For a government worried about falling tax revenues, here is some good news. Advance tax collections of Indian companies surge for the first quarter of FY-20 by 171% with the biggest centre of Mumbai recording a 133% growth in advance tax payments. Mumbai currently contributes almost 1/3rd of the direct tax revenues of the Indian economy as a whole. Tax experts are seeing such a staggering growth as a very positive sign of an economic revival in coming quarters. While the breakup is not available, this kind of growth is indicative of a broad-based growth across the board.
At least, one mutual fund appears to have put its customers first. HDFC MF may take Rs.500 crore of FMP exposure of unit holders into its own books. The facility to investors to exit the FMPs of Essel Group firms will only be made available to FMPs that matured in the month of April and prior to the standstill agreement with the Essel Group. The standstill agreement gives the promoters of the Essel Group time till September to clear the dues. It is not clear what happens if the promoters of Essel Group are unable to pay the dues by then, which does quite likely at this point of time.
It was Black Monday for the Indian markets. Nifty and Sensex crack sharply on Indo-US trade war fears, a day after India decided to impose punitive tariffs up to 70% on US imports ranging from walnuts to chickpeas. The markets feared that if the US gets down to retaliating, Indian may be drawn into an unnecessary trade war at a time when the GDP was already on the slow path. Post withdrawal of GSP, India had decided to go ahead with tariffs on 28 such products. These higher tariffs were supposed to originally go live 8 months back but India kept postponing hoping for relief on GSP.
Rate cut hopes buoyed Wall Street as it started building in a likely 25 bps rate cut when the FOMC meeting concluded on 19th June. The FOMC meeting on Jun 18th and 19th is expected to be a showdown between Trump and the Fed. Trump has been bargaining hard for a rate cut to spur growth. The Fed is keen to put off the rate cut for one more meet. Markets are expecting a rate cut by the Fed to ease the trade war impact and to reduce deficit. CME FEDWATCH has assigned a 23% probability of a Fed rate cut on 19th June. This probability is down from 30% last week.
In what should have happened more than a month back, lenders to Jet Airways may finally refer the airline to the NCLT for bankruptcy proceedings. SBI, as the principal lender in the consortium, is expected to initiate action on 18th June. The IBC referral had been delayed since SBI had committed to find a buyer to take a majority stake in Jet. However, only conditional offers were received and even Etihad only wanted a minority stake. Hinduja Group had offered a 95% haircut to banks, which SBI was not ready for. With the doors for a buyout virtually closed, bigger questions could arise. What will the NCLT do and what assets will it sell when there is nothing tangible left in the books of Jet Airways. Most aircraft are already repossessed by the lessors. Jet could be an interesting test case for NCLT.
Global rating agency, Fitch, cuts India’s GDP growth forecast to 6.6% for FY-20. The 20 bps forecast cut by Fitch was driven by a slowdown in agriculture and manufacturing. Fitch also pointed out that export growth had also faltered during the last one year. However, Fitch expects Indian GDP growth to go above the 7% mark in FY-21 and FY-22. Fitch also underscored that a lot will depend on how the RBI maintains its dovishness on the interest rate front. Fitch has also underlined the risks emanating from the global headwinds comprising the trade war and geopolitical risk in the Middle East.
