Indian Prime Minister Narendra Modi launched a new tax scheme today via video conferencing. The unveiled scheme is named as ‘Transparent Taxation – Honoring The Honest’ and has been portrayed as a scheme that will benefit the honest and sincere taxpayers of the nation.
“In the last six years, banking the unbanked, securing the unsecured and funding the unfunded has been our focus. Today, it is the start of a new journey – Honoring The Honest. When the life of an honest taxpayer of the country becomes easy, he moves forward and develops, then the country also develops and leaps forward. Our effort is that our tax system should be seamless, painless, faceless.” – PM Narendra Modi.
The virtual launch of the new platform was attended by big names in the business like Ratan Tata, Anand Mahindra and Uday Kotak.
Tax is one of the most important components of the government’s income. More taxes gives the government the space to launch more socially benefitting policies. The current number of taxpayers in the country is merely 1.5 crore. This is just 1% of the 135 crores of the Indian population. The focus on tax reforms is to motivate people to pay taxes. This can be done by decreasing the tax rate or simplifying the process for them to come out.
About the new scheme
The new platform will consist of faceless assessment, faceless appeal, and taxpayers charter.
To reduce the manual procedure, the faceless assessment will be decided randomly by a computer. Also, the pattern won’t be a fixed one and will be changed from time to time.
With the use of technology; machine learning and AI, geographical boundaries within the nation will be abolished. A tax officer of another state can overlook the transaction of the taxpayer of another state.
The service related to faceless appeal will start from September 25 but the faceless assessment and taxpayers charter will start from today.
Tax return security has been declined to one-fourth to 0.26% of all returns filed.
Easing the current process
Indian tax administration has often faced allegations of harsh treatment and their insensitivity towards the taxpayers. A high number of cases has witnessed taxpayers and tax administration locking horns with each other.
The issue of alleged tax harassment gathered a lot of attention last year. The founder of India’s largest coffee shop chain, VG Siddharta of Cafe Coffee Day, committed suicide under sustained pressure from the I-T department. He left behind a note accusing tax authorities of torturing and mentally harassing him.
Review
Until now, if you were issued a notice, you would have to visit the tax office and answer their questions. These sessions could have gone for long. One of the main benefits of the scheme is to make the process more fair and courteous. This is done so that the Income Tax department give respect to taxpayer’s dignity.
A people-centric and public-friendly approach will be followed from now onwards. The faceless income tax assessment has been introduced to reduce the scope for corruption. If the income tax administration and the income taxpayers will not meet, the scope of pressurising will decrease significantly. As there is no communication, chances of corruption will also take a huge hit.
Making the process depend more on Artificial Intelligence will surely reduce the harassment faced by taxpayers. But, will it also reduce the tax collection? Many of the taxpayers are forced to pay tax then only they do it. Before that, they are unwilling to pay as they consider it as their income which should not be shared. Reduction of mental stress is important but how will it impact the tax collection is another point to keep an eye on. Until, next time.
The national government of BJP has given us many slogans over the past 6 years. It started from “Ache din aane wale hai” in 2014. The latest is “Vocal for Local”. PM Narendra Modi urged the nation to move towards making an “Atmanirbhar Bharat” amid the pandemic.
Indian Defence Minister, Rajnath Singh, made a big announcement on Sunday. He announced that India will suspend the import of 101 defence items from December 2020 to December 2025. The reason behind this progressive ban is to bolster domestic defence manufacturing sector.
The items include high technology weapon systems like ammunition, sonars, radars, artillery guns, assault rifles, corvettes, missile destroyers, transport aircraft, light combat helicopter, long-range land-attack cruise missiles, communication satellites, wheeled armoured fighting vehicles, Shipborne Cruise Missiles, Shipborne Cruise Missiles and conventional diesel-electric submarines.
With this move, outright procurement of the 101 listed products from abroad is banned. Though, the Indian private and public companies can work with foreign companies to produce the items in India itself.
According to the current Defence Minister, this list wasn’t prepared randomly but after a lot of discussions which involved armed forces, DRDO state-owned and private companies. This list is not the final one. Every year, the production capability of the domestic companies will be reviewed. If the scope of expansion is found, this list will be extended.
The Numbers Behind
India has tense relations with almost all of its immediate neighbours. This forces the government to spend more. Last year, India accounted for 9.2% of the total global arms imports. They were the second-largest buyer of foreign weaponry and the third-biggest military spender in the world.
According to government estimates, around Rs 4 lakh crores worth of orders will now be placed with the domestic industry. This is bifurcated into two areas. Rs 1.3 lakh crore for the Army and IAF and 1.4 lakh crore for the Navy.
“The five pillars of Modi’s self-reliant India are economy, infrastructure, system, demography, and demand. Our aim is to appraise the Indian defence industry about the anticipated requirements of the Armed Forces so that they are better prepared to realise the goal of indigenisation.” – Rajnath Singh
Share Market Movement
The defence stocks rallied up after the announcement from the Defence Minister. Bharat Heavy Electronics Limited (BHEL), Larsen & Toubro (L&T), Bharat Forge, Hindustan Aeronautics Limited (HAL), all reaped benefits with a higher closing.
Hindustan Aeronautics Limited (HAL) stock price closed at Rs 944 on Friday. It opened at Rs 1019.20 on Monday morning. Overall, it gained over 8% and closed at Rs 1026.Bharat Forge’s stock price also increased by Rs 12.75 to close at Rs 420.55. It’s Friday closing price was Rs 407.15.
Bharat Heavy Electronics Limited (BHEL) rose by 3.12% to close at Rs 36.35 after Monday’s trading session. Larsen & Toubro (L&T) stock closed at Rs 916.05 on Friday and opened at Rs 946.10 after Sunday’s announcement. All in all, it rose by whooping 4.84% to close at Rs 959.95 after Monday’s trading session.
Our say
This announcement has given a huge impetus to the defence stocks in the Indian market. This surge might continue for a few days as India aims to become self-reliant in the defence sector. Is this a good decision by the Indian government? Reaching a final answer will be a hasty conclusion. It has two sides.
On a postive end, this will act as a stimulus to the domestic defence manufacturing companies. India aim’s that the manufacturing sector contributes up to 25% of Indian GDP by next few years. They are still languishing at around 16%. Thus, this announcement will surely boost up the domestic manufacturing numbers.
On the other side, the quality of production still poses a huge question mark. The need for importing these products was because of cheaper production and quality output. Can India produce the high demand of arsenal at a similar low price? If they can, will they able to match or improve the quality of armoury? Both of these questions can be answered only with time. Until then, next time.
