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Monday, February 24, 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


There's more to Donald Trump's India trip than meets the eye

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By: Avinash MohananeyFacing stiff challenge to his re-election from a surging Bernie Sanders (Democrat nomination aspirant) armed with popular progressive agenda and his failed Iranian gamble, Donald Trump is now desperately looking towards new avenues to brighten his electoral prospects. Sanders recorded an emphatic win in Nevada Democratic presidential caucus last Saturday described by a political commentator as the dawn of "a new era in American life." Similarly, the people in the US did not accept the Trump narrative on Iran and held rallies across the US against any misadventure.Despite no trade agreement with India in sight, Trump has taken out time to visit this country hoping for a massive swing of votes of Indian community in the US in his favour. Equally on his mind is signing of a peace deal with the Taliban on February 29. In his usual style of speaking, Trump told reporters on Sunday before he left the White House for the India visit, "We think they (Taliban) want to make a deal. We want to make a deal. I think it's going to work out." He added "time to come home (American soldiers in Afghanistan)."To pave the way for signing of the peace deal, the Taliban have agreed to "reduction in violence" beginning intervening night of February 21-22. They, however, rejected the key US demand for a cease-fire. But was it not the ground on which Trump had called off the Camp David meeting in September last year, when the Taliban representatives were supposed to travel to the US for signing an agreement worked out by US interlocutor Zalmay Khalilzad?Well, time changes everything. Getting American soldiers out of Afghanistan was a key promise that Trump made during his election campaign in 2016, which remains unfulfilled. Even an announcement to the effect can boost his electoral prospects. Similarly, the Taliban are afraid that the Islamic state of Iraq and Syria may get a firm foothold in Afghanistan to the detriment to their interests, if the war rages on.So, there are separate compelling domestic circumstances for all three players –– the US, Pakistan and the Taliban –– to come to an understanding so that key interests of every side are taken care of at least to some extent. The US is getting a promise that the Taliban would not allow Afghan soil to be used against US interests, which is way below an "honourable" settlement.Nevertheless, the "agreement" has to be sold to the American people as a major diplomatic victory. Ground for the same was prepared when New York Times published a writeup on February 20 by Sirajuddin Haqqani, once on the hit list of the US, addressing many concerns that the "liberals" in the US and across the globe have about the Taliban. Writing on behalf of the Taliban, he has promised an inclusive Islamic system guaranteeing rights of women as enshrined in Islam. He has also agreed to keep the international community engaged and interested in Afghanistan. Who would have scripted this write-up and got it published in such a prestigious paper?Much to India's discomfort, Pakistan emerges as the key player to assure the US that the Taliban will behave, and the agreement will hold. Pakistan is the only country with significant leverage on the Taliban. Knowing well that Pakistan is a slippery customer, it has to be kept under tight leash using Financial Action Task Force grey list. This is exactly what the US is ensuring. One can understand the plight of Pakistan from the fact that they have to keep their most important "strategic asset", Hafiz Saeed, behind the bars to get out of the grey list.India has invested heavily in Afghanistan and enjoys goodwill among the people. But who is going to protect its interests, as India is not on the table? Will our strategic partner, the US, ensure that Afghanistan is not used by Pakistan against Indian interests? It is time for the Trump administration to keep India in the loop on Afghanistan, if the bilateral strategic partnership has to be strengthened.(The writer is a former IB officer, who served in Pakistan)

