The RBI annual report has pegged the year-end Gross NPAs of the banking sector at 9.1% for FY19. This is 210 basis points lower than the 11.2% recorded in FY18. This was largely driven by reduction in fresh slippages and better recoveries; thanks to NCLT. RBI had conducted OMOs to the tune of a record Rs.3,30,000 crore leading to sharply higher income; which was distributed as dividend to the government. The RBI annual report also disclosed that out of the total payout by the RBI of Rs.176,000 crore, Rs.120,000 crore was dividend and the balance was from excess capital reserves.
US GDP growth slows in June quarter but looks like there are no real worries on the macro front with consumption staying robust. The US government announced that the economy had grown at 2% in the June quarter, lower than the 2.1% anticipated. However, the consumption spending was the best in the last 54 months and that largely did away with any recession fears. With 3.1% growth in the March quarter, US has reported average growth of 2.6% in the first half of the year; lower than IMF projections. This should do away with recession talks for now; more so with an inversion in the yield curve.
With equity gains exempted from surcharge, FPIs now want the tax surcharge to be removed on debt securities also. The association of foreign portfolio investors based out of Hong Kong welcomed the decision of the government to withdraw the tax surcharge on capital gains made by non-corporate FPIs on equities. However, they have now demanded that the government withdraw the tax surcharge on debt instruments also since the FPIs already have an investment of over Rs.1 trillion in Indian debt. In the last 2 months, FPIs have been selling heavily in equities but have been net buyers in debt.
The AMFI Chairman is confident of expanding the Indian Mutual Fund overall AUM to Rs.100 trillion in 10 years. N S Venkatesh expressed confidence that the overall AUM of the mutual fund segment could grow four-fold to Rs.100 trillion in the next decade. He expects growth in the mutual fund investor base as well as in the ticket size. The AUM of the overall mutual fund segment has growth three-fold between 2014 and 2019, before it slowed down last year on exposure issues. However, debt funds have faced severe outflows after the FMP crisis last year and cases of default by bond issuers.
There was a sharp revival in equity markets across the US and Europe after China sounded a lot more optimistic about the success of its trade talks with the US. Europe especially was pleased with the political crisis being resolved in Italy and the formation of a new government. With the right noises coming from China, technology stocks were the big gainers in the US markets. Riding on the positive cues from the US and China, Brent crude rallied to $60.80. Crude oil managed to decisively cross the $60/bbl mark on Thursday after China made expressed optimism about the end of the trade war with the US. This revived hopes of buoyant demand from China, the world’s largest oil consumer and importer. The sharp drawdown in US inventories and OPEC supplies also helped oil prices to rally.
British Labour Party to insist on emergency debate on BREXIT issue. A day after UK Prime Minister, Boris Johnson, announced his decision to prorogue the parliament and also obtained the Queen’s approval, the Labour Party has said that it would trigger an emergency debate in Parliament in the coming week. The idea is to force Boris Johnson not to rush through BREXIT on October 31st without a proper withdrawal EU-deal in place. Boris Johnson had already announced that Britain would go ahead with BREXIT on 31st October irrespective of whether there was a deal in place or not.
