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BQuick On March 19: Top 10 Stories In Under 10 Minutes

Introducing Election Soundtrack, a daily podcast that’ll get you up to speed with everything that you need to know about Elections 2019. Today, we tell you about Congress-AAP alliance talks, the floor test in Goa and more.

This is a roundup of the day’s top stories in brief.

1. L&T's 'Pyaar' Vs Mindtree's Five Questions

Larsen and Toubro Ltd. today held a press conference explaining its three-step bid to take control of Mindtree Ltd. for about Rs 10,700 crore. Later in the day, Mindtree promoters—who had already voiced their opposition to the hostile takeover bid—held a separate media conference posing five key questions to L&T.

  • L&T’s Chief Financial Officer R Shankar Raman said that they had decided to keep L&T Infotech and Mindtree separate to protect the interests of minority shareholders. Markets and developments will decide when, if at all, Mindtree and LTI can be combined, Raman said.
  • The Rs 980 per share offer price was arrived at by taking the six-month weighted average price and adding a premium to it, the company explained.
  • L&T added that the transaction will be neutral from the return on equity perspective, and won’t derail the company’s RoE targets.
  • Chief Executive Officer SN Subrahmanyan said that while emotions are involved in this case, "business is business".
What we are trying to do, is with, if I can use the word ‘pyaar’, and we will continue to look at it as something we are doing from our ‘dil’. And we will continue to look at it with the same manner and purpose.
SN Subrahmanyan, CEO, L&T 

Mindtree promoters said that they will continue to oppose the takeover attempt. They then posed five questions to L&T:

  1. L&T mounted India IT's first ever "hostile takeover". Is this the example that L&T wants to set?
  2. Why can't L&T build a technology business, without decimating another organisation?
  3. Our customers choose us for our unique culture, they may take business elsewhere. Then, you would have demolished shareholder value for both companies. Is that the right thing to do?
  4. Our people have signed up for a mission, not just a salary. Take their mission away, and they will go. What would you be left with?
  5. If companies like you behave with extreme hostility to first generation entrepreneurs, what message are you giving to startups in the country?

Follow all the developments here.

2. GST Council Paves Way For Real Estate Tax Cut

The Goods and Service Tax Council has approved the transition plan to move towards new tax rates for the real estate sector by giving an option to builders to choose and levy the old tax rate if they want.

  • Choosing the old tax rates for projects, construction for which was started before March 31, will help builders to avail their accumulated input tax credit.
  • New projects starting from April 1 will have the new tax rates of 1 percent for affordable housing projects, and 5 percent for other housing projects without the benefit of input tax credit.
  • Giving two options to builders will address the problem of inventory, so builders have an option to choose which rate is beneficial in clearing the inventory, Revenue Secretary Ajay Bhushan Pandey told reporters.

This would provide relief to builders who were worried about the loss of input tax credit.

3. IL&FS' NPA Status: RBI's Intervention

The Reserve Bank of India has moved the National Company Law Appellate Tribunal seeking a modification in an earlier order which restrained banks from declaring accounts of the Infrastructure Leasing and Financial Services group as non-performing assets.

  • The NCLAT has allowed the intervention by the RBI.
  • On Feb. 25, the NCLAT bench headed by Chairperson Retired Justice SJ Mukhopadhyay passed an order stating that lenders should not classify any account belonging to the IL&FS group as NPA without prior permission from the appellate authority.
  • Once declared as an NPA, the RBI’s Income Recognition and Asset Classification norms require banks to make provisions against the account. In the first year, banks have to set aside 25 percent as provisioning against these accounts.

If the NCLAT reverses its Feb. 25 order, banks will need to classify the accounts as NPA.

4. Don’t Mind The Elections, Says Atul Suri

Atul Suri isn’t bothered about what elections can throw up—because he sees ample indicators of a long-term surge.

  • While elections and events like that might have a short-term impact, long-term charts point to an uptrend, both locally and globally, Suri, chief investment officer of portfolio manager Marathon Trends said.
  • Most investors are unable to comprehend the market, he said citing the example of India-Pakistan tensions. They expected that foreign investors would stay away, but strong inflows followed.
“Markets have a way. Respect Mr Market, because it is supreme.”

2019 will belong to emerging markets, he said. Here’s why.

5. Longest Streak Since December

Indian equity benchmarks ended higher for the seventh consecutive trading session, registering the longest gaining streak since Dec. 19.