Coronavirus is making Dalal Street nervous

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The Nifty could soon test the 200-day simple moving average of 11,682.8, with the major support of 12,000 being breached Monday on FII selling across cash and derivatives markets. The FII reaction underscored the panic in global markets about the rapidly spreading corona virus from China to other parts of the world.Derivatives analysts cited the overnight build-up in open interest (OI) of the February 27 expiry 11,700 put on Thursday — close to expiry — for their forecast of markets testing the 200-day SMA of 11,682.8. That strike saw OI jump to 19.78 lakh shares (75 shares make a lot) Thursday from 15.49 lakh shares a day earlier. Such a rise in OI close to expiry is seen by analysts as negative for markets."Strong hands purchased 11,700 strike puts on Thursday when the market was at 12,080," said Amit Gupta, derivatives head, ICICI Securities. "This strike is just above the 200-day SMA and its purchase close to monthly derivatives expiry indicates the increasing chances of the market testing that level."Indeed, the price of this put has risen 6 times from last Wednesday to a provisional Rs 42 a share this Monday along with a spike in OI to 27.82 lakh shares from 15.49 lakh shares over the same period. It hints at buying by institutions, like FIIs, either as a hedge to their portfolios or simply as a bet on markets falling and their gaining by a rise in the put price. 74293030 Some analysts expect the fall to be deeper than just 1.2 per cent to the 200-day SMA if the impact of Corona virus worsens. FIIs net sold shares worth a provisional Rs 1,161 crore and index futures — Nifty and Bank Nifty — worth Rs 1,238 crore apart from net purchasing more index puts, which caused the Nifty to fall 2 per cent to 11,829.4 on Monday.On Monday, they were cumulatively net short index futures by 1,07,773 contracts, up from 95,873 contracts last Thursday. The number of index puts they cumulatively bought stood at 2,23,628 contracts, up from 2,04,073 contracts, which caused fear gauge India Vix to spike 24 per cent to 16.99.For investors and traders, the option in a falling market is to buy out of the money index puts."The pace of the decline indicates that markets could even breach the 200-day SMA," said Rajesh Palviya, derivatives head at Axis Securities. "Under such circumstances, buying out of the money index puts is an option."The active Nifty futures contract witnessed some long liquidation as the market fell. The extent of the bearishness on the index was evident in the near month index put call ratio dropping to 0.75 Monday from 1.01on Thursday. This showed that prop traders have cumulatively sold huge number of calls prior to expiry as they don't expect the market to rise. The buyers of these calls are FIIs, who are short index futures and long index puts, and rich clients.The range of the market is 11,800-12,000 for now in the current month, options data indicate. But odds of the index breaking the 11,800 have shortened.

Maruti ready for a life without diesel

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New Delhi | Mumbai: Maruti Suzuki is banking on affordable green vehicles including those running on compressed natural gas (CNG) and on hybrid technology to drive in volumes and cut emissions over the next few years. India's biggest carmaker will stop sale of its diesel cars from April 2020.The company is eyeing sales of a million green vehicles mid-term, with nearly half of these volumes coming from CNG options, said sources in the know. It expects sales of additional 250,000-300,000 units from 48 volt smart hybrids, which will emerge as an alternative to diesel vehicles. The remaining volumes will come from stronger parallel hybrids and electric vehicles.Maruti Suzuki MD Kenichi Ayukawa told ET some time ago that while electrification will take time, the company has a slew of technologies on offer to reduce dependence on imported oil and cut down vehicular pollution. "We have CNG, we have strong and mild hyrbids, depending on the product we have to select the technology," Ayukawa said.The company, which has eight CNG models currently, has already commenced work to make all small cars in its portfolio available in the fuel option, going forward. Maruti Suzuki also has plans to bring to the market the parallel hybrid technology developed by parent Suzuki Motor Corporation (SMC).The company recently showcased the parallel hybrid system on hatchback Swift, which delivers higher fuel efficiency of 32 kmpl.Ayukawa said "We are planning to bring in parallel hybrids (to India), we have the hybrid system, point is localisation." At present, it has 5 vehicles with the smart hybrid tech.Not only are these vehicles that it plans to bring to the market cleaner and greener, they do not come with a major sticker shock on price, allowing Maruti Suzuki to retain its edge in terms of both fuel efficiency and affordability in the face of rising competition. The move, additionally, will help the company reduce about one million tonne of CO2 emission as major cities continue to suffer from extremely poor air quality."What took a decade for the company to deliver, it wants to now do it in three years, sell one million cleaner vehicles and 'affordability' is at the core of it", said a senior industry executive, aware of the company's plans, said on condition of anonymity.Meanwhile, CNG-powered vehicles already constitute 9% of overall sales of the company. In states where CNG distribution outlets are available, variants running on the fuel account for up to 70-75% of the sales of the model. Over 1950 CNG stations are present across 18 states and threeUTs, with major concentration in Delhi-NCR, Mumbai, Pune, Ahmedabad and Hyderabad.Shashank Srivastava, executive director, marketing and sales, Maruti Suzuki said. "Running cost of CNG is less than diesel. In Pune, 71% of sales of WagonR come from CNG. Penetration is very high. The question is not the acceptance of CNG, but the availability of CNG."

