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Sunday, January 5, 2020

economic news of india - world economic news - economics news for students - indian economy news

economic news of india - world economic news - economics news for students - indian economy news


Mukesh Ambani still hasn't decided on what job he'll keep at RIL

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MUMBAI: Almost half the top 500 listed companies are yet to comply with the Sebi rule on splitting the roles of the chairperson and managing director.The new rule based on the recommendations of the Uday Kotak committee on corporate governance will be effective from April 1. This stipulates that the chairperson of the board should be a non-executive director and should not be related to the managing director or CEO. It doesn't apply to companies that don't have identifiable promoters as per the shareholding pattern.According to data compiled by nseinfobase.com, the chairperson has an executive role in 213 companies, while the chairman is also MD or CEO in 161 of them, including RIL, Hindustan Unilever, ONGC, Coal India, NTPC, Bharat Petroleum Corp and Power Grid Corp. HUL will split the role to comply with the rule, ET reported on December 28. The chairman is related to either the MD or CEO in 79 companies, including Bajaj Finserv, Bajaj Auto, Adani Port, Shree Cement, UPL and Lupin.The rule varies globally. Sebi's view is that separation of powers provides a more balanced governance structure, enabling effective supervision."What is causing anxiety is making the emotional business decision of choosing the chairman and managing director from among different family members," said Amit Tandon, founder and managing director, Institutional Investor Advisory Services. "In the UK, this split is for all practical purposes, mandatory. In the US, there has been a gradual shift in the past one decade and about 53% of S&P 500 companies have split the two roles." 73114830 Sebi chairman Ajay Tyagi said in November that companies had been given sufficient time to comply with the requirement.The regulations "were notified in May 2018 and we made them applicable from April 2020. The idea was to make people understand and plan for it", Tyagi said. "I agree with the argument that this may not solve it (corporate governance issues), but that doesn't mean that you will not try to solve it."A Wipro spokesperson said the company will comply with all applicable regulatory norms. A Bharti Airtel spokesperson said, "As a responsible corporate, we have always been and will be compliant with all regulations."Reliance Industries, SBI, HUL, Bajaj Finserv and Coal India didn't respond to queries."Most promoters have for long treated their companies as proprietary firms, with all powers (and most gains) concentrated in the family," said Prithvi Haldea, chairman of Prime Database. "It has been found worldwide that concentration of these two roles in one person or in one family has led to poor governance. Though not relevant, I fear that slowing of the economy is being used as a pressure point to do away with, or at least postpone, this regulation." However, the role of chairman will be much more accountable going forward, Haldea said.

Iran returns Trump's fire with a nuclear dare

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Iran on Sunday announced its fifth step back from a nuclear deal saying it will forego the "limit on the number of centrifuges", amid mounting tensions with the United States. In a statement, Tehran said it would continue cooperating "as before" with the International Atomic Energy Agency, which monitors the implementation of the nuclear deal. The announcement came after a US drone strike Friday killed top Iranian military commander Qasem Soleimani in Iraq, sparking fury in Iran which has vowed to avenge his death. The nuclear accord between Iran and the United Nations Security Council's five permanent members -- Britain, China, France, Russia and the United States -- plus Germany was agreed in 2015. It has been hanging by a thread since the US withdrawal in May 2018, despite efforts to salvage it led by the three European nations that remain parties to the deal along with China and Russia. On Saturday, France urged Iran to stick to the landmark 2015 nuclear accord. "France fully shares with Germany the central objective of de-escalation and preservation of the Vienna (nuclear) accord," Foreign Minister Jean-Yves Le Drian said. With China, "we in particular noted our agreement... to urge Iran to avoid any new violation of the Vienna accord," he added. And the European Union said Sunday it had invited Iranian Foreign Minister Mohammad Javad Zarif to Brussels for talks.