What does the Metal and Mining sector look like in India?
According to TradingEconomics, GDP from mining stood at USD 1052 Billion as of April 2020 which is about 10-11% of the GDP(PPP)
India produces 95 minerals – 4 fuel-related minerals, 10 metallic minerals, 23 non-metallic minerals, 3 atomic minerals and 55 minor minerals (including building and other minerals).
India ranks fourth in terms of iron ore production globally also India became the world’s second-largest crude steel producer in 2019 with production at 111.2 MT(Million Tonnes). India is the third-largest producer of coal standing at 55.4MT.
India’s iron and steel export in FY20 (till January 2020) stood at US$ 7.96 billion. India is the 14th largest exporter of steel, this leaves a huge potential for India to produce and meet global demand and pump up exports
India Exported $3357.61 Million worth of Aluminium in FY20. India Exported Zinc worth 360.24 USD Million in 2019
Steel and Economic Growth.
How does steel signify economic growth? Construction, Automobile and Spares, Transport and Logistics, Energy and Appliances are some of the industries that heavily rely on iron,steel and aluminium. A healthy crude steel consumption is a sign of growth in a developing economy.
Already developed economies, with low GDP growth rates do not indulge in mining activities for “domestic” consumption. Developing economies like India, China, Vietnam have high levels of domestic consumption as compared to other developed economies.
A COVID restrictions ease and economic activites begin normalizing, you can expect Heavy Industries and Capital Goods sector to reopen as well. Moreover, India is also expecting to meet global steel demands post-COVID period, with currently the importer of steel from India being China.
Metals and Mines on Dalal Street
NIFTY METAL is the benchmark for Metal and Mining Stocks on National Stock Exchange.
Following are the Top stocks by Market Capitalization in NIFTY METAL .
Company
Market Cap.
Hindustan Zinc Ltd.
106871.4
Coal India Ltd.
79961.4
JSW Steel Ltd.
57648
Tata Steel Ltd.
46261.7
Hindalco Industries Ltd.
39427.2
NIFTY METAL stocks by Market Cap
Following are the top gainers in NIFTY METAL in terms of annual(%) returns:
Company
Annual%
Jindal Steel & Power Ltd.
95.01%
Mishra Dhatu Nigam Ltd.
77.70%
APL Apollo Tubes Ltd.
64.09%
Hindustan Zinc Ltd.
21.44%
Ratnamani Metals & Tubes Ltd.
20.29%
Top Gainers in NIFTY METAL by Annual%
Following are the top losers in NIFTY METAL in terms of annual(%) returns:
Company
Annual%
Coal India Ltd.
-37.05%
National Aluminium Company
-18.93%
NMDC Ltd.
-12.30%
Welspun Corp Ltd.
-11.77%
Steel Authority of India
-3.46%
Top Losers in NIFTY METAL by Annual%
Metal Stocks Performance in COVID.
The COVID pandemic managed to jolt almost all stocks in the NIFTY METAL benchmark except for TWO. Steel Authority of India(SAIL) with Net Profit (+)383% YoY and Jindal Steel and Power(JSPL) with Net Profit (+) 406.16%YoY What is it that made these two companies exceptional?
SAIL and JSPL both adopted an export-oriented approach. SAIL’sexports increased by a staggering 349% in July(YoY) from 0.8 ton to 3.1 ton and JSPL’s exports increased by 203% in July(YoY). Naveen Jindal of JSPL announced aiming for 80% export of output for time being.
Last year Indian Iron and Steel Industry faced a de-growth of 6-7% however after the COVID restrictions eased Indian companies focused on increasing exports because of reduced domestic demand in the country.
According to EEPC India, Indian steel export increase two-fold in June. JSPL export sales contributed to 39% of the total standalone Sales in July 2020 to 2,50,000 tonnes.
Hindalco (Aluminium) is exporting over 80% of its output amid contracting domestic demand. Read More Here.
NMDC India’s prime iron ore producer reported increased production by 13% and increased sales by 7% in July post lifting of lockdown restrictions.
Nifty Metals index this year has gained nearly 6% so far in August
Future Prospects of Metal Stocks?
Despite 100% FDI through the automatic route introduced in 2019, Steel industry didn’t see much of it due to absence of domestic expertise, lack of MSMEs and inefficient productivity.
According to a Crisil report, steel companies with 22 MT capacity were referred to the National Company Law Tribunal (NCLT) in the RBI’s first round of resolution of stressed assets. The MSMEs in Steel Sectors are finding it difficult to get the Credit from Banks and thus impacting their production.
After a long slump, Metal prices, as well as demand, have started to pick up. Import demand exists in developing economies such as China and ASEAN countries(South East Asian Nations) where construction and infrastructure sectors have resumed show and the demand for capital goods has arisen.
China and Vietnam were top destinations of Indian steel exports accounting for nearly 63.5% of total steel exports during June 2020 as compared to only 6.2% in June 2019. Essentially, current global prices are China-driven.
Source: Ministry of Steel Monthly Report
Steel demand in the developing economies excluding China is expected to fall by 11.6% in 2020 but will see a substantial recovery of 9.2% in 2021 according to the World Steel Association. This leaves prospects for India to pump exports into already existing markets of ASEAN.
Base metal prices had slumped after the COVID lockdown, the price has started moving up as market normalises and global production gains momentum which is seen as a positive, however precious metals like Gold which crossed its highest-ever Rs. 57,000 mark this week adds to volatility surrounding markets which may continue till the vaccine isn’t obtained.
MSME, Small Cap and Secondary metal enterprises are unlikely to report any significant production anytime in the future as they are grappling with additional challenges of low working capital and depleting cash reserves under lock-down. The focus should be directed on larger and established metal or mining stocks until volatility doesn’t die down.
The gap between international domestic price was 7-8 per cent (source: Business Standard). This leaves Indian steel prices a potential to recover the gap. Domestic hot-rolled coil (HRC), a variety of steel sold, moved up by Rs 2,000 a tonne from end-July.
With projects pending all over the country, rising exports to developing economies and the declaration of Atmanirbhar Bharat, India plans to become a producer hub for the world. This goal will be fueled by all major industries in India, one such being the Iron and Steel Industry. You can expect a fair share of growth once the economy restarts to its full scale. As India continuously aims to increase its Net Export, the future for the Metal and Mining industry seems bright and shiny.
The Reserve Bank of India has approved the appointment of Sashidhar Jagdishan as Managing Director and CEO of HDFC Bank for a period of three years from October27, 2020, when he will take the charge from the outgoing MD Aditya Puri.