  • The S&P BSE Sensex closed 0.7 percent or 268 points higher at 38,363.
  • The NSE Nifty 50 ended at 11,532, up 0.61 percent.
  • The broader markets, represented by the NSE Nifty 500 Index also ended higher after gaining 0.56 percent.
  • Nine out of 11 sectoral gauges compiled by NSE advanced.

Follow the day’s trading action here.

BQuick On March 19: Top 10 Stories In Under 10 Minutes

U.S. equities climbed as investors awaited this week’s central bank decisions, including word from a recently more-dovish Federal Reserve.

  • The S&P 500 Index continued rising Tuesday after climbing to a five-month high the day before.
  • The Dow Jones and Nasdaq 100 gauges followed suit, while European shares gained after Asian stocks drifted.
  • West Texas crude hovered near a four-month high after OPEC and its allies recommended deferring a decision on whether to extend oil production cuts until June.
  • The euro strengthened while Treasuries slipped.

Get your daily fix of global markets here.

6. Goldman Upgrades India

Indian stocks will accelerate gains in the lead-up to the election next month as foreign investors pile back in amid a “sharp underperformance” in the market and earnings growth that’s expected to top the region, according to Goldman Sachs Group Inc.

  • Equities of Asia’s third-largest economy were raised to overweight from marketweight -- just six months after Goldman downgraded them -- analysts led by Sunil Koul said in a report on Monday.
  • The Nifty 50 index will reach 12,500 in 12 months, implying a 9.1 percent gain from Monday’s close, while earnings growth this year is expected to climb 16 percent, they wrote.
  • Foreign inflows have picked up “as market expectations for a potentially stable government have risen in recent weeks,” Koul wrote in the report.

Here are the sectors that Goldman prefers in India.

7. The Good News On Bad Loans

Banks managed to sell half of the loans they put up for sale this fiscal at better prices than last year, according to four people familiar with the numbers, as recoveries through insolvency process are expected to rise.

  • Asset reconstruction companies purchased at least Rs 22,000-crore loans from a total of Rs 40,000 crore banks tried to sell in the year ending March, the people said on the condition of anonymity as details of stressed-asset sales aren't public.
  • By comparison, ARCs had bought Rs 17,500-crore loans in the previous financial year from the pool of Rs 30,000 crore.
  • To be sure, the numbers are provisional and could change by March 31 as ARCs and banks reach a consensus on further sales.
  • ARCs got discounts of about 50-55 percent to the book value, the people cited earlier said. That's lower than last fiscal.

One reason for lower discounts this year is...

Also read: What’s (Not) Surprising About India’s Steep Yield Curve

8. India’s Federalism At A Crossroad—YV Reddy’s Take

A set of events over the last few years have changed the balance of power between the central and state governments.

  • These developments, when taken together, suggest that ‘Fiscal Federalism’ is at a crossroad in India, argues a recently released book called ‘Indian Fiscal Federalism’, authored by former Reserve Bank of India Governor YV Reddy and co-authored by GR Reddy.
  • These events taken together give the impression that an attempt is being made to shift the balance between centre and states, YV Reddy and GR Reddy told BloombergQuint in an interview.
  • These events have led to an erosion of trust between the centre and states, which must be corrected, the authors argued.

Watch the full interview and find out the events that have brought Centre-State relations to a crossroad.

9. Double Delight For Appliance Makers?

This summer could bring a double delight for the makers and sellers of appliances, lifting sagging growth after nearly a year and a half.

  • While the sales of air-conditioners are expected to jump in the south, television volumes are likely to surge across the nation ahead of the Indian Premier League and the cricket world cup, according to BloombergQuint’s survey of dealers and retailers.
  • They peg the growth between 5 and 15 percent over the previous summer across a range of appliances.
  • That comes as an extended winter last year had hurt demand for air-conditioners in the north, causing the inventory to pile up.

Here’s what will drive the growth this summer season.

10. We Won’t Need To Fight A War If We Can Win Peace In Kashmir

The insurgency in Kashmir can be, and must be, defeated, but it must be defeated in a way that ensures that getting rid of one terrorist does not create three more, writes Amit Varma.

  • Just as we must not lose Kashmir, we also must not lose Kashmiris.
  • Good governance and democratic politics are as important a part of the puzzle as police or military action are.
  • In the last few years, we have mishandled the problem and made it far worse.

If we could solve Kashmir, Pakistan would cease to be such a huge problem, Varma writes.