The Nifty and the Sensex opened the day on a positive note backed by momentum in automobile and PSU stocks.
Join us as we follow the top business news through the day.
1:00 PM
Commodity market participants seek FM’s intervention as volumes shrink in Feb-Mar
Liquidity troubles come to the fore.
PTI reports: “The Commodity Participants Association of India (CPAI) on Thursday met Finance Minister Nirmala Sitharaman and sought her immediate intervention and policy support following a sharp decline in the volumes of exchange-traded commodities.
During the meeting, the CPAI representatives expressed their concerns pertaining to current challenges and hurdles that the industry is facing, which are contributing to diminishing liquidity on Indian commodity exchanges. Commodity markets’ average daily turnover (ADT) has shrunk further by 27 per cent between February and March 2021. Besides, equity markets have also seen a sharp fall of 19 per cent in ADT in this period, while equity futures volumes are down by 14 per cent.
Indian commodity exchanges are failing to recover from liquidity issues owing to existing challenges pertaining to IGST, peak margin and commodity transactions tax (CTT) and securities transactions tax (STT), CPAI, the pan-India apex association of commodity market participants, said in a statement.
“In today’s pandemic times, when GoI (Government of India) is supporting industries with schemes like production-linked incentive (PLI), commodity market participants have also urged the MoF (Ministry of Finance) for policy support to improve market depth and liquidity, and enable India to emerge as a price setter of commodities,” Narinder Wadhwa, President, CPAI, said.
“Implementing our suggestions will reduce the cost of hedging in commodity markets, bring ease of doing business,” he added.
The CPAI has placed their concerns and sought the FM’s intervention on three key issues — rationalising the peak margin requirement to maintain market depth and turnover; rationalising cost of transactions and amending IGST Act owing to the challenges faced by market participants while delivering or receiving goods at the designated centres. Sebi implemented a peak margin requirement for all clients from December 1, 2020. Under the plan, clients were to be allowed reduced leverage on intraday positions in phases. In first phase from December 2020, the client was required to have 25 per cent of the peak margin available with the broker. In the next phase (Mar-May 2021), the peak margin that needs to be available with the broker is 50 per cent while in the third phase (June-August 2021), the client needs to have 75 per cent peak margin wih the broker. By September 2021, clients need to have 100 per cent peak margins. With margins slated to increase in phases, the CPAI said markets are likely to witness a significant drop in volumes and participation. “Our markets are already saddled with higher costs as compared to global markets. A large part of the costs is regulatory costs. Further with the increased margin requirements on day trades, overall liquidity and depth could go down further,” it added.
The CPAI, therefore, urged the Finance Minister to help the industry for rationalising peak margin requirement to maintain market depth and turnover. On cost of transactions, CPAI said the cost of transaction started increasing from 2004 when STT was introduced and incidentally the turnover to market ratio fell more steeply when section 88E was withdrawn in 2008 and STT started getting treated as an expense instead of a tax.
Similarly, introduction of CTT in 2012 led to a sharp fall in commodity market volumes as well, it added.
With regard to IGST, the association urged the FM to suitably amend the IGST Act in order to allow the seller of commodities to raise the tax invoice from the state where he is already registered. It also requested FM to do away with the need of obtaining a casual taxable person registration in the state where the accredited warehouse is located.
The CPAI further submitted that the place of supply of goods should be the registered address of buyer and not the physical location of the goods at the time of delivery– either actual or constructive. All trades which result in delivery on the exchange platform are covered under IGST except for where the buyer and seller are located in the same state. If the buyer and seller are located in different states from the place of delivery, challenges are faced by market participants on IGST registrations, which increases their compliance burden, CPAI said.”
12:30 PM
Shares of four public sector banks jump up to 10% after capital infusion
A big boost for government banks.
PTI reports: “Shares of four public sector banks — Indian Overseas Bank, Bank of India, Central Bank of India and UCO Bank — on Thursday gained up to 10 per cent after the government infused Rs 14,500 crore to improve their financial health.