Who is Sasidhar Jagdisan? What does his appointment as MD mean for the future of HDFC?
A Mumbai-boy, Jagdishan grew up in the quiet suburban neighbourhood of Matunga where he studied in Don Bosco High School, after which he went on to pursue his bachelors in Physics from Mumbai University. He is also a qualified Chartered Accountant and holds a Master’s degree in Economics of Money, Banking & Finance from the University of Sheffield, UK.
Sashidhar Jagdishan
He worked as a senior officer in the country financial control division of Deutsche Bank in Mumbai. Post which he quit and joined HDFC Bank in 1996.
Sashidhar Jagdishan joined HDFC Bank in 1996 as a manager in the finance function. He became Business Head- Finance in 1999. Thereafter he became Cheif Financial Officer for HDFC in 2008.
Sashidhar is currently the Group Head of Finance, Human Resources, Legal & Secretarial, Administration, Infrastructure, Corporate Communications, Corporate Social Responsibility and the Strategic Change Agent of the Bank.
HDFC Bank’s stock price has been under pressure due to concerns around the succession and the recent attrition in the top management.The stake sale by Aditya Puri had also impacted the sentiment and raised uncertainty over the CEO finalization. The stock had corrected 12 per cent in two weeks before the finalization of CEO by RBI.
HDFC Bank‘s share price rose nearly 6 per cent intraday on August 4 on the report of RBI approving Sashidharan Jagdishan as MD, CEO.
Sashidhar Jagdishan, Kaizad Bharucha, Executive Director at Operations(HDFC) and Sunil Garg, CEO, Citi Commercial Bank were the three final options to replace Aditya Puri as MD, CEO.
Certain board members and analysts saw Kaizad Bharuchaas a better fit for MD/CEO since he was the face for investor relations, operations and wholesale banking. Whereas,Sashidhar’s domain is finance.
“In an uncertain environment like this, we believe an internal candidate who is in sync with the outgoing CEO Mr Puri is the right choice.” – Suresh Ganapathy, Macquarie Securities
“Considering the appointment of an internal candidate, who has been part and parcel of the team that built that kind of a legacy, I do not think there should be much of an issue,” – Dipan Mehta, Founder and Director, Elixir Equities
Keeping COIVD pandemic in mind you should expect slow growth in the short term. However, if Sasidhar’s term is extended from the signed three years you can expect continuity in the performance of the company.
The Legacy of Aditya Puri.
Aditya Puri was born in Gurdaspur District (Punjab) and studied at Punjab University, Chandigarh, gaining a bachelor’s degree in Commerce. He qualified as a Chartered Accountant with the Institute of Chartered Accountants of India. He has worked in the banking sector for 40 years, in India and other countries. He became CEO of Citibank, Malaysia in 1992. In September 1994 he returned to India as Managing Director of HDFC Bank
Aditya Puri joined HDFC Bank in September 1994 with the vision of creating a world-class bank and became the longest-serving head of any private bank in the country. He presided over HDFC’s acquisitions of Times Bank Limited in 2000 and of Centurion Bank of Punjab in 2008
HDFC Bank became listed on BSE in May 1995. Since then, the stock has delivered 25,000 per cent returns to investors to date. Puri is the highest-paid CEO in the banking industry; his total remuneration was Rs 18.9 crore in 2019-20.
Puri left his cushy job in Citibank Malaysia to head back home to start a greenfield bank promoted by mortgage lender HDFC Ltd in the early 90s. In the next two and a half decades, Puri scaled up the bank organically and turned it into a profit-making machine with the lowest NPAs in the industry.
Puri, whose tenure ends in October 2020, held a 0.14% stake or 7.8 million shares as of 30 June. Recently, he sold nearly Rs 800 crores worth of shares, and thus, the veteran banker now holds 3.76 lakh shares or 0.01% stake in the bank.
Under Puri, the bank became the first in India to launch an International Debit Card in association with VISA (Visa Electron). In the year 2001, they started their Credit Card business. Subsequently, HDFC Bank became the first private sector bank to be authorized by the Central Board of Direct Taxes (CBDT) and RBI to accept direct taxes.
Under Puri, the Bank made a strategic tie-up with a Bangalore-based business solutions software developer Tally Solutions Pvt Ltd for developing and offering products and services facilitating on-line accounting and banking services to SMEs. Thereafter, On 20 July 2001 HDFC Bank’s American depositary receipt (ADR) was listed on the New York Stock Exchange under the symbol HDB.
The Sum and Substance.
In conclusion, Sashidhar’s appointment was a welcomed decision in the market with HDFC share price going up 6% shortly after the announcement. Aditya Puri’s legacy saw HDFC transitioning from infancy to once of India’s Largest Private Sector Bank by Assets as well as market capitalization.
With the effects of COVID-19 in the scenario, you can expect overall stunted growth in short-term for its Non-Banking entity. With optimism in the market about the new MD and the approval of Aditya Puri himself, one can take a backseat and wait for the COVID situation to clear out and most assuredly the appointment of Sashidhar Jagdishan shall bring prosperity to HDFC as an entity.
Reserve Bank of India (RBI) Governor and the head of the six-member Monetary Policy Committee (MPC), Shaktikanta Das addressed the media after the three-day MPC meeting. The MPC decided to keep the repo rate, the rate at which the central bank lends short term money to commercial banks, unchanged at 4% after 115 basis points reduction between March and May this year.
RBI Governor said that the real GDP growth will remain negative in FY21.
In order to understand the concept of Repo and Reverse Repo Rates better, please go through this article.
In short, an increase in Repo rate means that the banks will have difficulty in availing loans easily. This, in turn, reduces the money supply in the economy and helps in controlling inflation. On the contrary, a decrease in Repo rate means that the banks can easily get money from the Central Bank. This increases the money supply in the market and is associated with high economic growth.
Gold
RBI also eased the gold loan guidelines which will enable lenders to give more loan against jewellery. According to current RBI regulations, up to 75% of the value of the gold can be lent. According to new guidelines, 90% of the value of gold can be lent. This relaxation will be effective until March 31.
In simpler terms, if the value of the gold against which loan is issued is worth Rs 1000, then according to the previous regulation a loan amount of Rs 750 can be issued. But now a loan of Rs 900 can be issued.
Moratorium and Loan Restructuring
Reserve Bank of India (RBI) did not extend the moratorium in its monetary policy review on Thursday, it allowed banks to restructure the loans of borrowers who are in financial difficulty and are unable to repay them.