Net neutrality: Content, tech cos back separate body

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KOLKATA: Telecom carriers and content/ technology companies have sparred over tighter enforcement of net neutrality rules, with the likes of Bharti Airtel calling on the government to reorient its position about the open internet with the advent of 5G, and urged application of net neutrality rules on content providers such as Netflix.In their submissions to the telecom regulator on contours of reasonable internet traffic management practices, content players and technology companies backed an independent and powerful multi-stakeholder body (MSB) that can work closely with the Department of Telecommunications (DoT) and Telecom Regulatory Authority of India (Trai) in monitoring the application of net neutrality regulations.Telcos, by contrast, want light touch regulation, with Reliance Jio Infocomm backing Bharti Airtel in saying there's no real need to establish an MSB as net neutrality rules are part of licensing conditions enforced by DoT."A one size fits all approach has become obsolete in the 5G context, and the policy on net neutrality needs to be reconsidered and aligned with the principles and standards of 5G," Airtel said in its submissions to Trai. 74292752 Investments in 5G, it said, would depend on enabling regulatory provisions, which would help in unlocking the full potential/ benefits of these newer technologies.Airtel also rued that no steps had been taken by the government yet to apply the net neutrality rules on content providers and mobile apps despite the power these entities wield in the internet ecosystem. "Netflix has admitted in the past they were throttling their content on AT&T and Verizon's networks," Airtel said.US browser maker Mozilla Corp though called for stringent enforcement of net neutrality rules."A truly empowered and diverse multistakeholder advisory body would go a long way in cementing India's position as a leader in net neutrality regulation globally," the company said.It also called on Trai to emulate the Body of European Regulators for Electronic Communications (BEREC) model to "determine and measure (the extent) of net neutrality violations''.Software services body Nasscom also wants the proposed MSB to make "non-discrimination of content a top priority," and boost public awareness levels about the benefits of net neutrality, besides balancing matters such as "accessibility of services, consumer rights and expectations".Airtel though strongly discouraged the need for an MSB, saying net neutrality principles are already part of a telco's licensing norms, and DoT is fully empowered to ensure compliance."If it's (still) decided to establish an MSB, it should be mandated to advice DoT on enforcing net neutrality principles on entities, other than telecom/internet service providers, such as content providers, device makers, browsers who also have significant impact on internet traffic," Airtel said in its submissions to Trai.Jio backed Airtel, saying DoT, instead of creating an MSB, should consult an existing industry-led body that can play an active role in assisting it in monitoring and enforcing net neutrality functions, especially since the department intends to retain the monitoring and enforcement functions on this score.Back in August 2017, Trai had recommended a free and open Internet and had even suggested monetary penalties for violation of net neutrality rules, starting at Rs 50,000 per violation per day but capped at Rs 50 lakh. Further, it had mooted an MSB comprising telcos, internet service providers, content providers, civil society organisations and consumer representatives to detect violations.In August 2018, DoT endorsed Trai's recommendations but said actual monitoring and enforcement of the rules would remain with it, and that the proposed MSB would play only an advisory role.

HUL to set up subsidiary to save on tax

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Hindustan Unilever is setting up a fully-owned subsidiary that will invest in newer manufacturing units and help the maker of Rin and Dove significantly lower taxes under the corporate tax rates announced last year.Finance minister Nirmala Sitharaman last year slashed corporate tax rate to 22% from 30% for existing companies, and to 15% from 25% for new manufacturing companies.The new subsidiary, which has an authorised capital of Rs 2,000 crore, has been formed to leverage on enablers, including corporate tax as well as 'Make in India' initiative, said the company."We are taking into account the whole thrust on Make in India and also tax enabling provisions which the government has created. Our ability to invest more also becomes better because there's an overall financial case to it. It also give us an opportunity to look at new categories and new brands," said Srinivas Phatak, chief financial officer at HUL.AVAILING NEW TAX RATEHUL, the country's biggest consumer goods firm, has over 28 manufacturing facilities and attract corporate tax of over 25%.However, none of the infrastructure can be transferred into the new subsidiary that has to invest in a completely new set-up to benefit from the reduced 15% tax rate."In the first phase, we will look at anywhere between Rs 500 and Rs 800 crore of investment in a couple of our existing categories, but that's work in progress," Phatak added.With arm's length transaction pricing, Hindustan Unilever will buy products from the new company that will only be entitled to manufacturing profits and not marketing profits.

