Quarterly results and the geopolitical situation are likely to impact the markets in the coming week. The coming week we will see TCS, HCL Tech and Wipro announcing quarterly numbers after Infosys gave a strong guidance last week. RIL and HDFC Bank are the other heavyweights that will be declaring results. The trade deal, expected on 15th of January, and the future outlook for the Iran crisis will also impact the markets via the rupee and oil prices. Above all, a lot of expectations are being built around the Union budget to be announced on Feb-01 and that is likely to be a key trigger for the market this week.
REITs and INVITs are now beginning to attract the interest of mutual funds. While the investment universe is still too small, the year gone by saw some significant investments by mutual funds. Consider these numbers. During the year, the Indian mutual funds invested a total of Rs. 670 crore in REITs and Rs. 11,347 crore in INVITs taking the total allocation to Rs.12,000 crore. While REITs are proxies for commercial real estate investments, INVITs are participation certificates in large scale infrastructure projects. Both are recently launched products and represent a new asset class for investors.
Foreign portfolio investors (FPIs) were net sellers during the month of January till date. In the first 10 days of January, FPIs infused Rs.777 crore into equities and withdrew Rs.3193 crore from debt. Debt market selling has been happening for two reasons. Firstly, globally there is risk off sentiments and that is luring FPIs towards developed market debt. Secondly, volatile rupee plays an important role in determining debt returns for FPIs and post the elevated geopolitical risk in the Middle East, the risk premiums have risen. This resulted in the INR going as low as Rs.72/$ leading to caution among FPIs.
IL&FS has proposed a new resolution model where the Committee of Creditors (COC) will have limited say in the determination of the resolution process and their hold will be limited to voting on the best bid. In the past, the operational creditors had constantly complained that the financial creditors were taking away the cream of the proceeds. IL&FS board has suggested model where the board takes the final decision on the sharing formula under the broad IBC guidelines. Resolution expenses will rank first in priority followed by financial creditors. This plan is yet to be approved by the NCLAT.
Despite the tight financial situation, Nobel laureate Abhijit Banerjee has ruled out any fiscal tightening by the government. According to Banerjee, higher fiscal deficit will not be a real concern if the spending was well directed and had the potential to enhance productivity and output in the economy. Banerjee underlined that reducing spending was not an answer as it would only exacerbate the slowdown that the economy is already facing at this point of time. Banerjee was reacting to the reduction of the education budget by Rs.3000 crore and did not seem overly concerned as education was more of a state subject. With an Rs.145,000 crore bill due to corporate tax cuts, the government is expected to overshoot the fiscal deficit target of 3.3% by a huge margin. Revenue sources could hold the key.
Jeff Bezos is likely to be greeted by fierce protests across India due to the inordinate negative impact that Amazon is having on Indian retail. The association of traders has decided to organize protests across India as the Amazon online model is forcing a lot of retail players out of business. With his aggressive plans for India and deep pockets, Jeff Bezos has the ability to use equity as a currency to leverage his expansion plans. Indian retailers have been increasingly up in arms against the domination of a handful of global names like Amazon and Wal-Mart in the Indian online retail space.