Once restructured, such loans would be considered as standard. This means that the lenders won’t report the borrower as a defaulter to credit bureaus if the borrower follows the new payment structure.
Personal loans include those given to individuals and include education loan, housing loan and loans given for investment in financial assets (shares, debentures, and so on).
According to RBI, the resolution of stressed personal loans will be available only to those borrowers who were repaying their loans regularly as on 1 March 2020.
RBI wants lenders to offer the resolution plan only to eligible borrowers. Institutions could, therefore, have the discretion to choose the borrower based on the facts of the case. The facility, hence, could be available to genuine borrowers who have lost their jobs or have faced a high pay cut, putting stress on their finances.
Rs 10,000 crores to NABARD and NHB
RBI in its monetary policy announced today announced an additional special liquidity facility (ASLF) of Rs 10,000 crore equally split between NABARD (National Bank for Agriculture and Rural Development) and the NHB (National Housing Bank) to help small financiers and home loan companies.
RBI said“In order to shield the housing sector from liquidity disruptions under the prevailing conditions and augment the flow of finance to the sector, it has been decided to provide an additional standing liquidity facility (ASLF) of Rs 5,000 crore to NHB – over and above Rs 10,000 crore already provided – for supporting housing finance companies (HFCs).“
In conclusion, the bi-monthly briefing by the RBI Governor provided some insight over the policies to maintain a financially sound ecosystem in the times of crisis. The Loan Restructuring process is a way to protect borrowers, in the time of COVID-19.
This highlights positive market sentiment as Sensex gained 362 points and Nifty 50 gained 99 points after the announcement.
Dhirubhai Ambani, who gave birth to Reliance, started his mission in 1957 with a small 500 sq. ft. office. He developed a little yarn trading business but always dreamt of establishing India’s largest company.
In 1977, Reliance Textile Industries’ IPO was subscribed over 7 times thus, giving a major financial and morale boost to the company. Following the idea of backward integration, Reliance set up its first mega manufacturing plant at Patalganga under just 18 months. Reliance Industrial Infra was also launched in 1988.
With the idea to reap benefits of backward integration, the Hazira plant was started in 1991 which made them the world’s largest integrated producer of polyester. A huge breakthrough was found in 2000 as Reliance built the world’s largest grassroots refinery in Jamnagar, that too in just 36 months!
The year 2002 witnessed the launch of Reliance Communications as Reliance Infocomm Limited. The same year witnessed the death of Dhirubhai Ambani. From there on, reports of disagreement between the two brothers, Anil Ambani and Mukesh Ambani came to surface. When the feud became public in 2005, their mother Kokilaben intervened to split the Reliance empire.
Mukesh Ambani led Reliance got the soul of the business: Reliance Industries, along with IPCL. On the other hand, Anil Ambani got the responsibility to command Infocomm, Reliance Energy and Reliance Capital.
The oil & gas business took a massive upturn in 2009 when Reliance commenced production of hydrocarbons in its KGD6 block. This helped them to develop the world’s fastest green-field deepwater oil development project. After penetrating the retail business, Reliance Retail becomes the largest retailer by revenue in 2014.
Mukesh Ambani led Reliance ventured into the digital revolution of the country by launching wireless broadband 4G services and Jio. In just four decades, the company has grown from a small start-up to one of the biggest companies around the world. It has been some journey!
Reliance is dominating the current Indian market. Thus, it is no wrong that everyone is talking about this company. Yes, it is a huge empire, but do you know where the revenue and profits come from? Everything below will explain to you how the company makes money from and which segment helps them to achieve this consistent growth.
Revenue and Profit Distribution
Reliance reported a consolidated turnover of Rs 6,59,205 crore for FY20, a rise of 5% over the previous year. Consolidated net worth also increased by 15% to reach Rs 3,75,734 crore. Reliance operates in several markets. From trading yarn to oil and now to digital transformation, Reliance has ventured in many spaces. The tables below show which segment has contributed more to revenues and profits over the past four years.
2017
2018
2019
2020
Refining
63.7%
56.4%
50.9%
47.8%
Organized Retail
8.6%
12.8%
16.9%
20.1%
Petrochemicals
23.5%
23.1%
22.3%
17.9%
Digital Services
0.2%
4.4%
6.3%
8.4%
Crude Petroleum
2.7%
2.3%
2.9%
5.2%
Percentage contribution of different segments to Total Revenue
2017
2018
2019
2020
Refining
65.5%
49.4%
33%
30.1%
Organized Retail
2.0%
3.8%
7.7%
11.3%
Petrochemicals
34%
40%
46.7%
36%
Digital Services
-0.1%
6.1%
12.6%
20.3%
Crude Petroleum
2.8%
3.2%
1.7%
3.1%
Percentage contribution of different segments to Net Profits
Digital Services
Jio is an entire ecosystem which aims to help Indians enjoys digital life to the fullest. It aims to cover 90% of India’s population in the next year. Under the music stream, it acquired Saavn and turned it into Jio Saavn. To counter zoom’s dominance, it launched video conferencing app JioMeet. Reliance Jio becamethe number 1 ranked mobile telecom operator in the country by both Adjusted Gross Revenue (AGR) and subscribers.
India has around 450 million unique smartphone users, second only to China in the whole world. This gives them additional motivation to turn this segment into a cash cow and utilize the already dominated market.
Jio has been the driving force behind RIL in the past four months. With the world under lockdown, the oil & gas domain faced a drastic decline in demand. In these extreme times, sale of stake in Jio Platforms helped the company become net-debt free much before their targeted time.
Revenue from this domainhas increased by a CAGR of 226% in the past four years. In 2017, the digital services made just 0.7% of the total revenues. This has increased to 8.4% in FY20, according to the recent annual report of the company. Digital services were accruing losses in 2017. But a well-planned strategy has made this segment the crown jewel of Mukesh Ambani. Jio contributed around 20% of profits for RIL this year.
Source: Author’s own creation
Refining and Marketing
Reliance R&M helps in making a wide range of products like Liquified Petroleum Gas, Propylene, Gasoline, Jet fuel, sulphur etc. These products are used widely as domestic and industrial fuel, transport fuel, feedstocks for fertilizer and pharmaceuticals, etc.
The global oil industry has been in turmoil since the spread of COVID-19. The demand for oil worldwide fell to the lowest level since 2011. From 2018 to 2019, this domain registered a growth of 29% but things were way different this year. FY2019-20 revenue from this segment fell by 1.6% y-o-y to 3,87,522 crore. Crude oil prices fell massively. This made the production more expensive for the company. Thus, their gross refining margin (GRM) fell to $6.3 per barrel from $8.1 per barrel.
