Nifty as it recovered after a highly volatile day

It was a day of sharp gyrations on the Nifty as it recovered after a highly volatile day to close in positive territory. The realty and metal stocks came in for a sharp correction on Monday even as oil stocks showed a rebound. Banking showed positive moves after the RBI hinted that NBFCs may be subjected to asset liability norms. Meanwhile, the INR closed beyond the 74/$ mark for the first time in its history after the RBI status quo on rates. Bond yields fell sharply from 8.20% down to 7.97% in a span of just 2 trading sessions despite the hawkish outlook presented by the RBI.

It is the second extension of the tax filing deadline for audited accounts by the CBDT. It has extended the last date for filing audited returns to October 31st, the second such extension. However, this is only for filing returns and date for remitting taxes will still remain 30th September. This is intended to give sufficient time for the businesses to reconcile their numbers with the GST since this is the first corporate filing that is being done after introduction of GST. Corporate tax returns now need to be reconciled with the GST returns and the CBDT audit trail will also track the same.

In a significant move, the Oil Minister has confirmed that India is likely to increase its oil imports from Iran, despite US sanctions from November. This move is significant and the first signs were there when Iran placed a huge order to import rice from India. Even after November when the US sanctions come through, the ban will essentially be on dollar payments to Iran. India is working out a model wherein the payments can either be made in rupees or against rice exports. This could stem the rupee from falling further and also help bridge the Current Account Deficit.

The trade war took its toll on the global equity markets on Monday. Trading action saw the US market take a hit after its trade talks with China did not progress as the US and China stuck to their respective stands. European markets got a shock after Italy continued to show defiance against the Euro diktats raising the spectre of a possible secession. China is expected to announce a stimulus, which would be an admission of a slowdown in growth. Most of the global markets across Asia, Europe and the US are facing some degree of pressure due to global uncertainty.

In a first, BOI-AXA mutual fund takes an Rs.100 crore hit on its IL&FS exposure. The BOI-AXA Credit Risk Fund has written off its entire exposure in IL&FS to the tune of Rs.100 crore. This amounts to a 5% hit on the NAV of the fund. This move will force the other mutual funds with exposure to IL&FS to also make a clean disclosure and take a provision immediately. That is likely to hit bond fund NAVs in this quarter. This is also fair to unit-holders that exits are after provisions. Pressure on liquid funds was visible as MF AUMs plunged by Rs.3.14 trillion in the month of September 2018. One of the direct outcomes of the IL&FS fiasco has been the massive redemption in liquid and debt funds. In fact, the total AUM of the mutual fund industry during the month of September shrank from Rs.25.20 trillion to Rs.22.06 trillion.

In a bid to curb the huge import bill of gold, the government has launched Sovereign Gold Bonds scheme 2019. The Sovereign Gold Bonds, like the previous issues, will carry 2.50% interest and capital gains on redemption will be entirely exempt from tax. This is expected to lower the extent of gold imports and also improve the current account deficit. India’s gold imports were pegged at $33.7 billion in FY-18, which is a worry because it is an unproductive asset that consumes foreign exchange. To extent this gold bond scheme curbs imports will be something that has to be seen.

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