Midnight News Update – Aug 29th 2017
The government of India has brought out its consolidated FDI policy which also includes broad measures to encourage start-ups. The idea is to project start-ups as the software of India’s FDI plan so as to ensure greater foreign participation in FDI inflows. Start-ups will now be able to raise up to 100% from Venture Capital Funds. Start-ups will be permitted to issue equity, equity linked instruments or even debt against such foreign remittances. The consolidated FDI policy will also allow NRIs to invest funds in these start-ups subject to extant limits and conditions. India is already the largest recipient of FDI in the world.
As Infosys readies for its Rs.13,000 crore buyback at a price of Rs.1150/share, it has now been indicated that the founding promoters will also be participating in the buyback. Since the buyback will be on a proportional basis, the stake of the promoters will not get diluted in the post-buyback equity. The keenness of the founders to participate in the buyback may be quite surprising just a couple of days after Nandan Nilekani took charge at the helm of Infosys. The buyback was approved a day after the resignation of Vishal Sikka from the post of CEO. It is the second largest buyback in India after TCS.
The US trade deficit for the month of July 2017 widened due to weaker exports. A 1.3% fall in exports resulted in a 1.7% rise in trade deficit to $65.1 billion. The big weakness in exports came from the 8% fall in the export of automobiles. The fall in exports means that the GDP growth in the next couple of quarters could also be disappointing. Trump has already protested due to the high trade deficit that the US runs with China, Europe and the NAFTA countries. The US has already walked out of the Trans Pacific trade agreement and is now also threatening to dismantle the NAFTA pact with Canada and Mexico.
The government of India will be divesting a 10% stake in India’s largest thermal power producer, NTPC. The government will sell 5% stake consisting of 41.2 crore shares with an option to sell another 5% in the form of a green-shoe option. The floor price has been set at the price of Rs.168, which is a slight discount to the market price of Rs.173. While institutions and HNIs will bid on Tuesday, the retail will bid on Wednesday with the additional benefit of 5% discount. The 10% stake sale will enable the government to raise Rs.13,483 crore substantially bridging its disinvestment shortfall for the year.
Some of the most respected names in the global financial markets like Ray Dalios of Bridgewater and Jeff Gundlach have warned about the risks of investing in emerging markets. Over the last few weeks, FIIs have been selling aggressively across emerging market equities and India has been no exception. The two experts have pointed at the flare-ups in Venezuela and the strife in North Korea and the South China Sea as potential tinderboxes. As per the Citi Macro Risk index, the risk aversion among fund managers has already climbed to a 9-month high. Both the fund managers also expressed concerned that vocal populism was actually accentuating these fault-lines. Emerging market have been the big outperformers in the last couple of years as the surge liquidity has led to a massive re-rating.
India Commodity Exchange Ltd pioneered the trading of Diamond Futures in India and also for the first time in the world. India accounts for a chunk of the polishing of diamonds that happen in the world and the holding of diamond inventory is a major risk that Indian players run. The idea is to help the players in the diamond market hedge their risk. The exchange is backed by Reliance Capital and MMTC. The exchange will start trading in 1 carat / 100 cents contract and subsequently launch 50 cents and 30 cents contract also. It will be the first of its kind of futures trading anywhere in the world.