The problem in this segment is not in the top line, but actually in the bottom line. Even though the revenue is decreasing at a gradual pace, the profits contributing to the total profits is decreasing even faster. In fact, in the space of four years, profits % contribution has fallen by more than half. Good time to switch from oil to telecom maybe?
Source: Author’s own creation
Retail
Reliance Retail is the retail segment of the Reliance group. The retail serves under the food and grocery, consumer electronics and fashion & lifestyle category. Reliance Trends, Trends Women, Reliance Fresh, Reliance Smart, Reliance Footprint and Reliance Jewels and some of the stores under which Reliance operates.
The general perception is that growth in digital services is helping the company to thrive. Here’s an eye-opener. The retail business of Reliance has grown with a CAGR of 382% during financial years 2017-’20. This is in contrast to digital services’ 226%.
The company has focussed on store expansion and increasing the number of product mix so that the consumers can consider it a one-stop-shop. Roll-out of the Digital Commerce initiative will further increase customer’s awareness and customer’s accessibility.
Recently, Reliance Retail and WhatsApp entered a partnership to support small businesses on WhatsApp via JioMart. And as many reports suggest, Reliance is inching closer every day to acquire Future Retail as soon as possible.
Source: Author’s own creation
Petrochemicals
Reliance is among the top ten largest producers of petrochemicals in the world and the biggest in India. Petrochemical is a chemical which is obtained from refining of petroleum and chemical. These chemical compounds are later used to manufacture a range of products which comes is the daily use of people. Few products are resins, synthetic fibres, plastics, detergents and pesticides. With the power of chemistry and innovation, the Reliance focuses on making several products across agriculture, automobile, housing, industrial and healthcare. The company produced a range of polymers, aromatics, polyesters, etc.
The disturbed global factors related to oil echoed in petrochemicals performance this year. Their overall contribution to the revenue decreased from 22.3% last year to 18% this year. Due to lower price realization and lower sales, revenues from this segment has decreased by 15.5%.
Last year, revenues amassed from petrochemicals was Rs 1,72,065 crore. This year, it fell to Rs 1,45,264 crore. Petrochemical has been the second most revenue generated area for a while but this changed in FY20. Organized retail leapfrogged the petrochemicals by almost 3% when it comes to revenue contribution.
Petrochemical has always been one of the biggest contributors to total net profits for Reliance. From 2017-19, it has increased from 34% to 46.7% but with the pandemic affecting half of the financial year, expenses shot up due to trade barriers. This has resulted in a decrease in contribution from 46.7% to 36%.
Source: Author’s own creation
Shortly, we will be knocking on your doors to explain each and every segment in detail. Until next time.
TikTok and Microsoft have been in news recently as US President Donald Trump on Monday said Microsoft can buy the Chinese-owned video app TikTok. 15 September has been set as the ultimatum date for TikTok to close the deal, or to get banned in the United States.
Microsoft in a blog post on Sunday confirmed talks to buy TikTok’s operations in the United States, as well as in Canada, Australia and New Zealand. The Chinese Video app has come under scrutiny in Washington for its Chinese ownership.
Trump administration officials and lawmakers have argued that the app, which is known for dance videos and other fun viral clips, could pose a national security threat by potentially giving the Chinese government access to vast quantities of American user data. This is also a similar reason why the Indian Government recently banned TikTok in the country.
Microsoft outlined in their blog about how it would transfer and protect user data. The company said that it “would ensure that all private data of TikTok’s American users are transferred to and remains in the United States”. The blog added that “Any such data currently stored outside the U.S. would be deleted from servers overseas“.
ByteDance
First, let us understand the origin and the financials of the TikTok’s parent company ByteDance.
ByteDance is the world’s 2nd most valued startup, valued at $100 Billion above the likes of SpaceX ($33.3 Billion) and Airbnb ($18 Billion). Its investors include KKR, SoftBank, and Sequoia Capital China.
The Parent Company itself had revenue of $17 billion last year with profits of $3 billion. But that’s the entire company, with a stable of at least 20 apps including Douyin (the Chinese version of TikTok) and news feed Toutiao. According to The Information, TikTok’s revenue last year was around $300 million globally — that’s less than 2% of an entire company. This year, TikTok was aiming for $500 million in sales in the U.S.
Chinese Retaliation
“China willnot accept United States’ attempts of acquiring TikTok and considers Microsoft’s pursuit of purchasing the company a “theft” of its technology, state-run China Daily said in an editorial on Tuesday. It said that China had “plenty of ways to respond if the administration carries out its planned smash and grab”.
China Daily, which is a mouthpiece of China’s ruling Communist Party, said that “such shilly-shallying” is a tactic the US administration employed during the trade deal negotiations with China.
What’s in it for Microsoft?
A deal like that would vault Microsoft into the social media and advertising markets dominated by Facebook Inc. and Google. Microsoft once paid $6.3 billion for Internet ad company aQuantive, the largest deal ever for the company at the time. The effort failed and the company ended up writing down almost the whole value of the deal.
Buying TikTok would give Microsoft “a crown jewel” in consumer social media at a time when Facebook and Google are under massive regulatory scrutiny over antitrust concerns.
With no consumer social media app, Xbox and Minecraft are pretty much its sole attention-getter among younger users. TikTok would help bolster that business, though it would also push Microsoft to confront controversial areas it has mostly avoided, such as censorship and disinformation.
Microsoft has added $77 billion in market value after confirming talks to buy TikTok in the US. Many legal hurdles remain in front of Microsoft ahead of the September 15 deadline. The exact the terms of the buyout and how the Chinese Administration will react to it are also yet to be seen.
India is the 5th largest auto market in the world with market size estimated to be $118 Billion. Domestic automobiles production increased at2.36 per cent CAGR betweenFY16-20 with 26.36 million vehicles being manufactured in the country in FY20 with thetwo-wheeler segment domination the sales.
The Indian Automobile along with Auto-Components industry slumped during the lockdown between March 2020 and June 2020. According to Society of Indian Automobile Manufacturers(SIAM), The total production of Passenger Vehicles, Three Wheelers, Two Wheelers and Quadricycle in the month of June 2020 was 1,094,363 as against 2,253,407 in June 2019 facing degrowth of (-)51.4%. Overall the industry has faced a 75.5% degrowth between Q1FY20 and Q1 FY21.
