Realty turned out to be a damp squib on Monday as they appeared to be unimpressed by the GST rate cuts announced in the Sunday GST Council meet. The GST Council had cut rates to 5% for under-construction property and to 1% for low-cost houses. However, analysts have expressed concerns over two aspects. Firstly, the cut in GST is likely to only benefit the end customer and not the developer; whose shares are listed on the bourses. Secondly, the lower GST rate does away with the input tax credit (ITC), which was the big deal for realtors.
The National Company Law Appellate Tribunal (NCLAT) rejected the demand by lenders to declare the debt of IL&FS and its subsidiaries as NPAs. This status will now hold even if IL&FS again defaults on future debt payments. An NPA classification would help the companies to eventually recover part of their dues from IL&FS under the provisions of the Insolvency and Bankruptcy Code (IBC). Lenders have been demanding that IL&FS and its subsidiaries be declared as NPA defaulters but the government does not want to precipitate a situation where a financial market crisis triggered by IL&FS.
Steel companies hiked the price of HRCs for the third time in the last 1 month. The latest hike in hot rolled coil (HRC) prices by Rs.1000/ton has taken the total increase in steel prices in the last 30 days to Rs.2750/ton. According to industry experts, such a sharp hike in steel prices is unprecedented in the last 8 years. Steel companies have been seeing a sharp increase in the prices of iron ore (a key input) and they have been passing on these hikes to end users. Input costs for steel companies have gone up sharply even as cheaper steel from abroad is proving to be the bugbear.
In the first indications of a trade deal between the US and China, the Chinese soybean imports from the US doubled in January2018. Chinese Customs Department released data on the doubling of soybean imports from the US. Post the tariff war, China had shifted a substantial chunk of its soybean buying to Brazil. The deal includes a clause wherein China will purchase goods worth $1.2 trillion from the US in the next few years. While the US and China have been cagey to talk about the deal, this data indicates that the deal is on and already being executed. Soybeans are just the reflection of the deal.
Sensex and Nifty bounced back sharply on positive global cues. Both indices managed to recover more than 50% of the recent correction after Trump announced the postponement of the tariff cut-off-date beyond March 01st. Trump’s statement expressing satisfaction at the progress of the trade talks, resulted in the Shanghai Composite rising by 5.9%. A/D Ratio was also favorable at 36:14. In support of the markets, the Brent Crude price cracked by 179 bps to $65.92/bbl after Trump tweeted a subtle warning to OPEC members. In fact, Donald Trump asked the OPEC to go slow on cutting the supply of crude. In the last few months, crude supplies are already under strain due to sanctions on Iran and Venezuela. Trump was of the view that the growth revival the trade deal will anyways build up crude demand.
In the first important input for the agricultural sector, the private sector SKYNET has predicted a normal monsoon in 2019. A normal monsoon is defined in India as the range of 96-104% of the long term 50-year average of 89 cm rainfall. According to SKYNET, the El Nino impact was likely to be weak. The quantum and spread of Monsoon will be the key to India’s annual Kharif output. A bumper Kharif output is essential for keeping food inflation in check and also for ensuring that farm incomes are sufficient to trigger demand from rural and semi-urban areas.
