Here is a roundup of the day’s top stories in brief.
1. Troubles Mount For P Chidambaram
Congress leader P Chidambaram, facing threat of arrest in the INX media scam, failed to get an audience from Chief Justice Ranjan Gogoi on Tuesday for urgent hearing of his appeal in the Supreme Court against the Delhi High Court order dismissing his anticipatory bail plea.
- A team of lawyers led by senior advocate and Chidambaram’s party colleague Kapil Sibal was told by Registrar (Judicial) to mention the petition on Wednesday morning in the apex court.
- Sibal was the first senior advocate to reach the apex court to meet Chidambaram and the two were seen rushing from one corridor to another to meet officials including the secretary general and Chief Justice’s staff for having a word with Justice Gogoi.
- Senior advocate Dayan Krishnan, who had appeared for Chidambaram in the High Court on Tuesday, also joined them later.
- The Central Bureau of Investigation had registered a first information report on May 15, 2017 alleging irregularities in the Foreign Investment Promotion Board clearance granted to the media group for receiving overseas funds of Rs 305 crore in 2007 during Chidambaram's tenure as finance minister.
The Enforcement Directorate had in 2018 lodged the money laundering case.
2. ‘Suspicious’ Transactions Trigger Stock Plunge
Shares of CG Power And Industrial Solutions Ltd. hit the lower circuit on Tuesday after a probe by a legal firm revealed that the Gautam Thapar-founded Avantha Group flagship understated its liabilities and advances made to related and unrelated parties, among other financial irregularities.
- The transactions were carried out by some key managerial personnel and other employees prejudicial to the company’s interest, according to an exchange filing.
- The transactions appeared to have been undertaken in a seemingly “fraudulent manner” warranting investigation, it said.
- CG Power didn’t disclose the name of the legal firm that undertook the investigation.
Here are key findings of the investigation and why it adds to CG Power’s woes.
3. Why Maruti Won’t Stop Expanding, Even Amid Slowdown
Maruti Suzuki India Ltd. will continue with its plans of expanding its sales network, even as its peers cut back on production and close dealerships, because the current auto slowdown in India is “very temporary”.
- That’s according to the carmaker’s Chairman RC Bhargava, who said Maruti Suzuki dealers have adequate financing.
- “If we once slow down the tempo of creating new dealerships and increasing the sales and service network, it will be very hard to get that back again,” he told BloombergQuint in an interview on Tuesday.
- India’s automobile industry is witnessing its worst slowdown in more than a decade. Vehicle makers, including Maruti Suzuki, have cut production over the last few months.
- The production cut, however, is only to align inventories to market demand, Bhargava said.
Here is why Bhargava believes the slowdown is temporary.
4. Nifty Dips, U.S. Stocks Drop
Indian equity benchmarks snapped their three-day gaining streak despite a recovery for automakers.
- The S&P BSE Sensex fell 0.20 percent to close at 37,328.01.
- The NSE Nifty 50 declined 0.33 percent to 11,017.
- The broader markets represented by the NSE Nifty 500 Index fell as much as 0.45 percent.
- For this week, 10,970 is a crucial support level for the Nifty, according to Aditya Agarwalla, technical analyst at Yes Securities.
- Eight out of 11 sectoral gauges compiled by NSE traded lower.
Follow the day’s trading action here.
Meanwhile, shares of Shapoorji Pallonji-promoted Sterling and Wilson Solar Ltd. fell 7 percent from its IPO price on its listing day, after its Aug. 6-8 initial public offering failed to get full subscription.
- The stock debuted at Rs 700, a 10.2 percent discount on its issue price of Rs 780. It however recovered to end the day 7.01 percent lower at Rs 725.35.
Here’s more on the new listing.
Treasuries climbed and stocks fell as investors assessed the latest news on trade negotiations and awaited more clues on monetary policy.
- Benchmark 10-year yields extended their slide after U.S. Secretary of State Michael Pompeo told CNBC that Huawei Technologies Co. isn’t the only Chinese company that poses risks. He also sees the U.S. and China continuing their talks -- at least by phone -- over the next week or 10 days.
- The S&P 500 Index halted a three-day rally as traders digested earnings from retailers Home Depot Inc. and Kohl’s Corp.
- The dollar fell from this year’s high.
- West Texas Intermediate crude dipped 1.3 percent to $55.49 a barrel.
Get your daily fix of global markets here.
5. Supreme Court Relief For WhatsApp
Supreme Court handed out a reprieve to Facebook Inc. in its battle to preserve the encryption feature of its Whatsapp messaging service which prevents it from sharing details of users or messages with the authorities.