Passenger Vehicles
However, the story seems different for July, Passenger Vehicle sales were up 69% in July 2020 as compared to June 2020 falling short of just (-)1% as compared to July 2019 sales indicating a return to normalcy in the near future.
Maruti Suzuki logged an 88% growth in sales as compared to June 2020 along with making a 1.3% YoY Growth. Maruti sales were led by entry-segment Alto, WagonR and sPresso.
Tata Motors flew past Maruti-Suzuki in terms of sales growth. Tata Motors sold 15k units, 43 per cent up from 10,485 units sold in July 2019. Despite not-so-great Q1 results on 31st July Friday, Tata Motors shared zoomed at 6.5% after the market opened on 3rd August, Monday.
MG motor a comparatively new player in the market showed a rise of 40% in sales YoY selling 2,105 units in July 20 as compared to 1,508 in July 19
Passenger Vehicle Sales
The Farm Equipment Sector and rise in Agriculture
Mahindra’s domestic vehicle sales of 11,025 units were 34.5 per cent down on last year’s numbers. However, it’s Farm Equipment Sector (FES) reported a 27% growth in the sales of tractors to 25,402 units which are by far the highest July sales according to company reports.
Escorts Ltd on Saturday reported a 9.5 per cent increase in tractor sales at 5,322 units in July. The manufacturer has also made a 21.1% YoY growth in terms of sale.
VST Tillers has reported total sales of 8226 power tillers and 2616 tractors during the period April-July 2020, as compared to 7904 power tillers and 2404 tractors amounting to 6% growth during the period April-July 2019.
The reason behind this is the rise in the rural market and an increase in agriculture as an occupation due to lockdown in most urban and metro areas causing a loss of occupation in cities.
OEMs
July 2020
July 2019
% change
Mahindra & Mahindra
24,463
19,174
28
Escorts
4,953
4,505
10
VST Tillers
10,842
10,308
6
Two Wheelers
Hero MotorCorp managed to sell over 514,509 units indicating a 14.4% growth Month-over-Month in sales (June-July 2020)
Suzuki Motorcycle India Pvt. Ltd. had a 37% appreciation in sales to 31,421 units in July 2020. Exports stood at 2,991 units in the month gone by.
Eicher Motors Owned Royal Enfield showed a6% increase in sales Month-On-Month basis ending July. Royal Enfield claimed that its Interceptor 650 was the highest-selling motorcycle in the U.K. over the past 12 months, with the Himalayan coming in at fourth.
TVS Motor Company registered a sales growth of 27% in July 2020 with 252,744 units as against 198,387 units in June 2020. TVS Motor Company registered sales of 252,744 units in July 2020 as against 279,465 units registered in the month of July 2019.
Commercial Vehicle Sale
Ashok Leyland‘s sales might have declined 56% per cent YoY but have managed todouble sales on a monthly basis with 4775 models in July 2020 as compared to 10,926 models in June 2020
In the Commercial Vehicles segment, Mahindra and Mahindra sold 13,103 vehicles in July 2020, as against 15,969 vehicles in July 2019.
Mahindra and Mahindra Total Sales Figures (Source:RushLane)
The commercial vehicle segment is impacted the most due to travel restrictions being imposed all across the country and limited passes being issued to transporters. Moreover, with reduced sales, the transporters are having to pay for road taxes, permits and other secondary charges.
The COVID-19 reduced the profits for transportation business while forcing many to shut shop. Although, transportation was of utmost importance in transporting essentials it couldn’t push demand for automobiles whatsoever.
Despite the reduction in Oil prices, the government increased tax on Oil which did no good to the automotive industry. With respect to commercial passenger vehicles, enforced social distancing norms has caused a reduction in the use of public transport/buses.
As the world recovers, you can expect a steady growth in automobile demand in in Light Commercial Vehicle(LCV) Category more than Heavy Commercial Vehicle (HCV) Category. Two wheeler sales and Passenger Vehicle segment should resume and can be expected correlate with the reduction in impact of COVID-19 and the implementation of Make-In-India along with the Atmanirbhar Bharat moment.
Yesterday, after the market hours Apple, Alphabet, Amazon and Facebook reported their Q2 earnings of 2020. As millions of people have lost their jobs, it was interesting to see how the big tech giants of the US has fared during the worldwide pandemic.
Apple
Apple reported Q2 2020 results which destroyed the Wall Street estimates. Total net revenue of $59.7 billion was declared, which is a mighty 11% higher than what was recorded in the same period last year. Net profits also increased by 12% from $10.04 billion to $11.2 billion. The major chunk of the increase in revenue has come through the services domain. Revenue from the services segment has increased by 14% whereas from products segment has increased by 10%.
Better financial performance in the quarter has forced Earning per share to rise by almost 19% to reach $2.6. Again, the rise in EPS has beaten the estimates of Yahoo Finance data.
“We’re conscious of the fact that these results stand in stark relief during a time of real economic adversity for businesses, large and small, and certainly for families. We do not have a zero-sum approach to prosperity, and especially in times like this, we are focused on growing the pie, making sure our success isn’t just our success.” – Chief Executive Officer Tim Cook.
Apple also delivered on its commitment to double its annual service revenue within four years. All this had a positive effect on the company’s stock price. Apple shares went up by 4.7% in after-hours trading. The booming performance in the stock market has prompted them to go for a stock split for the fifth time in their history.
The aim behind the stock split is to make the stock cheaply accessible to the investors who are interested to buy the stock. To know more about the stock split, click here. As coronavirus forced offices, schools and colleges to operate from home, demand for products like iPad and Mac surged. iPad had its best June quarter in eight years whereas the Mac had its second strongest quarter in its history.
Amazon
Amidst the global pandemic, when companies are reporting losses, Amazon has just declared the biggest profit in its 26-year history. As compared to the same quarter previous year, Amazon has reported an increase of 29% in their total revenues, from $63.2 billion to $88.9 billion. With the retail shops shut around the world and fears of stepping out in the mind of people has forced them to look for e-commerce to buy things.
This has worked hugely in favours of Amazon whose Online grocery sales tripled year over year. Also, their streaming video platform has seen video hours doubled. The sales in online stores have increased exponentially by more than 48% to reach $45.9 billion in the second quarter.
“Everyone was looking for masks; everyone was looking for gloves; everyone was buying groceries online. That mix is not super profitable,” he said. “What we saw in Q2 was not only did the mix start to shift back to a more normal mix” but that “we also were able to ship a lot more than we had originally thought.” – Brian Olsavsky, Amazon’s chief financial officer.