Soon, city gas distributors may not have to tie up supplies for 5 years

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New Delhi: The downstream regulator is planning to waive a key condition for city gas distributors — of signing natural gas purchase pacts within 180 days from the award of licence — in response to companies' reluctance to go for such deals amid a global supply glut that has led to a sharp decline in prices and amplified volatility, said people aware of the matter. The idea behind mandating licensees to compulsorily tie up supplies was to ensure security of supply and smooth services.But the US shale revolution and construction of several gas export facilities worldwide over the past few years have made supplies plentiful and cheaper, prompting Petroleum and Natural Gas Regulatory Board (PNGRB) to revisit this condition. 74293489 "Forcing them to tie up gas for five years at the beginning of the licence period won't be in the commercial interest of city gas licence holders. They should have flexibility in sourcing gas," said a person familiar with PNGRB's plans.The removal of such restriction will enable city gas distributors to better respond to market situations and serve consumers better, he said, speaking on condition of anonymity. The proposed move would help several companies that won licences in the ninth and tenth rounds of city gas auction held in the past two years.Indian Oil, BPCL, HPCL, Adani, Torrent and AG&P were the biggest winners in the last two rounds in which 136 licences, covering nearly half of India's population, were awarded.India imports about half of the gas it consumes.City gas companies get cheap local gas for distribution to homes and vehicles, but depend mostly on imported liquefied natural gas (LNG) for serving industries and commercial establishments.The current PNGRB regulation requires that the licence holder should "enter into and submit to the board, a natural gas sale agreement (GSA) or heads of gas sale agreement (HOA) or memorandum of understanding for sale of natural gas (MoU) with producer or marketer of natural gas for the proposed city gas distribution network project, in a transparent manner and on an arm's length basis for a minimum period of five years, within 180 days from the date of the authorisation".The minimum volume of natural gas for which such a pact can be entered into is equal to the expected consumption in five years based on the work programme promised during the bid.

Coronavirus scare has some positives for Tata Steel, JSW Steel

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Ambit Capital has initiated coverage on Tata Steel and JSW Steel with 'buy' ratings citing expected stimulus by China, credit impulse and continued global liquidity. The brokerage said there could be demand destruction in the near-term on account of Coronavirus but it expects a 'supportive environment' for metals from the second- half of 2021. Shares of Tata Steel dropped 6.4%, while JSW Steel slumped 8.1% on Monday as worries about Coronavirus spreading weighed on sentiment. "As an early cycle metal, steel stands to benefit the most from Chinese infrastructure spend. Global cyclical recovery and restocking should provide added support," said Ambit.Tata Steel CMP: Rs 415.35Ambit's Target Price: Rs 550 Expected Returns (%): 32%"Tata Steel, with significant operating and financial leverage, could significantly improve RoE (return on equity) on cyclical recovery in global pricing and improved Indian supply/demand," Ambit said. The brokerage said steel maker's net debt will remain high and Europe will remain fragile but its Indian operations would make up for these vulnerabilities. The stock is trading at 0.6 times FY20 price to book – the lower-end of its 10-year range.JSW Steel CMP: Rs 258.80Ambit's Target Price: Rs 350 Expected Returns (%): 35%The brokerage said despite higher iron ore costs post Odisha auctions, the company's consolidated operating profit would grow from Rs 130bn in FY20E to Rs 215bn by FY22E (29% CAGR) led by volume growth and margin expansion. "Commissioning of 5MT Dolvi expansion in 1HFY21E should again coincide with cyclical recovery by mid-FY21," the brokerage said. "Higher volumes, better mix should drive earnings growth through the cycle."