How to game a market that has mood swings

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By Dhirendra KumarThe apparent decline of the auto sector, with new car sales just not taking off, is now seen as a deep crisis by many people, as the auto industry is the bellwether of some equity investors' mood.This is indeed the way it used to be. It used to be hard to imagine a modern economy doing well and auto sales not growing. For about 100 years now, this has been more or less true for most of the world. In India, this has been true since the late 80s, with the rise of Maruti. However, we may be seeing a fundamental shift today. Electric vehicles, app-based ride hailing, vehicles-as-a-service are here and the connection between a certain level of prosperity and a certain level of car usage is now broken. In fact, the narrative has changed so fast that the impending doom of the auto industry is just a breath away from becoming conventional wisdom.At this point, I could say one of the two things, both equally convincing. One, I could say that habits don't change so fast, people will be buying cars for decades. Or two, I could agree with the new conventional wisdom that the auto industry is doomed.Either way, it does not actually matter to my real topic here, which is how investors can possibly cope with what looks like a high rate of change. This goes well beyond just the auto industry. Whenever anyone looks back at a longish period of equity investing, it's almost a tradition to say that there were a lot of ups and downs. Of course, such a statement is pointless–it's what statisticians call a 'vacuous observation'. Something that is true, and yet pointless.There are always ups and downs in the equity market, in fact, it would be news if there was an extended period of time when there were no major ups and downs. In fact, one gets an exaggerated sense of stability when one observes the equity markets as a whole, especially using large cap indices like the Sensex or the Nifty as references. However, for the last few years, it has been clear to any thinking investor that something bigger than this normal volatility is afoot. The wind of change that is driven by technology has now become a storm of transformation. In just a few years, not just companies, but the entire industry is looking completely different from what they actually used to.There are two aspects to this. One, entirely new types of businesses have been created. Google and Facebook are the biggest examples but there are many others. Nothing like Uber or Ola ever existed earlier. I mean, taxi is not a new phenomena in this world, but the scale at which such companies can organise and aggregate information, transforms the simple act of calling a taxi into a completely new kind of activity. The kind of strong waves of change that are hitting the auto industry happen once every few years. In fact, in the beginning of the auto industry, there was a similar shift from animal-drawn urban transport to motorised transport.So what should investors do? At the most basic level, this is one of the most basic problems that diversification solves. Companies and sectors will face all kinds of wrenching changes, some temporary and some permanent. However, there is often something else that does not change.Many years ago Amazon's founder and CEO Jeff Bezos wrote this: I very frequently get the question: "What's going to change in the next 10 years?" And that is a very interesting question; it's a very common one. I almost never get the question: "What's not going to change in the next 10 years?" And I submit to you that that second question is actually the more important of the two – because you can build a business strategy around the things that are stable in time. It's impossible to imagine a future 10 years from now where a customer comes up and says, "Jeff, I love Amazon; I just wish the prices were a little higher." "I love Amazon; I just wish you'd deliver a little more slowly." Impossible.Bezos has put his finger right on not only the most important thing in running a business, but also in being an equity investor.In the firestorm of change, investors should focus on what does not change.(The writer is CEO, Value Research)

