BQuick On Jan. 15: Top 10 Stories In Under 10 Minutes
This is a roundup of the day’s top stories in brief.
1. What Top Portfolio Managers Of 2019 Did Differently
Only about a third of India’s top 55 portfolio managers beat or met returns by benchmark indices in 2019 as broader markets tumbled in a year of uncertainty.
- The four best-performing portfolio management firms BloombergQuint spoke with were unanimous that wealth managers can’t alter investment strategy because of temporary market conditions.
- But what works is betting on businesses that have a better pricing power and can be expected to gain market share within their categories, they said.
- Marcellus Investment Managers Pvt. Ltd. and Ambit Capital Pvt. Ltd. think paying a premium for growth and quality might still work for 2020 and beyond.
- Clubmillionaire Financial Services Pvt. Ltd. and Sameeksha Capital Pvt. Ltd. would like to hunt for value and don’t mind sitting on cash till they find opportunities at the right price.
Here’s a snapshot of what worked for them and what they would do in 2020...
2. Top Five Changes Proposed In Direct Tax Code
A new income tax law has been the dream of many a finance minister and government for 30 years now, albeit with little to show for it. Many tried but none were able to rewrite the law. The project was revived by the Narendra Modi government which formed a task force for it. Several thousand man-hours later the task force presented its 200-page report to the finance minister. It’s been five months since and the report hasn’t even been made public yet leave alone an implementation timeline.
Taxsutra has spoken to those involved in the finalisation of the report and identified five fundamental changes to the law as suggested by the committee. These include:
- Sweeping changes to the personal income tax rates by creating five slabs instead of the current three.
- Adopting a territorial system of taxation—meaning tax those who tax those incomes whose source is India, irrespective of residential status of the corporation or individual.
Find out more such changes in this exclusive story published in arrangement with Taxsutra.
3. Forget The Headline, ‘Real’ Fiscal Deficit Could Be Worse
Ahead of the upcoming Union Budget presentation, former economic affairs secretary Subhash Chandra Garg has pointed to the understatement of fiscal deficit, using means such as funding via the National Small Savings Fund and borrowings through ‘fully serviced’ bonds.
- Garg, who resigned after being abruptly shifted from the Finance Ministry, estimates that the headline fiscal deficit for 2019-20 will likely be between 3.7-4 percent.
- The ‘real’ fiscal deficit would be higher at close to 4.5-5 percent of GDP, Garg estimates.
- According to Garg, the current financial year will see a significant revenue shortfall of up to Rs 2 lakh crore, which the government will find difficult to bridge despite planned expenditure cuts.
Read Garg’s explanation on what the real fiscal deficit is.
4. Exports, Imports Fall Yet Again
India’s trade deficit narrowed more than estimated, as imports declined for a seventh straight month.
- The gap between exports and imports was at $11.25 billion in December, compared with $12.1 billion in November, data released by the Commerce Ministry shows.
- That was narrower than the median estimate of $11.6 billion in a Bloomberg survey of 22 economists.
- Imports declined by 8.8 percent from a year ago to $38.6 billion.
- Exports decreased 1.8 percent to $27.36 billion.
The decline in exports was sharper than that witnessed in November.
5. Sensex, Nifty Halt Gaining Streak
Indian stocks halted their two-day record closing streak, led by the declines in IndusInd Bank Ltd. and Reliance Industries Ltd.
- The S&P BSE Sensex fell 0.19 percent or 79.9 points to close at 41,872.73.
- The NSE Nifty 50 fell 0.18 percent to end at 12,340.35.
- The broader markets represented by the NSE Nifty 500 Index, however, rose 0.11 percent.
- Seven out of 11 sectoral gauges compiled by NSE ended higher.
Follow the day’s trading action here.
Investors are settling for equities due to the “need and fear” environment even as markets trade at premium valuations in India and the U.S., according to Adrian Mowat, chief strategist at CLSA.
- “Investors require a higher return as the one that is available in fixed income products is too low to meet one’s liabilities,” Mowat told BloombergQuint in an interview.
Find out what Mowat has to say about gold as an alternative investment strategy.
U.S. Stocks Rise Before China Trade Pact Signing
U.S. stocks rose as America and China prepared to sign their initial trade accord.
- The S&P 500 pushed higher even after Goldman Sachs Group Inc.’s earnings missed analysts’ estimates, damping the mood after Bank of America Corp. joined Wall Street’s trading comeback earlier.
