Nandan himself is keen to come back. In the corporate governance battle the board has chosen to stand behind Sikka, which means that the entire board may see a reshuffle sooner rather than later. The immediate concern will be to handle clients and large institutional investors.
IOC plans to sign a pact with the Odisha government to invest up to Rs.52,000 crore in the Paradip refinery. The investment will go towards expanding the capacity at the Paradip refinery and also setting up a downstream petrochemical complex. However, this will be subject to the state of Odisha restoring part of the tax incentives. The state has already agreed to compensate IOC to make up for the withdrawn incentive. The refining capacity at Paradip will go up by 5 million TPA. IOC is part of the government’s mega plan to create an oil behemoth encompassing upstream and downstream oil.
Insurance companies have filed for IPOs to the tune of Rs.20,000 crore in the next few months. Apart from HDFC Life, New India Assurance and GIC Re have also filed for IPOs. HDFC Life has decided to go ahead with its IPO after the merger talks with Max Life broke off following objections from the IRDA. Both HDFC and Standard Life will be diluting part of their stake in HDFC Life through the IPO. Between GIC Re and New India Assurance a total of Rs.13,000 crore will be raised by the government through the stake sale. This will cover nearly 20% of the total annual divestment target of Rs.72,500 crore.
A flash report prepared by the MOSPI has raised some serious concerns over the status of project implementation. As many as 322 infrastructure projects with outlays of over Rs.150 crore each have seen a total cost overrun of Rs.171,000 crore. Out of the total 1231 projects under implementation there has been a cost overrun in 25% of the projects. Out of these delayed projects, nearly 1/3rd showed both cost and time overruns. The government had put a lot of focus on de-bottlenecking infrastructure and therefore this report does come as a disappointment. According to the MOSPI, some of the key reasons for these time and cost overruns include delays in land acquisition, forest clearances, supply of equipment, funding constraints, Maoist incursions and other law and order related problems.
More than 1/4th of India has received deficient rainfall according to the IMD. With the Monsoons already half way through, the IMD is still hopeful that there should be a recovery in the monsoons. The overall shortfall across India is around 5%. States like Maharashtra, Madhya Pradesh and Karnataka have seen the maximum deficit in rainfall. However, the IMD is still sticking to its estimate of rains at 100% of long period average (LPA). While Kharif sowing has been impacted in some states, the overall Kharif sowing has been better than the previous year indicating subdued good prices this year too!