Reliance Home Finance could land at NCLT

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MUMBAI: Debt investors of Reliance Home Finance (RHFL), a unit of Reliance Capital, are planning legal action that may include a request for initiating recovery proceedings in the National Company Law Tribunal against the stressed financier, which defaulted on bond repayments due earlier this month.Multiple industry sources aware of the developments told ET that IDBI Trusteeship, which is representing the interests of RHFL's non-convertible debenture (NCD) holders, has appointed Shardul Amarchand Mangaldas as the legal adviser for the affected investors, numbering about 20,000."The legal firm has conducted a conference call with investors and has already prepared an application draft on behalf of the investors," one of the participating investors told ET.Investors are weighing the option of filing the case in either the National Company Law Tribunal (NCLT) or Debt Recovery Tribunal (DRT) to recover their money. IDBI Trusteeship has already reached out to the company's lenders for approval, said another person who invested in RHFL bonds. "The NCLT application is likely, but through the Companies Act, as there are certain instances of irregularities," said an investor.A forensic report has also allegedly pointed to some deviations. ET could not independently verify contents of the forensic report.IDBI Trusteeship did not immediately comment.A Reliance Capital spokesperson said that RHFL has sufficient assets to honour repayment claims from its bond buyers."Reliance Home Finance has good quality retail assets and close to Rs 500 crore, (with) which it wants to pay retail investors, but is unable to proceed with such payments owing to the complete restraint placed by the banks, led by the lead lender, on making any preferential payments."The company also said that it is working on a resolution plan it wants to share with bondholders."On the issue of trustees calling for full loan repayment, we have already called for a debentureholders' meeting and will be sharing the resolution plan as one of the agenda items," the spokesperson said in response to a query from ET.RHFL had raised Rs 3,500 crore via public issuance of NCDs from about 20,000 investors. 73114763 If IDBI Trusteeship decides to file a case using the Insolvency and Bankruptcy Code (IBC), it may have to approach the Reserve Bank of India (RBI). The central bank recently referred Dewan Housing Finance (DHFL) to the dedicated insolvency courts in the first such case involving financial companies."The IBC route is not actively under consideration for now," said a person involved in the matter.The government has empowered RBI to refer any financial services company for insolvency proceedings."The new amendment related to financial services companies (Sec 227 of IBC) is applicable only when the administrator (RBI ) refers any such company to NCLT," said Anil Goel, founder of AAA Insolvency. "If a trustee wants to take a company to NCLT acting on behalf of investors, it has to first approach the RBI."IDBI Trusteeship Services is yet to receive any confirmation from RHFL pertaining to principal and interest due on January 3, it said in a note to investors.On November 19, Swapan Kumar Bagchi, MD & CEO of IDBI Trusteeship Services, wrote to RHFL's chief investment officer, recalling the entire loan amount on the immediate maturity date of January 3 after the company was downgraded to 'D', or default."In case you fail to make the payments…, the trustee shall be constrained to take such steps as may be advised for enforcing the securities and realising the dues at your own risk," the letter said.Nippon India Mutual Fund, SBI Mutual Fund, Indian Iron and Steel PF, an arm of sovereign backed SAIL, Oriental Bank of Commerce, Emami group entity Frank Ross, the National Bank for Agriculture and Rural Development (NABARD), and Maharashtra government-owned SICOM were among those that invested in these bonds that were once rated AA+ - just a notch lower than the highest grade.

Soleimani’s killing and its impact: HPCL Chairman sees crude cooling down if Iran doesn’t strike big

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NEW DELHI: Oil prices will give up the recent surge if there is no major retaliatory action by Iran within weeks since the top Iranian general's killing has raised regional tension and stoked fears of supply disruption but hasn't changed the actual demand-supply situation, chairman of Hindustan Petroleum Corp has said."The news has been factored in the price. Now it's about the perception of the people, whether it will escalate or not," HPCL chairman MK Surana told ET in an interview. "Some new trigger can only take it further in the next few weeks. But if there is none, prices will come down."Oil prices had climbed about $3 on Friday to reach $69 a barrel. Increased risk perception, efforts at short-covering, and speculation could still drive oil prices up a bit but not beyond $75 a barrel, Surana said."This event has the potential, depends on how Iran responds. The past few events make us believe that the impact will be limited," Surana said, mainly referring to how the September attack on Saudi Arabia's installation, which had removed 5% of global oil supplies, provoked no quick retaliation. A fast restoration of supplies by Saudis and abundant supply in the world market ensured prices were back to pre-attack levels quickly.What would be important to see is not just how Iran retaliates but also how the world responds to that retaliation, Surana said, adding that he would also be keenly watching the exchange rate over the next few weeks. "If the bond yield is going up based on the risk perception of the people, it will have an impact on the movement of dollar in and out of the country," Surana said. Rupee depreciation increases import bill for refiners like HPCL.Higher crude prices also push up pump prices for petrol and diesel in the country that are already at 13-month high. Local rates of petrol and diesel have already risen Rs 2.5-3 per litre in two months."Had Iran been a full-fledged supplier, the impact could have been much bigger," Surana said. US sanctions have severely curtailed Iran's production and exports, and cut off world's dependence on Iranian crude. Besides, the world's dependence on Middle East is much lower today than it was a decade ago as the US and Russia have become key oil producers, and can swiftly respond to demand-supply signals, Surana said."Availability of surpluses is still there. Which is why the production cut news hasn't increased prices substantially," Surana said, referring to the limited effect of recent extension of production cut agreement between OPEC members and allies.The US-China trade tensions hasn't resolved fully and so the demand concerns remain, he said, in a bid to bolster his point that neither demand nor supply situation has changed significantly and therefore just the increased risk perception on Iran can't keep driving prices for long.

