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BQuick On July 11: Top 10 Stories In Under 10 Minutes

Here’s a roundup of all the top stories of the day in brief.

1. Evading The Super Rich Tax Won’t Be Easy

Overseas investors may struggle to circumvent India’s plan to tax the very rich as the option proposed by the tax authorities to sidestep the levies isn’t easy to implement.

  • With frightened investors wiping off Rs 2.9 lakh crore ($42 billion) from the benchmark S&P BSE Sensex since the budget on July 5 through Wednesday, tax officials have suggested that global funds convert themselves from trusts -- a structure followed by several foreign funds that invest in India -- to corporates as a way to avoid paying the higher surcharge.
  • The devil’s in the detail. “Under General Anti-Avoidance Rules, tax authorities can question the move and even deny tax benefits to an entity if the change in the structure is purely led with an intention to avoid tax,” said Punit Shah, a partner at Mumbai-based tax consultants Dhruva Advisors LLP.

Here are some other deterrents that make it difficult for foreign investors to evade the tax.

2. Will A Higher Public Float Sink Or Swim?

In this new series, top lawyer Cyril Shroff and team examine implications of the 35 percent minimum public shareholding proposal.

  • First, it is imperative to identify the policy goal sought to be achieved through this change.
  • There is no change in rights or remedies that would be effected by the increase in the threshold to 35 percent.

A forced capital raise, for regulatory and not business requirement, may have the unintended consequence of inefficient hoarding of capital.

3. Reliance Infrastructure Finally Enters Debt Restructuring

Reliance Infrastructure Ltd.’s lenders agreed to a standstill on debt, giving the Anil Ambani group company time to raise funds to repay banks.

  • The company’s 16 lenders signed an inter-creditor agreement for the resolution of debt, it said in an exchange filing. That gives it 180 days under the Reserve Bank of India’s norms.
  • The company expects to implement the resolution plan, which includes asset sales, within that period.
  • Shares of Reliance Infrastructure jumped as much as 16.2 percent, the most in more than a month, after the filing.

The company has already revealed some of its monetisation plans.

4. Sensex Recovers, Dow Hits 27,000

Indian stocks rebounded from their lowest close in nearly two months, tracking regional peers after comments by Federal Reserve Chairman Jerome Powell signaled a willingness to lower interest rates.

  • The S&P BSE Sensex closed 0.69 percent or 266 points higher at 38,823.10.
  • The NSE Nifty 50 snapped its four-day losing streak and ended at 11,582.90, up 0.73 percent.
  • The broader market index represented by the NSE Nifty 500 Index closed 0.80 percent higher.
  • All the 11 sectoral gauges compiled by NSE ended higher.

Follow the day’s trading action here.

An early rally in U.S. stocks lost some steam after President Donald Trump tweeted a complaint that China is “letting us down” by not buying U.S. farm products.

  • The S&P 500 tested 3,000 at the start of Thursday’s session while the Dow Jones Industrial Average flirted with 27,000 as investors weighed the latest clues on the path for monetary policy.
  • Health-care shares gained after the Trump administration pulled the plug on a proposed overhaul of drug rebates. Technology and media shares also gained.
  • Federal Reserve Chair Jerome Powell, who struck a dovish tone in questioning before a congressional panel on Wednesday, is due back on Capitol Hill today to answer senators’ questions.
  • Treasuries retreated after the latest American inflation reading came in hotter than anticipated, the dollar dropped for a second day and gold slipped.
  • West Texas Intermediate crude climbed 0.2% to $60.56 a barrel, the highest in seven weeks.

Get your daily fix of global markets here.

Also read: What Foreign Investors Bought And Sold In June

5. Six Stocks That Defied Earnings Growth = Better Valuations Logic

Stock prices either react to earnings growth or change in valuations. A few companies, however, saw their valuations tumble even after showing a spike in growth.

  • The stocks, picked from among NSE Nifty 200 Index, showed a better revenue growth in FY19 but their price-to-earnings multiple tumbled.
  • That coincided with a period of volatility in India’s stock market when nearly half of Nifty 200 stocks declined in the 12 months, driven by slow growth or rerating of valuations.
  • BloombergQuint compiled a list of such stocks that are defying the earnings growth = better valuations logic.

