BQuick On Nov. 13: Top 10 Stories In Under 10 Minutes
This is a roundup of the day’s stories in brief.
1. Dividend Distribution Tax To Be Investors' Headache?
India is considering changes to its dividend distribution tax, people with knowledge of the matter told Bloomberg News, in a bid to goad companies to boost spending and revive foreign fund inflows.
- The budget statement due February may include a proposal to tax dividends once they are paid to shareholders, rather than the current system where the company pays the levy, the people said, asking not to be identified as the deliberations are private.
- The impact of the dividend tax has been prompting firms to invest in debt “thereby depriving companies of much-needed equity,” to expand, said Daksha Baxi, Mumbai-based head of international taxation at law firm Cyril Amarchand Mangaldas.
The dividend distribution tax brings about Rs 60,000 crore to the exchequer each year.
2. CPI Inflation Spikes To 16-Month High
India’s retail inflation rose to the highest in 16 months, as food prices spiked due to unseasonable rain which disrupted supplies of vegetables.
- Consumer Price Index inflation rose to 4.62 percent in October compared to 3.99 percent in September.
- Food and beverages rose to 6.93 percent, the highest in at least a year. Prices of vegetables and pulses rose the most in that category.
- Most economists see the increase as temporary and expect average retail inflation to remain below 4 percent in the current fiscal.However, core inflation, which reflects demand in the economy, fell sharply due to weak economic conditions.
- However, core inflation, which reflects demand in the economy, fell sharply due to weak economic conditions.
Find out the inflation internals here.
3. Three Crucial Supreme Court Verdicts
The Supreme Court of India today struck down the restructuring of various tribunals in the country done through the Finance Act, 2017.
- The changes, in Section 184 of the Act, gave the central government the authority to decide the terms and services of the members of the tribunals.
- The rules were challenged on the grounds that the law was passed as part of a Money Bill whereas these provisions pertaining to tribunals did not meet the definition of a Money Bill. Also, that they infringed on the independence of the judiciary.
- The bench ordered the central government to reframe the rules.
Read more about the money bill argument here.
The Supreme Court also held that the office of the Chief Justice of India is a public authority under the Right to Information Act.
- A five-judge Constitution Bench upheld the 2010 Delhi High Court verdict and dismissed the three appeals filed by Secretary General of the Supreme Court and the Central Public Information Officer of the apex court.
- Cautioning that RTI cannot be used as tool of surveillance, the top court held that judicial independence has to be kept in mind while dealing with transparency.
Here are the highlights from the verdict.
Earlier in the day, the Supreme Court upheld the disqualification of 17 members of Karnataka Legislative Assembly, but allowed them to contest the upcoming by-elections.
- If elected in the by-polls, these disqualified Karnataka MLAs can become ministers or hold public office.
- The verdict is based on facts and circumstance of case and does not interfere in Speaker’s power to disqualify members, the three-judge bench ruled.
Bypolls for 15 out of these 17 assembly seats will be held on Dec. 5.
4. Sensex Slips, Rupee Falls Below 72/Dollar
Indian equity indices extended declines to end at a two-week low.
- The S&P BSE Sensex fell 0.57 percent or 229 points to end at 40,16.06.
- The NSE Nifty 50 fell 0.61 percent or 73 points to close at 11,840.45.
- The broader markets represented by the NSE Nifty 500 Index fell 0.64 percent.
- All the 11 sectoral gauges compiled by NSE ended lower.
- The rupee slumped 62 paise to hit an two-month low of 72.09 to the U.S. dollar.
- This is the lowest closing level for the rupee since Sept. 4.
Follow the day’s trading action here.
6. Oil Demand To Plateau
Global oil demand will hit a plateau around 2030 as the use of more efficient cars and electric vehicles ends an expansion that dominated the past century, the International Energy Agency predicts.
- While the current growth rate of 1 million barrels a day -- or about 1 percent -- will hold for the next five years, it will ebb to just 100,000 barrels a day in the 2030s, the agency said.
