Equities in India could take a beating early this week, similar to the rout on Wall Street on Friday, after US Federal Reserve chairperson Jerome Powell indicated there would be further interest rate increases and no likelihood of monetary policy easing in the near future. As a result, the S&P 500 index in the US dropped 3.4 percent on Friday.
Why it’s important: The Indian stock markets have moved in tandem with US equities this year and may fall over two percent in the next few trading sessions, experts have warned. The Sensex and Nifty could plummet 5-10 percent by October, depending on how the dollar and US 10-year yields bounce.
2. Rupee, bonds set for rollercoaster ride as US Fed indicates sharper rate hikes
Government bonds and the rupee are expected to see turbulence after the US Federal Reserve pledged to fight inflation with sharper rate hikes. The rupee is expected to extend losses to test new lows unless the Reserve Bank of India intervenes. Benchmark bond yields may surge, but the losses are likely to be limited by talks on India’s inclusion in the global bond indices.
Why it’s important: If Indian bonds are listed on global indices, it may generate $30-40 billion foreign fund flows into local bonds. The rupee might face pressure in the coming days as the dollar strengthens.
3. Reserve Bank of India wary of easing loan rules for infrastructure firms
Rising interest rates and low growth in capital spending has put pressure on the Reserve Bank of India to accept a more flexible capital rule that could soften the rate on infrastructure loans and let lenders fund more projects. A lobby of lenders has recently approached the central bank to let banks assess the risk of an infrastructure company based on its cash flow and nature of counterparties. The regulator is unwilling to change the regulations.
Why it’s important: The banking regulator prefers a conservative approach and is wary of the practice of giving a higher rating to a firm whose financials are not that good but current cash flows are comfortable.
4. PayU gets antitrust notice on proposed $4.7 billion BillDesk acquisition
The Competition commission of India has issued a show-cause notice to PayU India on its proposed $4.7 billion acquisition of BillDesk, an Indian payment gateway, deepening its scrutiny of the deal and raising the possibility of modifications to ensure the combined entity does not undermine competition in the country.
Why it’s important: The antitrust notice may delay clearance by three months. The regulator wants to ensure the combined entity does not adversely affect competition in the market.
5. Market regulator sees no bar in share transfer in Adani-NDTV tussle
The Securities and Exchange Board of India has in internal consultations concluded that there is no bar on RRPR Holding, a promoter entity of news broadcaster NDTV, from allotting shares to the Adani group. The conglomerate indirectly acquired a 29.18 percent stake in NDTV by buying Vishvapradhan Commercial, which owned convertible debentures in RRPR. It also offered to buy an additional 26 percent from the open market, as is mandated by Indian law.
Why it’s important: The market regulator’s stance is likely to make it easier for Adani to wrest control of NDTV from promoters Radhika and Prannoy Roy.
6. Top-rated firms in India shifting to bond market for lower loan rates
Top-rated companies are selectively shifting to the bond market for borrowing needs, cutting their reliance on banks because the bond market is now offering lower interest rates and easier terms, bankers said. For an AAA-rated corporate, a 2-3-year bond is now available at 7.15-7.45 percent, whereas a three-year bank rate is at 7.3-7.5 percent.
Why it’s important: In a rising interest rate scenario, it makes sense for top corporates to tap the bond market rather than banks to raise funds. The trend could strengthen in the coming months.
7. Overhaul of special economic zones may come with strings attached
Conditions of minimum employment and production are likely to be added to the proposed Development of Enterprise and Service Hubs Bill, which seeks to overhaul special economic zones, The draft legislation may also see some revision with the imposition of an equalization levy to bring supplies from the development hubs to the domestic market to bring them on par with local firms.
Why it’s important: The proposed modifications are part of the commerce department’s efforts to accommodate the revenue department’s concerns on concessional corporation tax valid for 10 years.
8. Noida twin tower demolition ends legal fight of residents with builder
The Supertech Twin Towers in Noida have been demolished, ending a 12-year battle in the courts between the Emerald Court Resident Welfare Association and builder Supertech. The Noida Authority and Edifice Engineering, which was in charge of demolishing Supertech’s two non-compliant residential towers, have declared the process a success and shifted attention to reducing pollution and clearing the debris.
Why it’s important: The court verdict to demolish the tower blocks has become a landmark on the powers of a property allottee and illegal constructions done by builders in collusion with government authorities.
9. Modified law to make M&A clearances faster, but penalties to be stiffer on violations
Investors may get fast-tracked clearance from the Competition Commission of India for mergers and acquisitions within 20 days of being informed of the deal if the antitrust watchdog does not have an adverse first impression. At the same time, they could face stiff penalties for suppressing information, according to proposals making their way through the legislative process.
Why it’s important: The proposals being reviewed by a parliamentary panel will change the regime for regulating corporate transactions in a big way, but experts differ on their impacts.
10. Government may tweak natural gas pricing policy to cushion consumers
The government is planning to overhaul the natural gas pricing policy to cushion consumers from global shocks and ensure fair rates for both buyers and producers. The petroleum ministry may soon set up a committee under economist Kirit Parikh to recommend ways to keep domestic natural gas prices stable and affordable. The ministry has also asked producers and consumers to nominate representatives to the committee.Why it’s important: Skyrocketing global prices of natural gas has had a significant impact on domestic gas consumers, forcing the government to relook at the pricing policy. A stable pricing regime will be beneficial to all stakeholders.