In what could be a big positive move for the markets if accepted, the Direct Tax Code (DTC) Panel suggested peak income tax rate to be pegged at 20%. The long awaited DTC Panel report has recommended 3 rates of tax at 5%, 10% and 20%, effectively making 20% the peak tax rate for individuals. The DTC Panel has also suggested that the dividend distribution tax (DDT) be scrapped as it leads to multiple levels of taxation on dividends, which is already a post-tax appropriation. The panel, however, favours continuing with the LTCG tax as well as the already existing STCG tax.
Petrol and diesel may get expensive for a different reasons altogether, other than global crude prices. Oil companies are expected to hike petrol and diesel prices from April 2020 onwards. The hike from April is likely to happen irrespective of the crude levels in the global market. According to a report in The Hindu, oil majors like BPCL and HPCL will hike prices to recover the Rs.30,000 crore of investments in upgrading refineries to meet the BS-VI norms. Brent crude prices, meanwhile, tapered well below the $60 mark on fading hopes of a US-China rapprochement in the trade war on the back of Trump tweets.
A day after the Rs.1.76 trillion number was disclosed; the RBI released the full Bimal Jalan Panel report on transfer of RBI funds to government. While the proposed transfer of Rs.176,000 crore this fiscal was made public on Monday, the RBI made the full Jalan report public only on Tuesday. The panel has recommended increasing the Contingent Risk Buffer (CRB) from the 2.5% to 6.5%. The panel has called for a surplus distribution policy that targets the total economic capital and also the realized equity level of the RBI. Jalan has already come under flak for supporting this move.
Downgrades have been the norm in the two months since the first quarter ended to the extent that every two out of three stocks saw a price target downgrade since June 2019. A mix of slowing demand, weak corporate earnings and rising geopolitical tensions around the world have impelled analysts to downgrade the price target of 67% of the stock since June. The price downgrade was necessitated after the June quarter turned out to be rather disappointing from a top-line and a bottom-line perspective. However, markets continued to remain buoyant on optimism and liquidity infusion.
Global politics may be taking an interesting turn as Iran’s Rouhani ruled out talks with the US till sanctions are completely lifted. This was despite Macron’s attempts to bring Iran and the US to the negotiating table. Meanwhile, Trump had stated that he would be happy to meet with his Iranian counterpart to discuss an end to the nuclear standoff. However, Iran’s Rouhani has ruled out any talks with the US till sanctions are fully and unilaterally lifted on Iranian oil trade. In South Asia, Imran Khan is considering closing Pakistani airspace again for India. It had originally closed the airspace to India after the February 26th attack by India at Balakot. While, Pakistan had lifted these restrictions as a goodwill gesture, restrictions may come back after India abrogated Article 370 in Jammu & Kashmir.
SEBI chairman has asked mutual funds (especially debt funds) to draw the risk line very clearly saying that the fault lines had been exposed. Ashok Tyagi, chairman of SEBI, hinted that the recent crisis in debt funds exposed the inordinate risk that mutual funds were exposing investors to. Tyagi underlined that mutual funds were not supposed to take inordinate risks in the quest for higher returns nor compromise safety of investors. SEBI has already issued a plethora of investment restrictions on debt and liquid funds. SEBI directors are also counselling the trustees on how to monitor fund performance.