Air India policing artworks so they don’t fly away

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NEW DELHI: Air India, which the government is trying to sell, is keeping a close eye on about 40,000 pieces of art and other artefacts to ensure that it doesn't lose any more of them, said people with knowledge of the matter. They include works by MF Husain, VS Gaitonde and Anjolie Ela Menon, and are valued at hundreds of crores of rupees.An investigation in 2017 had discovered that executives had walked off with several items over the years.The airline recently completed the exercise of tagging every painting and artefact it has received over the years. They are under 24-hour CCTV surveillance and the log is checked every second day to ensure everything is intact, said the people.To be sure, the hoard won't go to Air India's buyer but will most likely end up at the National Gallery of Modern Art (NGMA), said the people. The civil aviation ministry will decide on their eventual destination."Though we have not done the evaluation as it is likely to get transferred to a government agency, considering the paintings are of MF Husain, VS Gaitonde and Anjolie Ela Menon, the value runs into hundreds of crores," said one of the persons. "Besides, we have ancient stone sculptures, the value of which can be evaluated by professionals."A case had been filed after the thefts became known in 2017 but it's not known if any of the pieces have been recovered. Air India then decided to put together a list of all such valuables and entrust their security to a separate team."With the sale of the airline imminent, the major threat was to ensure safety of these paintings and sculptures," said another of the persons. "We have a digital record and every item has been given a number. We have approximately 40,000 items. The items at the regional centres are the responsibility of the station manager and he/she will be responsible for any theft. Besides round-the-clock monitoring, a physical check is carried out routinely."According to Air India, most of the paintings were gifted or purchased when the artists weren't famous.The government, which failed to get any bids in its attempt to sell a stake in Air India in 2018, has sought to sweeten the offer this time around. This includes putting up the entire 100% stake in the airline on sale, substantial restructuring of debt and liabilities and allowing the new owner to offer a voluntary retirement scheme (VRS) to employees.According to the plan being discussed, the government will pay Air India's dues amounting to Rs 22,000 crore to vendors such as airports and oil companies before putting the airline up for sale. It may also waive the airline's entire working capital debt of about Rs 15,500 crore so that Air India is left with a loan burden of only about Rs 20,000 crore.The airline posted a net loss of Rs 8,400 crore in FY19.The airline is also selling properties in various states and abroad to pay off debt.