Virus spread roils markets; US stocks nosedive, havens rally

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The S&P 500 and the Dow Jones Industrial Average on Monday suffered their biggest one-day percentage losses in two years after a surge in coronavirus cases outside China fanned worries about the global economic impact of a potential pandemic.Investors sold riskier assets and rushed to traditionally safer bets such as gold and US Treasuries after countries including Iran, Italy and South Korea reported a rise in virus cases over the weekend even as China eased curbs with no new cases reported in Beijing and other cities.The benchmark S&P 500, which represents over 44 per cent of the market capitalization of all global equities, lost $927 billion of its value on Monday alone and $1.33 trillion since its closing high on Wednesday last week, according to S&P Dow Jones Indices senior analyst Howard Silverblatt.The S&P and the blue-chip Dow turned negative for the year to date and the Dow dropped more than 1,000 points on the day for only the third time in its history.The technology-heavy Nasdaq fell 3.71 per cent, the biggest daily percentage drop of the three major averages."We're not likely to make any progress higher until we have evidence the spread of the coronavirus is decelerating," said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia.The Dow Jones Industrial Average fell 1,031.61 points, or 3.56 per cent, to 27,960.8, the S&P 500 lost 111.86 points, or 3.35 per cent, to 3,225.89 and the Nasdaq Composite dropped 355.31 points, or 3.71 per cent, to 9,221.28.All of the 11 major S&P sectors closed in the red, led by the energy sector's 4.7 per cent decline and followed by a 4.2 per cent drop in technology stocks.Apple Inc slid 4.8 per cent as data showed sales of smartphones in China tumbled by more than a third in January.China-exposed chipmakers fell, with the Philadelphia SE Semiconductor index dropping 4.8 per cent, while concerns about growing travel curbs dragged the NYSE Arca Airline Index down 6 per cent.Of the S&P's sectors, the defensive utilities, real estate and consumer staples indexes fell the least on the day.Treasury yields fell to their lowest levels since 2016 as investors sought safety in government bonds, while the yield curve inversion between the 3-month and 10-year US Treasuries deepened in what is often viewed as a recession predictor.Adding to worries, Goldman Sachs slashed its US growth forecast on Sunday and predicted a more severe impact from the epidemic.The CBOE Volatility Index, a gauge of investor anxiety, registered its biggest one-day jump since February 2018 and ended the day at 25.03, its highest closing level since January 2019."There was this underlying concern that was out there, and obviously over the weekend, it just escalated," said Stacey Gilbert, portfolio manager for derivatives at Glenmede Investment Management in Philadelphia.After Monday's nosedive, the S&P closed almost 5 per cent below its record closing high, achieved last week, while the Nasdaq ended 6 per cent off its peak close and the Dow ended the day 5.4 per cent below its record close.The S&P 500 fell below its 50-day moving average and the Dow slipped below its 100-day moving average, all closely watched technical indicators.Health insurers such as UnitedHealth Group Inc and Cigna Corp dropped almost 8 per cent after Senator Bernie Sanders, who backs the elimination of private health insurance, strengthened his position for the Democratic presidential nomination with a victory in the Nevada caucuses.Janney Montgomery Scott's Luschini said that while the coronavirus was "by far and away the primary influence" for the market's decline on Monday, investors, he said, were "also beginning to handicap the odds of Sanders being the Democratic nominee."In a rare bright spot, Gilead Sciences Inc, whose antiviral remdesivir has shown promise in monkeys infected by a related coronavirus, rose 4.6 per cent.Declining issues outnumbered advancing ones on the NYSE by a 6.74-to-1 ratio; on Nasdaq, a 6.02-to-1 ratio favored decliners.The S&P 500 posted seven new 52-week highs and 23 new lows; the Nasdaq Composite recorded 21 new highs and 154 new lows.On US exchanges, 10.59 billion shares changed hands, compared with the 7.79 billion average for the last 20 sessions.

Jio-Microsoft partnership will define this decade: Mukesh Ambani

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MUMBAI: Speaking to Microsoft CEO, Satya Nadella in Mumbai, Chairman of Reliance Industries Mukesh Ambani said that the Jio and Microsoft partnership will be a defining one in the current decade in the context of digitization and connectivity."I am very excited about the partnership that Jio and Microsoft will have and I think that will be as we look at this decade, a defining partnership," he said to an audience of industry leaders.Jio had earlier last year signed a long-term alliance with Microsoft for the launch of new cloud data centres. Under the deal, Microsoft will bring in the Azure Cloud on the Jio Network targeting the enterprise and small business users who want to make a shift to a cloud technology infrastructure. He said that Jio and Microsoft will work with different businesses from startups, micro enterprises, merchants, shopkeepers to large enterprises to drive a technically enabled India in the coming years. There is an opportunity for SMEs to digitally enable themselves now and Jio and Microsoft could provide the toolsets and datasets for the same, he said. "Small, medium and micro enterprises provide 70% of India's employment, they drive 40% of our exports and are critical to all the economic activity that we see. And they have done this with zero technical enablement and adoption, " Mukesh Ambani said.Ambani said India that is at the cusp of becoming a "premier digital society" and will be among the top three economies of the world.India had changed a lot since the visits of previous US Presidents, Jimmy Carter, Bill Clinton and even Barack Obama, Ambani said, adding that mobile connectivity had ushered in the major changes in digital enablement of people in India. "The next generation will see a very different India than what you (Nadella) and I have grown up in," he said.

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