As the demand for online shopping increased, third-party merchants paid Amazon more to sponsor their products extensively. The companies worldwide are forced to shift to the online mode. Thus, Amazon’s cloud services also saw higher demand as the revenue from Amazon Web Services (AWS) increased by 28% $10.81 billion.
As the demand soared up, Amazon hired 175,000 people in recent months. The costs related to COVID-19 also increased as the company spent around $4 billion on protective equipment for staff. Yet, after incurring high operational expenses, Amazon was able to double in net profit from $26.2 billion to $52.4 billion in just one year.
Alphabet
Alphabet reported Q2 2020 earnings with a 2% dip in total revenue but still beating the street estimates. Total revenue and net income were amassed to be $38.3 billion and $6.96 billion in COVID-hit quarter. A big note of worry for the company is the falling revenue from Google ads for the second straight quarter. Revenue from google ads this quarter was $29.8 billion which is 8% less than what was amassed in the same quarter last year.
“We’re working to help people, businesses and communities in these uncertain times,” said Sundar Pichai, Chief Executive Officer of Google and Alphabet. “As people increasingly turn to online services, our platforms — from Cloud to Google Play to YouTube — are helping our partners provide important services and support their businesses.”
On a brighter side, revenue from Youtube ads and Google Cloud shot up by 5.4% and 43% respectively. The strong growth in both of these segments has aided Alphabet to beat the market estimates. With people putting in their home, video hours of Youtube platform increased which also forced merchants to pay more for their ads to come up. Similarly to AWS, Google Cloud grew massively as offices are switching to the work-from-home model.
Facebook
Just like the previous three tech giants, Facebook went past all the street estimates and registered an 11% rise in revenue from $16.9 billion last year to $18.7 billion. Due to the lower tax rate, their net income has shot up by more than 90%. Facebook daily active users (DAUs) has increased by 12% year-on-year to reach 1.79 billion in June 2020.
Facebook monthly active users (MAUs) also rose by 12% to stand at 2.70 billion. A 15% rise Family monthly active people (MAP) took the number to 3.14 billion as of June 30, 2020. The company has been under severe social pressure in this quarter. A public campaign was run against the company a while ago. Mark Zuckerberg failed to remove one of the comments of President Donald Trump which was deemed instigating by twitter and the public.
A worldwide ad boycott by more than 1,100 companies took place to support #StopHateForProfit campaign. Some of the major brands that have pulled their ads are Coca-Cola, Ford Motor, Puma, Unilever, etc. Even after so many issues, Facebook has managed to do well financially and overcome the street estimates.
Conclusion
The more this pandemic continues, more these tech giants are going to benefit as people shift to online medium for every reason. Whether they want to study or teach, whether they want to buy or sell, whether they want to talk or meet, all of this will be done via online medium. And, the business models of these tech giants readily support this movement of people during the pandemic.
The large tech giants have seen a huge surge in the demand for their products. The dependence of people has increased on them which has helped them to thrive during this pandemic. Every segment of the economy is depending on the tech facilities and this has created a huge boom for these companies. All in all, it has shaped a perfect Tech world.
NSE (National Stock Exchange) introduced trading in Treasury bills (T-bills) and State Development Loans (SDLs) in its capital market segment. In line with equity trading, investors can now buy and sellT-bills and SDLs through NSE trading members.
Most importantly, the move comes within a week of SEBI chairman Ajay Tyagi urging financial market participants to handhold those who have recently opened Demat accounts. They need to begin with investing in less-risky government securities before moving on to equities and other risky instruments, he said.
In order to understand what are Treasury bills and SDLs, kindly go through our next segment.
Treasury Bill
Firstly, treasury bills are used for short term borrowing by the Central Government to fund projects like building roads, schools etc. Furthermore, they are issued at three maturity periods–91 days, 182 days and 364 days. There is no interest component in the case of treasury bill, which is the main difference between a government bond and a treasury bill.
In other words, the bill is issued at a discount to its true value (which is higher than the discounted price) and at maturity the investor is given the true value of the bill. This is a simple case of buying low and selling high. It can be further explained through an example.
Let’s say, a 91-day treasury bill with a face value (true value) of Rs. 120 can be bought at a discounted price of Rs. 118.40. Upon maturity, the investor is eligible to receive the entire true value of Rs. 120, which allows them to realise a profit of Rs. 1.60.
As per the regulations put forward by the RBI, a minimum of Rs. 25,000 has to be invested by individuals willing to invest in a short term treasury bill. Furthermore, any higher investment has to be made in multiples of Rs. 25,000.
From an investor’s point of view, a treasury bill is an extremely safe investment option as it is issued by RBI and backed by the Central Government. So even during an economic crisis, the true value has to be paid to the investor upon maturity. In addition, they are highly liquid that means the true value will be deposited into the investor’s account a day after the maturity.
The current 91-day treasury bill yield is 3.22 per cent, in other words if the treasury bill would have been a government bond then its yearly interest rate will be 3.22 per cent.
State Development Loan (SDL)
State Development Loans (SDLs) are dated securities issued by states for meeting their borrowings requirements. Purpose of issuing State Development Loans is to meet the needs of state governments.
Lets first understand what is a dated security.
Dated Government securities are long term bonds of the government that carries a fixed interest rate. These are issued to fund state projects for rural and urban development
The key difference between SDL and Treasury Bill is that SDLs are long term investments having maturity periods up to 30 years and treasury bill has a maximum maturity period of a year.
The average interest (coupon) rate of a state development loan is around 8 per cent.
From an investor’s point of view, SDL is very safe government security for long term investment.
“Availability of a secondary market for these securities would encourage participation in the primary markets. Now all the major government securities including G-sec, SDL and T-bills are offered at NSE in both primary and secondary market platforms,” NSE Managing Director and CEO Vikram Limaye, said.
In conclusion, the availability of these securities in the capital market segment for trading, coupled with NSE’s wide reach, is likely to improve the participation of retail investors in this asset class.