Indian Overseas Bank jumped 10 per cent, Bank of India surged 6.55 per cent, Central Bank of India gained 4.89 per cent and UCO Bank rose 4.64 per cent on the BSE.
The government has infused Rs 14,500 crore, mainly into banks that are under the RBI’s prompt corrective action framework to improve their financial health.
Indian Overseas Bank, Central Bank of India and UCO Bank are currently under this framework that puts several restrictions on them, including on lending, management compensation and directors’ fees.
Of the total infusion, Rs 11,500 crore has gone to these three banks while the remaining Rs 3,000 crore has been infused into Bank of India.
According to a government notification, Rs 4,800 crore has been provided to Central Bank of India, Rs 4,100 crore to Indian Overseas Bank and Kolkata-based UCO Bank has got Rs 2,600 crore.
The capital infusion will help these banks to come out of the Reserve Bank of India’s prompt corrective action framework.”
12:00 PM
Do not agree with claim that Huawei will be blocked: Jay Chen
Amid uncertainty over the inclusion of China’s Huawei in the list of ‘trusted sources’ for purchase of telecom equipment, Jay Chen, the company’s Vice-President for the Asia-Pacific region, on Wednesday expressed confidence that Huawei will not be blocked, and instead will be welcomed by the Indian government.
The statement follows the Department of Telecom amending the licence conditions earlier this month, mandating that services providers procure telecom equipment only from ‘trusted sources’ as defined by the government. The move, which comes into effect from June 15, will also require service providers to take permission from the National Cyber Security Coordinator (NCSC) for upgradation of existing networks utilising equipment not designated as trusted products.
“…Not only 5G, but India as a market is very important for Huawei. We entered this market almost 20 years back and have the full operation function in India. We even put an international business centre here such as the network service centre in Bengaluru, which serves the global customer from almost 40 countries. So obviously India is very important,” Mr. Chen said while replying to a query during a virtual roundtable.
11:30 AM
Toyota Kirloskar sells 15,001 units in March, its highest dispatch during March in 8 yrs
An important milestone for Toyota in India.
PTI reports: “Toyota Kirloskar Motor (TKM) on Thursday said it sold a total of 15,001 units in March, registering the highest ever domestic sales in the month of March since 2013.
The automaker had sold 7,023 units in March 2020, amid a nationwide lockdown due to the COVID-19 pandemic.
In February this year, the company had reported wholesales of 14,075 units.
“We have been able to sustain the growth momentum as we closed the last quarter registering a 73 per cent growth in domestic sales, when compared to the sales in the corresponding period last year (January-March 2020). In fact, last month witnessed the highest ever domestic sales in the month of March since 2013,” TKM Senior Vice President Naveen Soni said in a statement.
The company’s sales performance in the last quarter proved to be better than the sales in the festive season of the third quarter (October- December 2021), he added.
“The demand for personal mobility still continues to grow as we witness a surge in both enquiries and customer orders thereby registering a 7 per cent growth in domestic sales in March 2021 when compared to the sales in February 2021,” Soni noted.
This reiterates the popularity of the brand amidst customers which has been further enhanced by the two new recent launches of the new Innova Crysta and the New Fortuner, as well as the Legender, he said.”
11:00 AM
NSE reduces mkt lot size for Nifty 50 derivative contracts
An important regulatory change.
PTI reports: “The National Stock Exchange (NSE) has slashed the market lot size for derivative contracts on Nifty 50, a move that will reduce the burden of excessive upfront margins for retail traders.
The lot size has been reduced to 50 from the existing 75, NSE said in a circular on Wednesday.
The reduction in the lot size for NIFTY will reduce the margin requirements for futures trading by one-third, stockbroking firm FYERS CEO Tejas Khoday said.
Currently, traders need approximately Rs 1,73,000 to trade one lot, he said.
