Reserve Bank unlikely to make unconventional moves to support rupee
Despite the rupee nearing 82 to the dollar, currency market experts said the Reserve Bank of India is unlikely to unveil any significant unconventional tools in its monetary policy committee meeting. The rupee touched a record low of 81.94 against the dollar as the US currency continued to rise and comments by members of the US Federal Reserve boosted expectations of further aggressive rate hikes.
Why it’s important: It is important to note that the rupee is still an outperformer among emerging market currencies. The Reserve Bank is expected to intervene only to arrest speculative activity.
Indian equities decline for six consecutive sessions on negative global cues
The benchmark Sensex has now fallen for the sixth straight session, its longest run of declines since June. Sustained selling by foreign portfolio investors amid higher US bond yields and stronger dollar. The Sensex fell 509 points, or 0.8 percent, to its lowest close since July 27. It has shed 5.2 percent in the past six trading sessions. The Nifty fell 149 points, or 0.9 percent.
Why it’s important: Investor sentiment for risky assets in emerging markets continues to remain weak as fears of a global recession deepens. There could be further pain ahead amid rising volatility.
Finance ministry not in favour of spending forex to cushion rupee’s free fall
The finance ministry has signaled that it was not in favor of selling dollars to defend any particular level of the rupee. “Let it (rupee) reach whatever levels it has to reach. We can’t fritter away reserves on defending some artificial, imaginary rate of exchange,” a finance ministry official said. Forex reserves have declined to a near two-year low of $ 545.65 billion on September 16, down $ 85.88 billion from the level on February 25, when the Ukraine war started.
Why it’s important: Although current foreign exchange reserves are enough for nine months of imports, they were enough to cover 15 months of imports just about a year ago. If the dollar continues to strengthen, the rupee, like other emerging market currencies, is bound to lose more of its value.
Government extends free food grain program till December
The central government has extended the Pradhan Mantri Garib Kalyan Anna Yojana, which provides additional free food grain to poor households, for another three months. The scheme had been extended for six months in March and was to end on September 30. In its seventh phase, the scheme will run until December 31 and cost an extra Rs 44,762 crore.
Why it’s important: The scheme, initially launched for six months to support poor households during the covid pandemic, has now seen multiple extensions. It is an tacit indication that though the pandemic has receded, the poor are still in distress.
Tata group to bring four startups under Tata Digital in consolidation move
Tata Industries is set to bring its startup businesses such as Tata Cliq, Tata Cliq Luxury, Tata Cliq Palette and Tata Health to Tata Digital in the next two weeks as part of a move to consolidate scalable e-commerce entities under one roof. Tata Health will be integrated into Tata Digital’s medical e-commerce business, 1mg. Tata Industries is an investment holding company that has incubated Tata Cliq, Tata Health, Inzpera Life Sciences, Flisom Solar Modules, Tata Strategic Management Group, Tata IQ, Tata Class Edge and Studi. In recent months, some of the startups incubated under it have been moved to firms that offer synergy.
Why it’s important: This is part of a larger group consolidation strategy led by Tata Sons, which has been merging similar businesses of the Tata group companies to tap synergies, cut costs and building scale.
Seven gaming portals, several players get tax notices in continuing crackdown
In a major investigation into alleged tax evasion by online gaming companies, the income-tax department has issued show-cause notices to seven entities and about three dozen high-value players active on their platforms. The possible tax evasion could be worth as much as Rs 28,000 crore. Notices have been sent out over the past 15 days.
Why it’s important: Gaming platforms are facing increasing scrutiny in India in the recent past even as the GST Council discusses the rate at which earnings from such activities should be taxed. Gross winnings face a flat 30 percent tax. Portals are to deduct tax at source at the rate of 0.1 percent for winnings of over Rs 10,000.
Trial drug to treat Alzheimer’s shows promising results in slowing down dementia
The share prices of Biogen and partner Eisai surged and led other drugmakers’ shares higher amid optimism about their breakthrough trial results on Alzheimer’s disease. Biogen climbed 50 percent in trading before US exchanges opened, on track to add about $ 14 billion in market value. Eisai shares closed up 17 percent in Tokyo, reaching its highest level in nine months. Eli Lilly and Roche, which are developing similar drugs, also gained.
Why it’s important: Biogen and Eisai have said the experimental drug significantly slowed down the disease, making it the first medicine to blunt the rapid progression of the most common dementia. This could lead to massive earnings for the two drugmakers.
India reaches out to Iraq, US and Saudi Arabia after Gazprom stops LNG supply
India has reached out to the US, the United Arab Emirates, Saudi Arabia, and Iraq to secure additional liquefied natural gas cargoes at affordable prices. The attempt follows state-run GAIL recently purchasing spot LNG at over $ 40 per mBtu amid high global LNG prices. GAIL had to make the costly spot purchases after a contract was reneged on by Gazprom Marketing and Trading Singapore.
Why it’s important: India needs to secure LNG supplies at affordable because increasing prices of natural gas would raise India’s oil bills. It would also add fuel to already high inflation and widen its trade deficit.
Refiners are not likely to pass on gains from the fall in crude oil prices
A 30 percent decline in crude oil prices since June has brought relief to refiners, which sold fuels at a loss to domestic customers for months, but they are unlikely to lower prices. Crude oil prices have fallen to $ 86 a barrel from $ 124 on June 8, as fear of a recession in the developed world sways investors amid interest rate tightening by central banks.
Why it’s important: Pump prices may not fall as there is still high volatility in the market. Authorities in India will find it difficult to tame inflation till fuel costs decline.
Incentive scheme to make IT hardware may rise 2.5 times to Rs 19,000 crore
The government may further sweeten the production-linked incentive (PLI) scheme for IT hardware by increasing its financial outlay by 2.5 times to around Rs 19,000 crore and double the incentive rates to woo multinational companies such as Dell, HP, Apple, Samsung, and Asus to step up manufacturing in the country. The draft of the revised scheme will be discussed with the industry and put up before the cabinet for approval.
Why it’s important: The government is pushing hard to boost manufacturing in the country and the additional business incentives are part of that. It is asking for more localization to become self-reliant in hardware manufacturing.
