| News Announcement |
Impact Analysis |
| Fiscal deficit spills by 50 bps on the upside for the next two fiscal years |
- Budget has set fiscal deficit at 3.8% for FY19-20 and at 3.5% for the fiscal year 2020-21
- Experts are concerned that even these targets of fiscal deficit may be hard to achieve and likely to spill over
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| Budget 2020 scraps the dividend distribution tax on equities |
- Instead of DDT, the dividends will now be taxed as other income at peak rates in the hands of the investors
- However, the DDT on debt funds will continue as before with only equity and equity funds exempted from DDT
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| Budget 2020 offers two different regimes of taxation to opt for |
- Individuals can choose to continue with the exiting direct regime of higher tax rates and exemptions
- Alternatively, tax payers can also opt for the new lower rates but will have to forgo 70 out of the 100 exemptions
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| Budget largely silent on the scrapping of the long term capital gains tax |
- Budget was broadly expected to scrap the LTTCG tax and continue with the STT system as before
- However, due to the resource constraints, the government has chosen to continue with the LTCG tax
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| Government proposes to give Rs.40,000 crore boost to consumption |
- The tax saving from lower direct taxes was supposed to cost the government close to Rs.40,000 crore
- With a marginal propensity to consume of 0.70, this was supposed to trigger consumption impact of Rs.1.33 trillion
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| Budget 2020 sets disinvestment target of Rs.210,000 crore for 2020-21 |
- This includes the mega plan to divest part of the LIC stake which is being valued at close to $150 billion
- Ironically, the government has lowered the divestment target for 2019-20 from Rs.105,000 crore to Rs.65,00 crore
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| FPIs remain net buyers in equity to the tune of Rs.12,100 crore in equities |
- This was almost fully compensated by Rs.11,100 crore selling in debt on higher inflation and lower real rates
- FPIs have infused close to Rs.60,000 crore in the last four months since the corporate tax was reduced
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| China to provide stimulus of $175 billion to support markets |
- This has been necessitated due to the negative impact of the rapidly spreading Corona Virus
- The pandemic has already resulted in over 250 deaths and is likely to impact more than 1 lakh people across the world
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| Companies with large promoter stakes could give out dividend bonanza |
- This could be a move to avoid the much steeper 43.5% tax that promoters may have to pay on dividends post April
- They may find the DDT methodology better as it entails a lower implicit tax rate of just about 20.56%
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| Insurance and MF stocks took a hit on Saturday on Section 80C limitations |
- Under the new regime, taxpayers will have the option to pay lower tax without claiming Section 80C benefits
- Section 80C of the IT Act has been a major driver for the demand for life insurance policies and ELSS funds
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| IT companies could benefit from data centre STPs permitted |
- This would be on the lines of the software technology parks that are already permitted in India
- In addition, the Chinese virus also raised fears that demand could see a slowdown across China and most of Asia
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| FM says sovereign guarantee on LIC policies will continue |
- FM has assured that the divestment of partial stake in LIC will not in any way impact the sovereign guarantee on policies
- However, that will be easier said than done because with a weaker balance sheet, this means contingent costs
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| After the success of first tranche, government plans second Debt ETF |
- Debt ETF has been an interesting passive debt fund investment option offered by the government
- This offers the government an opportunity to sell its G-Secs to the retail investors at large
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| All eyes likely to be on the RBI policy this week, but status quo expected |
- With the inflation at 7.35% and growth dipping, the MPC may choose to maintain status quo on the repo rates
- While there are talks of a rate hike, the MPC may not attempt at this point when the focus is on boosting consumption
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| Deposit insurance hiked from Rs.1 lakh to Rs.5 lakh per depositor |
- This change has been clearly necessitated after the recent PMC Cooperative Bank fiasco earlier last year
- Of course, this will be more relevant to smaller banks as RBI normally does not allow larger banks to fail
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| Rahul Bajaj decides to hang up his boots after nearly 50 years at the helm |
- While Rajiv Bajaj has been running Bajaj Auto for 15 years now, this is the first time Rahul Bajaj will take non-exec role
- In the last few quarters, Bajaj Auto has been the best performer on the back of its exports focus
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| Tata Motors managed to turn around from losses to profits in Dec-19 |
- The profits were largely driven by the recovery in global demand for JLR cars, especially from China
- However, the domestic auto business of Tata Motors continue to remain under demand pressures
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| US 2019 GDP growth comes in at just about 2.3% |
- This makes the growth far lower than the 3% growth that was being targeted by the US policy makers
- The US has been reeling under the onslaught of the trade war and Chinese retaliation had led to the slowdown
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| ED discovers Rs.12,700 crore money launder by DHFL promoters |
- The ED has already taken Mr. Wadhawan into custody over the round tripping of investor funds
- The modus operandi was to launder money through fictitious home loan accounts of non-existent persons
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| UK left the EU and it happened without much ado on 31st January |
- The real challenge for Britain would be to stitch trade pacts with European partners on favourable terms
- However, UK has an advantage in that it holds access to the world financial markets via London
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| US yield curve inverted once again during the previous week |
- Normally, the inverted yield curve is an indication of an impending slowdown in the economy
- However, this has repeated often in the last two years leading to hopes that this would once again be an aberration only
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