From July onwards, the margin requirement will reduce to approximately Rs 1,16,000 (at current Nifty prices). This is a great move by NSE to reduce the burden of excessive upfront margins for retail traders, he added.
“Only the far month contract i.e. July 2021 expiry contracts will be revised for market lots. Contracts with maturity of May 2021 and June 2021 would continue to have the existing market lots. All subsequent contracts (i.e. July 2021 monthly expiry and beyond) will have revised market lots,” NSE said.
According to the bourse, the day spread order book will not be available for the combination contract of May-July 2021 and June-July 2021 expiries.
Contracts with August 2021 weekly expiry and beyond will have revised market lots.
“The lot size of all existing NIFTY long term options contracts (having expiry greater than 3 months) shall be revised from 75 to 50 after expiry of June 2021 contracts (i.e. June 25, 2021),” the exchange said.”
10:40 AM
In February, output of core sectors contracts by 4.6%
The output of eight core sectors declined by 4.6% in February, the steepest contraction in the last six months, which, experts said, could drag the overall industrial production in the month into the negative territory.
All the key segments, including coal, crude oil, natural gas, and refinery products, witnessed a decline in production, according to the official data released on Wednesday.
The growth rate of the eight infrastructure sectors — coal, crude oil, natural gas, refinery products, fertilizers, steel, cement and electricity — stood at 6.4% in February 2020.
Last time in August 2020, the sectors had recorded a negative growth of 6.9%. In January this year, the segments have registered a positive growth of 0.9%.
10:20 AM
Government withdraws order on rate cut on small savings schemes
Hours after notifying significant cuts in small savings instruments’ returns for this quarter, the government has backtracked on these sharp cuts. This is the first time that the Centre has scrapped the notified interest rates on small savings schemes after switching to a quarterly interest rate setting system in April 2016.
The government appears to have had a rethink owing to a sharp backlash on social media about the middle class being squeezed. Retail inflation has been breaching the 6% mark and the government has also decided to tax Employees PF savings starting this year.
“Interest rates of small savings schemes of GoI shall continue to be at the rates which existed in the last quarter of 2020-2021, ie, rates that prevailed as of March 2021. Orders issued by oversight shall be withdrawn,” Finance Minister Nirmala Sitharaman said in a tweet early Thursday morning.
10:00 AM
Indian shares rise as auto, PSU banks gain
The positive momentum continues for stocks.
Reuters reports: “Indian shares edged up on Thursday, led by auto stocks ahead of monthly sales data and gains in public sector banks after capital infusion by the government.
Meanwhile, India has rolled back its decision to lower interest rates on the small savings scheme, Finance Minister Nirmala Sitharaman said on Thursday.
The blue-chip NSE Nifty 50 index rose 0.6% to 14,772 and the benchmark S&P BSE Sensex gained 0.9% to 49,821, by 0417 GMT.
India’s government on Wednesday infused a total of 145 billion rupees in four state-run banks including Indian Overseas Bank, Bank of India, Central Bank of India and UCO Bank.
The Nifty public sector bank index rose 1.7%, the IT index gained 1.3% and the Nifty auto index gained 1.2%
Auto companies will post their monthly sales data for March later in the day.”
9:30 AM
Govt. retains 4% inflation target for RBI’s rate panel for 2021-26
The Centre has decided to retain the inflation target of 4%, with a tolerance band of +/- 2 percentage points for the Monetary Policy Committee of the Reserve Bank of India for the coming five years, a top finance ministry official said on Wednesday.
“The inflation target for the period April 1, 2021, to March 31, 2026, under the Reserve Bank of India Act, 1924, has been kept at the same level as it was for the previous five years,” said Economic Affairs Secretary Tarun Bajaj. “So there’s no change,” he added.
He dismissed queries on whether the focus had shifted to core inflation or any other component of retail inflation and hinted that the framework would remain ‘the same’ as earlier.
Economists welcomed the continuity in the framework, despite the recent spate of high inflation prints beyond the 6% upper threshold of the inflation target.
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