Midnight News Update – Oct 23rd 2017

In the first 6 months of the current fiscal year ending September 2017, domestic mutual funds have pumped nearly $12 billion into equities. FPI contribution during this period was less than a billion dollars as FPIs have been consistently selling since July. According to domestic fund managers, there is tremendous traction from retail investors as well as from HNIs. In fact, equity inflows and the number of SIPs are at an all-time record level. The flow towards equities has been necessitated by the lack of remunerative returns in other asset classes like debt, gold and real estate.


Nomura believes that the Gross Value Added (GVA) for the Indian economy could grow by 6.3% during the September quarter. The actual figure will only be out by the end of November. GVA is the GDP growth excluding the impact of indirect taxes and subsidies. In fact, Nomura is suggesting that growth may have bottomed out in the previous quarter when the GDP growth was just 5.7%. World Bank has downgraded India’s growth forecast for the full year to 6.7%, which is a tad lower than the 6.8% growth that China is likely to achieve. Europe and Japanese economies are also on an up-tick


The month of September appears to be a disappointment for the GST Council as just 3.94 million out of the 8 million GST assessees actually filing their returns by the deadline of 20th October. The filing rate falling below the 50% mark is a major disappointment after 3 months of implementation. The GSTN servers are currently operating at 30% capacity utilization and that means it can handle much larger pressure on this front. The GST has been caught up in a variety of problems including technical issues, lack of seamless credits for businesses etc.


The EPFO may now start crediting ETF units instead of cash into the accounts of provident fund holders. It may be recollected that the provident funds in India were permitted to investment in equities through the ETF route, which was essentially a portfolio of PSU stocks. With the 5% exposure gradually hiked to 10%, ETF holdings have become a key part of the overall EPF portfolio. Now the EPFO proposes to directly credit the proportionate allocation into the accounts of individual PF holders. Such units can be sold by the PF holders at the prevailing market price at a future date.


Even as the street is trying to digest the import of Axis Bank overshooting on its NPAs, the sector overall may have to be prepared for another Rs.40,000 crore worth of NPAs. After the RBI directed Axis Bank to classify 8 consortium accounts as NPAS, other banks too may have to follow suit this time around. Of course, the other banks in the consortium may reclassify these accounts as NPAs over the next 2 quarters, but that is a hit that they will have to eventually take on their books of accounts. Indian banks are already saddled with NPAs to the tune of Rs.800,000 crore and this adds to the total NPA burden by another 5%. Power, steel, roads and textiles have been the major contributors to the NPA mess of banks. RBI has already gotten stricter on the NPA front and this is likely to continue going ahead.


According to market sources, Trump may have finally zeroed in on Taylor, Powell and Yellen as the 3 likely candidates to take over the chairmanship of the Fed when Janet Yellen’s tenure comes to an end. However, with the strong perception differences between Yellen and Trump, the final race may boil down to Powell and Taylor. After the sudden departure of Stanley Fischer, Trump will also have to look at appointing a vice chairman apart from the Chairman of the Fed. Trump is scheduled to leave on a trip to Asia in early November and most likely the decision will be out before that.


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