Mindspace Business Parks REIT has a quality office portfolio in Mumbai, Hyderabad, Pune and Chennai. The business parks in Mumbai are Mindspace Airoli East Business Park, Mindspace Airoli West Business Park, Paradigm Mindspace Malad and The Square, BKC
The total leasable area of Mindspace Business Parks is 12.1 MSF* in Mumbai, 11.6 MSF in Hyderabad, 5.0 MSF in Pune and 0.8 MSF in Chennai. With a total leasable area of 29.5 MSF, it is one of the largest Grade-A office portfolios in India. Total Market Value of our Portfolio, including the facility management division Rs. 23675 Crores
*MSF stands for ‘million square foot’
About the IPO
The Mindspace REIT filed a draft red herring prospectus on 31st December 2019 followed by an offer document on July 17, 2020. The IPO highlights are as follows:
According to the company’s red herring prospectus, the company will utilise Rs. 1000 Crores of the fresh issue for the following purposes:
Partial or full pre-payment or scheduled repayment of certain debt facilities of the Asset SPVs availed from banks/financial institutions (including any accrued interest and any applicable penalties/ premium). Its adjusted Net Debt stands at Rs 7214.8 Crores
Purchase of NCRPS(Non-Convertible Redeemable Preference Shares) of MBPPL(Mindspace Business Parks Private Limited)
General purposes
Key Financials and its Highlights
Source:SEBI
FY18
FY19
FY20
Total Income
15,022
16,797
20,262
Total Assets (Current + Non Current)
84,738
91,437
1,12,224
Profit before tax
3,518
6,073
7,518
EBITDA
10,249
12,614
13,718
Net Cash USED In Investing Acitivities
-4,267
-5,860
-13,551
Net cash generated from / (used in) financing activities
-4,878
-3,561
4,743
Borrowings
52,555
56,209
63,569
The Pros
Dividend income REITs have to pay at least 90% of net earnings to unitholders as a dividend. Ensured Regular Flow of Income
The Trust has a WALE(Weighted Average Lease Expiry) of 5.8 years, which means that at present the average time in which all leases will expire in 6 years which mean a steady cash flow for the next 6 years minimum.
Diversification– REITs help investors diversify a portfolio, as they have a low correlation to equity, debt and other assets class. Moreover, Every Tentant contributes to not more than 7.7% of its Gross Contracted Rentals.
Transparent-Like public listed companies, REITs must disclose financial information to investors, report on material business developments and risks on a timely basis. Since REITs distribute most of their earnings, they frequently seek funding from capital markets, which require them to make additional disclosure and justify plans for using such funds.
Allowed Investment only in Commercial Real Estate As per SEBI rules.
The Cons
Tax on dividend-Earnings from REITs is taxed at the marginal rate of taxation making it less attractive.
Lacks Presence in Banglore Cluster, a major IT and Corporarte Hub.
Limited growth-REITs exhibit limited growth, as they have to distribute 90% of income. Thus, REITs can reinvest 10% of its income indicating lower compounding effect.
Investment risks-The standard risks of the real estate market such as property values, interest rates on loans, location and tax laws are applicable to REITs.
High expenses-REITs charge management and transaction fees. There are instances where REITs have put a limit on redemption too.
Should one go for the IPO?
The COVID-19 pandemic practically rendered commercial real estate as a liability for most sectors. However many of Mindspace’s properties have a multi-year lease agreement already in place, Mindspace has decided to give waivers to occupants as well. This does not mean a reduction in the rental collection in the medium run. Offices will adhere to government norms like limited attendance, social distancing and fixed hours will make occupancy a viable option.
Moreover, the psychological impact of working at home was harmful to a major part of society, workspaces can be expected to resume in the long-term
Projected earnings of the company as well as analysts give a optimistic outlook towards the company.
Source: SEBI
Essentially, Investment in Mindspace REIT can be for those expecting long-term returns and a low-risk appetite with a steady income. Additionally, investment in a REIT is a safe haven since it does not correlate to other segments like Equity, Debt etc. also considering the comparatively low volatility in the real estate sector and that land is a tangible asset that seldom depreciates in value especially in Tech Hubs and Metros you can expect a good growth over a horizon of 3-8 years.
The Reserve Bank of India’s FSR for the month of July was published on last Friday. It outlined the bleak future for the Indian financial sector in upcoming quarters. The report describes various models and stress-tests which indicate that gross non-performing assets (GNPA) ratio of commercial banks could rise up to a worst-case scenario of 14.7% by March 2021 from 8.5% in March 2020. GNPA is the total bad loans a bank adds. The report also says that moratoriums on loans will have negative implications on the industry.
Current Situation
Banks have currently announced raising Rs 1 lakh crore in equity fundraising to offset any liquidity crunch. June ended quarter(Q1 FY21) results for the top 4 banks in India have not been entirely positive. Provisions saw a big rise in the quarter, dragging down net profits.
As we know, the stability in the financial system is very important for the growth of any economy. In her budget presentation in February, Finance Minister Nirmala Sitharaman had mentioned that the government expects to earn Rs 89,649 croreas dividends from the RBI and state-run banks and financial institutions. As the situation has quickly changed, dividend revenue will surely see a decline this financial year.
The economy currently needs a quick flush of spending by the government to restart it. But if the government is suddenly short of Rs 90,000 crore for the year (excluding drop in revenue from other sources), there is suddenly a big problem.
Reacting to the situation, banks are set to be included in the privatisation and disinvestment drive planned by the central government to raise money this fiscal. Number of Public Sector Banks (PSBs) are supposedly going to reduce to just 4 from the current number of 12. Public Sector Banks are those banks in which the government holds more than 50% stake.
NPAs and Risk Aversion
As the possibility of higher NPAs exist, risk aversion (act of avoiding risk) would increase, and banks would start giving lesser loans. As loans are the assets of banks, this risk aversion will cause revenues to decrease. This in turn will start a vicious cycle, inside which the commercial banks will be stuck in. “While risk management has to be prudent, extreme risk aversion would have adverse outcomes for all”, RBI governor Shaktikanta Das wrote in the report.
On a discussion with members of Confederation of Indian Industry (CII), the RBI Governor remarked that investments in the Infrastructure and Power industries will be key to economic revival. He declined to comment on a suggestion by HDFC chairman Deepak Parekh against extending the loan moratorium.
Bank Nifty
The report from RBI has sent shivers down Dalal Street, with all major banking sector stocks closing in red on Monday. Nifty Bank represents the 12 largest stocks from the banking sector which trade on the National Stock Exchange (NSE). As banks are the backbone of any modern economy, the index of banks in a country is a very important indicator of the economy itself.
Nifty Bank on Monday fell 3.4% as a reaction to the RBI report. NSE index Nifty fell 0.56%, even as global cues were positive. Nifty Bank is likely to remain volatile as the days go by.
Financial sector strengthening measures by the governmentwill beneeded to capitalise on current global sentiments favouring India. Going ahead, India’s goals of becoming the next manufacturing hub of the world will need support from the banking sector. Effective policies and interventions by RBI are the need of the hour, and hopefully they wont be too little too late.