Nifty50 companies’ Q3 profits may surge on low base, tax gain

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ET Intelligence Group: After a dip in the previous quarter, aggregate net profit of the Nifty50 companies is expected to catapult in the December 2019 quarter due to lower comparable base a year ago, lower corporate tax rate, and better performance by select banks and finance companies amid lower provisioning towards bad loans.The top line growth, however, is expected to be modest amid demand slack and higher base a year ago. Although the downward trend seems to have bottomed out, analysts do not expect a major turnaround anytime soon.According to the ET Intelligence Group's estimates, net profit of the Nifty 50 companies is likely to jump by a ninequarter high at 55.2 per cent year-on-year in the December quarter compared with 12.2 per cent drop in the previous quarter as several companies fully adjusted for the deferred tax assets in the aftermath of the government's decision in September to cut corporate tax rates.Profits had fallen sharply by 23.5 per cent in the year-ago quarter. The actual profit growth will depend upon the extent of deferred tax adjustments by companies.Net sales may increase by 3.6 per cent in the September quarter on a higher base of 24.1 per cent growth in the year-ago quarter. The operating margin may expand by 240 basis points to 18.6 per cent."We expect the repeat of the second quarter performance. The topline may continue to drop for our universe of companies while net profit is likely to grow by 12 per cent boosted by corporate tax cuts in the December quarter," said Gautam Duggad, research head of institutional equities, Motilal Oswal Financial Services (MOFSL).The pressure on revenues will continue given the sluggishness in consumer as well as industrial demand. "Going by the weak IIP and core infra numbers for October and November, weak corporate advance tax collections for the December quarter though in part due to corporate tax rate cut and the low GDP forecast for FY20, the Q3 corporate revenues and profits may not be too exciting. However most of this negativity is (captured) in the (stock) prices," said Deepak Jasani, retail research head, HDFC Securities.While there are signs of demand revival, analysts are observing caution. Duggad believes that though the declining trend in the corporate performance may have bottomed out, it would be too early to draw a conclusion. "We see mixed signals. For instance, auto demand improved in November but fell again in December. The volume of bikes sold was poor. Though things may not deteriorate much from hereon, the recovery will be rather gradual than quick," Jasani said.Analysts are not in a hurry to revise earnings estimates aggressively. MOFSL's FY20 Nifty50 earnings per share estimate has remained more or less stable at Rs 535 compared with Rs 530 at the end of the previous quarter. This is 10 per cent higher than Nifty's FY19 EPS of Rs 480.SECTORAL EXPECTATIONSAutomobiles: Volume growth appears to be bottoming out for the passenger vehicles segment, but the pressure has continued for two-wheelers and commercial vehicles. The realisations are likely to be subdued due to the record festive discounts and high promotional activity. This will weigh on the revenue of the automakers, while profit growth is likely to supported by the corporate tax cut.Banking and finance: Select private sector banks are likely to report lower bad loan growth. ICICI Bank and Indusind Bank are expected to report higher profit growth.State Bank of India may report fresh slippages in the aftermath of the DHFL bankruptcy. Nonbanking lenders including HDFC and Bajaj Finance are expected to report robust bottomline growth.Capital goods: The order activity and execution has moderated owing to lower capital expenditure by the states and the Union Government. The orders from the state governments which were prime drivers for the pick-up in the execution earlier have turned wobbly following order reviewing activity of some of the state governments including Andhra Pradesh and Maharashtra. The management commentary of L&T regarding the order growth guidance which is currently 10-12 per cent for FY20 will be keenly watched by the Street.Cement: Cement prices increased by 4 per cent year-on-year in the December 2019 quarter to Rs 337 per 50 kg bag. Since the fall in cement prices was higher in FY19 than in FY20 till date, cement companies may record higher revenue growth in comparison with the last year's December quarter. Large companies such as Ultra-Tech Cement, Ambuja Cements, ACC, and Shree Cement are expected to record 7-16 per cent growth in revenues in the December 2019 quarter. Lower per coke prices are likely to help these companies to report 85-96 per cent growth in their earnings.FMCG: While the topline growth will be impacted by the low sales volumes, the bottomline growth will continue to be healthy — aided by cut in the corporate tax rate. The volume growth will be subdued despite the festive demand boost in consumer buying given the slowdown in rural demand. Despite this, most FMCG companies are likely to maintain their profit margins due to rationalisation of expenses and lower corporate tax.IT: Top IT companies are expected to report 1.5-3 per cent growth in dollar denominated revenue. Wipro and Tech Mahindra will benefit from the inorganic revenue stream and may report better revenue growth than peers. The management commentary on the demand trend in the banking and financial vertical, which is a major source of revenue for Indian IT companies, will be critical. Infosys is expected to revise its FY20 revenue guidance upwards.Metals: Metals companies are expected to post a strong quarter after weak first half of FY20. After a consistent fall in the first six months of the fiscal, domestic steel prices have risen by 10 per cent since its lows in September. In addition, the benefit of fall in raw material (iron and coking coal) prices in the second quarter will benefit the companies in the current quarter due to lag effect. This is positive for JSW Steel, Tata Steel, JSPL and SAIL. The trend is similar for aluminium as well, a positive for Hindalco. Aluminium prices are up 7 per cent in the past three months. However, zinc prices remained flat, which may lead to a flat set of numbers for the largest zinc producer, Hindustan Zinc and Vedanta, its parent company.Pharma: Pharma companies are likely to post subdued growth in the quarter to December. Pricing pressure in the US generics market, price control concerns in the domestic market and USFDA regulatory woes will continue to impact the performance. Measures such as cost cutting, rationalisation of R&D expenditure and exiting from low-margin products are likely to aid margin growth.

