The Railway Ministry is coaxing the Finance Ministry to levy a Safety Cess on all railway bookings to finance the huge outlay of Rs.125,000 crore required to enhance railway safety. Ironically, the fares of First AC and Second AC are likely to be hit to a lesser extent while second class passengers may take the bulk of the burden. While the government has agreed to fund 25% of this Railway Safety Fund, it has asked the Railways to finance the balance.
Among the many tax sops, the FM is likely to hike the Section 80C limit by Rs.50,000 up to Rs.200,000 per annum. This is also intended to encourage people to move away from cash to long term investments. Section 80C is available in the form of an exemption, meaning it is a deduction from taxable income. Section 80C includes life insurance, PPF investments, NSC, Long term fixed deposits, principal portion of home loan and fees paid for the education of children. According to the latest financial survey, nearly 60% of household savings were in the form of physical assets like land and gold while the balance 40% was in financial assets. Even within the balance 40%, the assets were predominated by bank fixed deposits.
J P Morgan has warned that the oil rally could be capped as shale output has already shown signs of a sharp pick-up in the US. Post the announcement of the OPEC quota, oil prices moved up 20% from $46/bbl to $55/bbl. As part of the production cut arrangement, OPEC decided to cut production by 1.2 million bpd while non-OPEC nations like Russia and Mexico pledged to cut production by another 600,000 barrels per day, taking the total production cut to 1.8 million bpd. According to a note put out by Goldman Sachs, the US horizontal oil rig count is already at a 13-month high and the result could be a glut in supply by the middle of the year.
In a business that was supposed to be hit by demonetization, one of India’s largest toll road operators (IRB Infra) actually saw toll revenues go up during the demonetization period. According to the CEO of IRB, the toll collections were up by 3% in the month of December over October as the gap was filled up by digital payments at most of its toll gates. Currently, IRB allows people to pay through credit cards / debit cards, digital wallets as well as through RFID ETC tags. According to the CEO of IRB, already 15% of daily toll collections of IRB are happening through the digital route.
According to SBI, new currency circulation is likely to reach 89% by end of February. According to the RBI data, nearly 44% of the currency demonetized has already been replaced and that is evident from the reduction in liquidity stress across bank branches and ATMs. One reason could be that the RBI reduced its stress by printing Rs.2000 notes which can cover more value in a shorter span of time. At the same time, lower denomination notes are also being pumped into the system in a big way. One of the big advantages of the note ban is that the banks are flush with funds and that has forced a sharp cut in the MCLR. This has created a situation where suddenly the transmission rate has touched 100% despite the RBI not announcing any rate cuts in the last credit policy.
Global PE fund, KKR, is looking to acquire a stake in Fortis Healthcare and is apparently in advanced stage talks with the Singh brothers. Fortis Healthcare Holdings, owned by the Singh brothers, owns 67.5% stake in Fortis Healthcare. While the details of the transaction are not currently available, KKR seems to be examining either a takeover of the company or even a structured equity transaction for the holding company.
SEBI in its latest initiative has announced detailed guidelines for evaluation of company boards of listed companies. This topic has gained a lot of urgency after the recent fiasco in the Tata group wherein the CEO of Tata Sons was removed by the largest shareholding group. This will also include the role of independent directors, which came under a lot of scrutiny in the Tata case. The main idea of these regulations is to give a greater degree of continuity and assurance to small and large shareholders who view management changes with a magnifying lens. Any changes in the composition of the board will now be required to follow a well-articulated protocol.
The dollar, which rallied sharply in the aftermath of the Fed rate hike, was seen faltering on Thursday. The USD is already quoting at a 14-year high and as the Fed has committed itself to gradual rate hikes. The anti-dollar trade was also visible from the fact that gold prices also saw a sudden rally during the day. Analysts are increasingly veering around to the view that notwithstanding the hawkishness of the Fed in its December meet, it will be forced to temper down its outlook considering the global reality.
The second session of the Union Budget will start on March 09th, a day after the election results for the five states are announced. The second budget session will conclude on April 13th. There were demands from the opposition leaders to postpone the Union Budget announcement to after the announcement of the election results. The opposition parties have expressed apprehension that the ruling BJP may use the Union Budget as a prop to push its populist agendas and influence the state elections. The final decision on the same is yet to be taken.