- The court stopped short of scrapping a lower court hearing on a plea that seeks to force Facebook to share user details and trace origin of messages in order to fight cyber crime and fake news.
- However, it can continue proceedings but has been directed not to pass a final order.
- The top court also agreed to examine Facebook’s request to transfer all cases across the country to the top court in September.
- The case is keenly watched as it brings out the conflict between privacy concerns on governments accessing citizens’ messages and the fight against cyber crimes like child pornography.
WhatsApp’s lawyer Kapil Sibal argued that an order by the high court may lead to changes in the product globally.
6. Moon Mission Milestone
An Indian rocket carrying a rover to the moon’s south pole entered the lunar orbit on Tuesday, in a key milestone for a mission that may make the nation the first to reach the unexplored part of earth’s satellite.
- Indian Space Research Organisation remotely fired a liquid engine on board the unmanned vehicle at around 9:02 a.m. local time, inserting it into the moon’s orbit.
- The aim of the mission named ‘Chandrayaan-2’ -- Sanskrit for ‘moon vehicle’ -- is to explore virgin territory on the lunar surface and look for signs of water and helium-3, a waste-free source of nuclear energy.
- India will become the fourth nation after the former Soviet Union, the U.S. and China to make a soft landing on the moon.
A successful mission will solidify India’s position as a pioneer of low-cost exploration in the global space race.
7. Will Homes In Mumbai Get Cheaper?
Maharashtra reduced the rates developers pay to acquire additional floor space to build more saleable area in a bid to lower project costs in Mumbai as the real estate sector grapples with delays and unsold inventory.
- Premium for additional FSI—ratio of saleable area to plot size—is now 40 percent of the ready-reckoner rate, or market determined for taxation and stamp duty, compared with 50 percent earlier.
- For fungible FSI used to build balconies and flowerbeds, developers will have to pay 35 percent of ready-reckoner rate compared with 50 earlier for residential buildings; 40 percent of the market instead of 60 percent for commercial projects.
- The state also waived the development cess paid for buying additional FSI. It’s charged at 100 percent of development charges.
The relief on all three fronts, available for two years, is applicable to projects yet to be launched or where developers are yet to acquire more FSI.
Cheaper rates don’t apply to properties where the payments have been made.
8. Breaking Big 4’s Monopoly
In 2002, a local chartered accountancy firm thought it was time to protect itself from the shift in the nation’s audit market. The economy had opened a decade earlier, and the four largest global auditors were gaining ground. To avoid losing business, Shridhar and Santhanam joined an international accounting network.
PKF International allowed use of brand name, referred clients, shared work knowledge and oversaw quality without controlling or managing affairs of the firm. That gave members a global scale while retaining their identity.
- The fears of the Chennai-based firm weren’t misplaced. A little over decade-and-a-half later, the Big 4—Deloitte, KPMG, EY, and PwC—dominate India’s audit business, like the rest of the world.
- According to Prime Database, 60 percent of Nifty 500 companies are now audited by Big 4 or its affiliates.
- That’s when the nation, according to April 2018 data by the Institute of Chartered Accountants of India, has 71,223 chartered accountancy firms.
9. E-Invoicing Under GST – How Would It Work?
To push for a digital economy and as a deterrent to tax evasion, in this year’s Union Budget, the government made a major announcement, introducing an e-invoicing system from January 2020.
- Following this announcement, recently GSTN has also released a consultation paper on e-Invoice standard—drafted in partnership with ICAI—for industry feedback. This standard is based on globally-accepted standards, which are being used in various European countries.
- Through this, the government intends to standardise the invoice formats across industries which would provide an opportunity to automate the reading and booking of such invoices across different accounting software.
PwC’s Prashanth Agarwal outlines the mechanics of e-invoicing and the way forward for industry and government.
10. A Shift In Buying Patterns That’s Hurting Small Retailers
Businesses like Dhaval Shah’s stayed away from the high-discounts, free-returns game played by e-commerce companies in India. And that’s hurting them now, according to Shah, head of Apex Consumer Appliances, a Mumbai-based maker of kitchen stoves to pressure cookers with a turnover of Rs 80 crore.
- “The online industries started developing their own vendors, actually who did not have business or they were new players, and they were ready to work on whatever conditions,” he told BloombergQuint .
- Consumer purchasing trends are also changing rapidly, Shah said.
- That’s prompted longer credit periods by retailers, exacerbated by a shortage in working capital, he added while explaining why a turnaround is tough to achieve.
Watch the full conversation in BloombergQuint's special series Real Economy Check about the challenges that small enterprises like Apex face.
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