- Russia’s currency weakened as much as 0.6 percent against the dollar after Prime Minister Dmitry Medvedev resigned and said President Vladimir Putin will choose a new government, hours after the Kremlin leader called for a series of constitutional changes in his annual address.
- Meanwhile, oil futures drifted, with West Texas Intermediate trading around $58 a barrel. Gold nudged higher.
Get your daily fix of global markets here.
6. FMCG Makers Look To Assuage Concerns
Consumer goods makers have begun to implement measures to quell the disquiet among distributors months after they protested the differential pricing across sales channels.
- Dabur India Ltd. and Hindustan Unilever Ltd. are separating product portfolios sold through different channels of trade, multiple distributors BloombergQuint spoke with said.
- Marico Ltd. has stopped selling some of its smaller stock-keeping units at supermarkets and hypermarkets, besides introducing uniform discounts for modern trade or stores and distributors on its edible oil brand Saffola, the distributors said.
- That came after companies, over the past few years, started bypassing distributors—the conduit between manufacturers and millions of small stores—and directly supplied to supermarket chains.
BloombergQuint visited supermarket chains and grocery stores to find out how FMCG makers are reacting to the distributors’ threat.
Also read: Lupin’s Troubles In U.S. Run Deep
7. Asian Paints Faces Anti-Trust Probe
The Competition Commission of India has ordered a probe against Asian Paints Ltd. for allegedly hindering the entry of JSW Paints Ltd. by virtue of its dominance in the market for manufacture and sale of decorative paints.
- The order came after JSW Paints filed a complaint alleging that Asian Paints threatened various dealers in Karnataka, Telangana and Tamil Nadu from dealing with JSW Paints.
- "The Commission is of the view that evidence provided by JSW Paints is prima facie sufficient to indicate that Asian Paints has denied access to the distribution channels in the relevant market to JSW Paints by threatening and coercing such dealers through various means," CCI said.
Asian Paints, "prima facie", appears to be in contravention of provisions of India's Competition Act, CCI added.
8. Yes Bank’s Assurance
Yes Bank Ltd. said its financial position is stable and that it has ample liquidity to run operations.
- “...it may be noted that the Bank’s overall capital adequacy ratio is comfortably above regulatory requirements and all efforts are being made to financially strengthen the Bank even further,” the private lender said in an exchange filing.
- The bank was responding to press coverage and rumours on social media about its capital position as it has been unable to raise capital for months now.
- Yes Bank had disclosed in October that it had received a binding investment offer worth $1.2 billion from Canadian investor Erwin Singh Braich. On Jan. 10, it, however, said it wouldn’t proceed with the offer.
- The bank is still considering a $500 million investment offer from Citax Holdings.
It’s unusual for a bank to assure depositors about its stability.
9. Tougher Security Norms For Card Transactions
The Reserve Bank of India has introduced new rules to try and improve the security features associated with credit cards and debit cards, amid rising instances of fraud.
- In a notification, the RBI said that banks and other card issuers will have to ensure that new credit cards and debit cards issued are automatically enabled only for domestic transactions at ATMs and point of sale terminals.
- Customers who want to use their cards for online transactions, international transactions and contactless transactions, will have to separately ‘opt-in’ for these services.
- The step is aimed at improving security in card transactions and will be aimed at freshly issued cards or those being reissued.
RBI also said that customers must be provided with an option to switch-on or switch-off these types of transactions.
10. Jeff Bezos Commits $1 Billion To India Amid Traders’ Protests
Jeff Bezos, who is visiting India as online retailers face a pushback, said Amazon.com Inc. will invest $1 billion in its second-largest market to bring more small businesses online and promised to eliminate single-use plastic from deliveries in the country by June.
- He also committed the retail giant to exporting a total of $10 billion of made-in-India goods by 2025.
- However, Bezos got a bitter reception after the country’s antitrust regulator initiated a formal investigation hours before his arrival and infuriated small store owners demonstrated in the streets.
- India is arguably Amazon’s most important overseas market and a key growth driver, however, the small businesses that the CEO is hoping to endear himself to are organising in opposition.
- The Confederation of All India Traders announced that members of its affiliate bodies across the country would stage sit-ins and public rallies in 300 cities to raise a war cry against the world’s largest online retailer.
The traders’ body has alleged that much like Flipkart, Bezos' Amazon is an "economic terrorist".