Mutual funds see record inflows in December
Mutual funds received a record inflow of Rs 249.9 billion in December, more than double the Rs 106.9 billion in the previous month. The contribution of monthly systematic investment plans also hit a high of Rs 113 billion in December, compared to the previous high of Rs 110 billion in November, data released by the Association of Mutual Funds in India showed.
Why it’s important: Investments in mutual funds are growing in India and the threat of the pandemic derailing economic growth yet again has not been a deterrent. A correction in markets in November also provided a window of opportunity for mutual fund investors.
Standard income tax deduction may rise by 30-35 percent
The government may consider increasing the standard deduction limit for salaried taxpayers and pensioners by 30-35% in the upcoming budget while income tax slabs are likely to remain unchanged. Currently, Rs 50,000 standard deduction is allowed to these taxpayers.
Why it’s important: The government might allow this relief to salaried employees and pensioners due to rising expenses because of the Covid-19 pandemic. The decision will hinge upon how much tax the government mops up.
Fresh pandemic curbs hit business activity
The Nomura India Business Resumption Index, which tracks and compares business activities for a particular week, fell sharply by 10 percentage points to 109.9 for the week ended January 9 from the downwardly revised 119.8 in the prior week.
Why it’s important: The index has fallen for the first time in many months because of mobility restrictions as states rushed to contain the third of covid-19 infections. Economic growth is expected to rebound once Omicron-led coronavirus cases peak soon, restricting the impact to businesses in the fiscal last quarter.
Government mulls tax incentives for startup consolidation
The central government may allow carry forward of losses and accumulated depreciation during the amalgamation of companies to encourage consolidation among startups dealing in services and retail. The sops might be introduced in the budget scheduled to be presented on February 1.
Why it’s important: India already allows incentives to sectors like manufacturing, shipping and banking to facilitate consolidation. The services sector a major source of exports revenue. Consolidation among Indian firms may help them to create the scale necessary to compete with global companies.
Retailers holding low inventory of discretionary products
Retailers and distributors of discretionary items such as televisions and footwear have cut inventory by nearly a third in the past fortnight compared with the same period last year. Manufacturers of televisions, smartphones, refrigerators, washing machines, apparel and footwear said most retailers and distributors want to hold 15 days of inventory instead of 30 days.
Why it’s important: Based on the experience of the past two pandemic waves, retailers are taking protective measures to ensure there is no impact on their cash flows in case business dips due to uncertain demand, after Covid-19 infections have surged and states have imposed renewed restrictions.
Government to allow 20 percent FDI in LIC ahead of listing
The central government will allow 20 percent foreign direct investment in Life Insurance Corporation of India, like in the case of public sector banks, by amending Foreign Exchange Management Act rules. The Department of Financial Services and the Department of Investment and Public Asset Management have finalized the plan to modify the FDI policy in consultation with the Department for Promotion of Industry and Internal Trade.
Why it’s important: The initial public offering of LIC in 2022 is expected to be the country largest ever. The move to relax rules on foreign direct investment is meant to attract foreign investors ahead of LIC’s public listing.
Combined net profit of Nifty firms to rise 25 percent
Companies on the Nifty index on the National Stock Exchange are collectively expected to post net profit of Rs 1.5 trillion in the December quarter of 2021-22, an annual increase of 24.9 percent but marginally down from Rs 1.54 trillion in the three months ended September 2021.
Why it’s important: The strong earnings growth is expected led by metal and mining, oil and gas, and banking, financial services, and insurance companies. Manufacturers and consumer goods companies may face another quarterly shrinking margin and earnings decline. Top IT firms are likely to maintain their growth momentum but could face margin contraction as operating expenses rise faster than revenue growth.
Reliance and Welspun in race to buy Sintex
Reliance Industries and Welspun are the leading firms to buy bankrupt Sintex Industries. Reliance, in partnership with Assets Care and Reconstruction Enterprise, has offered a Rs 28.63 billion resolution plan. Reliance-ACRE and Welspun unit Easygo Textile are the two highest bidders among the four offers that lenders have received for the textile and yarn making company.
Why it’s important: Sintex was admitted to the insolvency process by Invesco Asset Management after the company defaulted on a Rs 154 million payment on principal and interest on non-convertible debentures. Sintex specializes in the premium fashion industry, providing fabric to global clients such as Armani, Hugo Boss, Diesel and Burberry.
Hindustan Construction defaults on debt worth Rs 22 billion
Hindustan Construction Company has defaulted to Rs 21.61 billion of debt on December The construction firm has a total debt of Rs 97.27 billion. Of this, it owes Rs 40.91 billion to banks, the company said in a statement to the stock exchanges.
Why it’s important: HCC’s debt servicing was hit on delays in order executions that resulted in lower revenues. It was also impacted by high-cost debt and high interest payments that led to it posting net losses. The company’s lenders have initiated a debt resolution plan last year.
Muted earnings seen for auto firms in fiscal third quarter
Average net profit at auto firms is likely to shrink by an annual 42 percent to Rs 50.41 billion, even as net sales is expected to increase to Rs 1.5 trillion from Rs 1.42 trillion in the same period in the previous financial year, according to a Bloomberg poll of analysts. Earnings before interest, tax, depreciation and amortization, a measure of profitability, is also expected to fall to Rs 168.64 billion for the three months ended December from Rs 207.41 billion in the prior corresponding quarter.
Why it’s important: The lower expected earnings are due to persistent chip shortages that has impacted the sales of passenger and commercial vehicles, and premium two wheelers. Poor demand has also impacted scooter and motorcycle makers. Higher raw material costs have added to the woes.
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