- By that time, the use of oil-based fuels in passenger cars will have peaked, the IEA said in its long-term World Energy Outlook.
- “Oil demand plateaus post-2030,” said Fatih Birol, executive director of the Paris-based agency, which advises most major economies.
- “Demand growth is robust to 2025, but growth slows to a crawl thereafter,” Birol said.
There's “no definitive peak”, but the stagnation in growth will have far-reaching consequences.
U.S. Stocks Fall, Treasuries, Dollar Rise
U.S. stocks stalled near all-time highs as investors saw few reasons to pile in after a furious five-week rally.
- S&P 500 retreated from yesterday’s record reached as part of a more than 7% rally since the start of October, fuelled by hopes of a U.S.-China trade deal, waning recession fears and rate cuts.
- Inflation data Wednesday did little to alter the view that the Federal Reserve is done easing and in no rush to hike as prices continue to rise at a tepid pace.
- Chairman Jerome Powell reinforced that thinking in prepared remarks ahead of his address to Congress this morning, saying the Fed’s current policy is appropriate as long as the economy stays on track.
- The 10-year Treasury yield fell the most in more than a week, while the dollar rose for the seventh time in eight sessions to the highest in a month.
- West Texas Intermediate crude declined 0.7% to $56.42 a barrel.
Get your daily fix of global markets here.
7. Reprieve For DHFL’s Lenders
The Bombay High Court has allowed a plea by a group of lenders led by State Bank of India, paving the way for them to recover dues from Dewan Housing Finance Corporation Ltd.
- Payments to banks and non-bank lenders who had purchased loan pools from the cash-strapped housing financier will be allowed, the court stated, modifying its earlier order.
- SBI, Union Bank of India, Indian Overseas Bank and HDFC Ltd., among other lenders, filed an intervention application seeking vacation from the earlier order.
DHFL can now make all future payments and previous dues which were payable since Oct. 10.
8. Lower-Rated Borrower? Sorry, No Loans For You
Indian lenders are increasingly reluctant to lend to corporations rated below investment grade as economic conditions remain weak and defaults stay elevated.
- Borrowers rated ‘BB’ and below have scarce access to funding from the debt markets.
- A reluctance from banks to lend to this segment and reduced sanctions from non-bank lenders could worsen the strains these lower-rated firms may already face.
- Industry-wide data of incremental lending to firms rated ‘BB’ and below is not available.
- However, conversations with multiple bankers and loan portfolios of individual banks point to an increased skew toward higher rated borrowers.
Read this BQ Blue Exclusive story with views from bankers on how lenders have turned cautious.
9. Roti, Kapda And...Makaan?
Unlike their parents, millennials may have different financial priorities, shaped by changing financial circumstances, such as higher education costs, shorter job tenures, or different discretionary consumption options, such as travel.
- This is also prompting a change in approach to asset ownership—evident in the growth of the sharing economy that ranges from cars to clothes.
- This shift in financial priorities and consumption preferences is especially visible when it comes to buying a home.
- Millennials presently drive over a third of sales in the real estate sector, according to the consultancy Anarock.
- “For any young professional an EMI would be a significant amount of his/her take home salary. This doesn’t encourage people to commit themselves to EMIs,” said Kiran Telang, certified financial planner and a SEBI-registered investment adviser.
Real estate developers are trying hard to woo young clientele.
10. The Problem With Diamonds
Five years ago, the diamond industry’s biggest worry was being forgotten by millennials, who — the theory went — didn’t covet sparkly gems the way their parents had.
- The concern turned out to be mostly unfounded, but the reality is almost worse.
- While Americans are buying more diamond jewelry than ever before, most polished diamonds are getting steadily cheaper.
- The lower prices and a glut of the type of stones that go into a discount-store engagement ring or pair of earrings have pushed the global diamond trade into crisis.
At the center of the pain are the middlemen.