View: Daily and weekly charts signal limited upside for Nifty

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BY NAGARAJ SHETTITECHNICAL RESEARCH ANALYST, HDFC SECURITIESThe underlying trend of Nifty continues to be range-bound and the key overhead resistance of 12350-12400 is unlikely to be broken before the index shows any meaningful downward correction, said technical analysts. Jubilant Foodworks, Wipro, ICICI Bank, Maruti & Tata Motors are some of the top short-term picks.Where Are We: A small negative candle was formed on Friday with a gap-down opening. This is placed just after the long bull candle of Thursday. This pattern indicates a range-bound movement in Nifty below the key overhead resistance of 11350. We observe a triangle pattern at highs, which has been developing for 5-6 sessions. A breakout/ breakdown of such patterns could determine a near-term direction (up 12280 and down 12190). What Is In Store: The Nifty is now placed near the key overhead resistance of long-term trend line of around 12350-12400 levels. Hence, this area is going to be a key hurdle for the market on the way up. The present range movement could be similar to the previous two top reversal patterns (mid of April 2019 and early June 2019). There is a possibility of another 1 or 2 weeks of range movement or false upside breakout attempt, before showing downside correction. What Could Investors Do: The underlying trend of Nifty continues to be range-bound at the highs. Though, Nifty is placed near the key resistance, there is no indication of a reversal pattern at highs. But, the daily/ weekly chart patterns signal a limited upside. The key overhead resistance of 12350-400 is unlikely to be broken on the up, before it shows a meaningful downward correction. Buy Jubilant Foodworks for 3-5 weeks at CMP of 1683. Buy Wipro for 3-5 weeks at CMP of 251.

Diversity under lens as IT faces fresh suits in US

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Indian IT services companies Wipro, Infosys and HCL Technologies have faced fresh lawsuits on employee discrimination in the US last month at a time when these firms are seeing an increased hostility for visas in their largest export market.In December, Wipro received a lawsuit over allegations of racial discrimination by an African-American employee named Kevin Clark. He has alleged that he was not given projects and ultimately terminated based on his race. While Clark sought damages for emotional pain and distress, he has also demanded a compensation of $25 mn and other costs.The same month, India's second largest software services exporter Infosys received a lawsuit from Cathy Szczepinski in Ohio for alleged violation of fair labour standards and denial of overtime payment. Whereas, HCL Technologies received a lawsuit over allegations of discrimination by an employee named Sierra Claytor based in North Carolina."Wipro is committed to being an equal opportunity employer and the employment policy adheres to the highest standards of integrity, fairness and ethical corporate practices. The company does not comment on pending litigation," said a Wipro spokesperson.Infosys and HCL Technologies did not respond to ET's queries until press time. Indian companies have been increasingly facing restrictions in getting the coveted H-1B visas due to the Donald Trump administration's decision to favour US technology companies for work permits. This has made Indian tech services companies increase hiring local workers in the US. With increasing number of clients demanding digital technology-led services, Indian tech services players are pushed to deploy more local employees to work with clients.In October, Infosys faced a class action suit from an investor as the company's ADS fell 12% following a whistleblower's allegations of accounting malfeasance. Analysts said the "lawsuits and the cost to settle these claims will not materially hurt these firms" but the lack of diversity both on race and gender could impact these firms to some extent. "The Indian service providers are in a very tough spot. All of them have adjusted their personal policies to accommodate US and EU expectations. They have trained their managers in US and EU techniques and have instituted industry best practice procedures regarding HR and anti-discrimination. Having said all that, their US and EU organisations suffer from a significant lack of diversity both from an ethnic and gender perspective," said Peter Bendor-Samuel, CEO at Everest Group, an IT advisory and research firm.