Here are the stocks and what analysts have to say about their future prospects.

6. Gautam Adani Wants To Expand His Empire

Gautam Adani—billionaire and mining tycoon—is setting his sight on what he believes could become another big money maker: Selling data storage services to companies such as Amazon.com Inc. and Alphabet Inc.’s Google.

  • India’s government is weighing a new law that would require data to be stored locally, and his conglomerate Adani Enterprises Ltd. has said it expects to invest Rs 70,000 crore to build data parks in a southern state over the next two decades.
  • The billionaire’s hope is to capitalise on demand from foreign technology companies, who are expanding in India as the use of smartphones and Internet surges.
  • If the proposed law goes through “it will explode data storage requirements, and that will need capacity,” Adani said in a rare interview in New Delhi.
This will be a multi-billion-dollar project that will bring in the Googles and the Amazons of the world.
Gautam Adani, Chairman, Adani Group

This is an approach that’s been a hallmark of Adani’s empire.

7. Reaching The Unbanked

Joint lending by banks and non-banking financial companies under the central bank’s new model has gathered pace as lenders look to target the unbanked at lower costs.

  • The Reserve Bank of India, in September last year, released guidelines for commercial banks and non-deposit taking systemically important NBFCs to co-originate loans for creating priority sector assets.
  • Under the model, banks and NBFCs can jointly provide credit to borrowers by sharing credit contribution and risk-reward in an 80:20 ratio.
  • The bank can claim priority sector status in respect of its share of credit while engaging in the co-origination arrangement, the RBI said in a statement. However, the priority sector assets on the bank’s books should at all times be without recourse to the NBFC.

Several NBFCs and banks have announced partnerships in the last five months.

8. Bank Nationalisation Architect’s First-Person Account

July 19, 1969 - The day when 14 banks were nationalised by Prime Minister Indira Gandhi. 50 years later, that decision remains most debated and discussed.

Former bureaucrat and banker DN Ghosh was a key member of the Finance Ministry team that shaped the move. Here's his first-person account:

  • In 1960, two scheduled commercial banks collapsed without much forewarning.
  • Then, the public savings mobilised by the banking system were being cornered by a select few.
  • It was becoming increasingly evident that without a credit thrust, the economy would not be able to shift to a higher growth trajectory.

That Indira Gandhi used the occasion to consolidate her political power, should not depreciate the economic rationale behind what was a historic step, writes Ghosh.

9. From Garbage To Greens

The city’s third-biggest garbage dump is barely a kilometre away from the family’s apartment. For 52 years, trucks piled waste onto heaps that are now up to 30 metres high and cover an area as big as 40 football fields. That’s nearly 72 lakh metric tonnes of food, paper, wood, clothes, plastic bottles, tin cans, metal and everything else that the city’s residents didn’t need anymore—nearly enough to fill garbage trucks lined up along India’s coastline.

  • The municipal corporation shut the landfill last October.
  • Better still, it has started clearing the refuse to reclaim the land through biomining.
  • In December, BMC began sprinkling microorganisms. That would help decompose organic material faster, while leftover rubber, glass, metal or plastic would be carted out for recycling.
  • The 24-hectare space could be converted into a green lungs pace.

Here’s the story of the garbage dump in Mulund, how it affects those who live near it, and how the BMC is trying to reclaim it.

10. Karnataka Crisis: Speaker Delays Deciding On MLA Resignations

Karnataka Assembly Speaker KR Ramesh Kumar today said that he has "deliberately" held back a decision on the resignation letters of 13 MLAs "in order to help the survival of a government which is allegedly running in a minority".

  • The speaker said that eight out of the 13 resignation letters were not submitted in the prescribed format of the legislative assembly.
  • Of the other five, the Speaker has given them two more days to decide and then come see him on July 12. The rest have been summoned on July 15.
  • Earlier, the Supreme Court had allowed the ten rebel MLAs to meet the Speaker today to convey their resignation.

Bloomberg Quint

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