Morning Scan: All the big stories to get you started for the day

Below is a shortlist of all the important articles from newspapers.

PFRDA, government in talks to tweak law to cover retirement funds
The government and the Pension Fund Regulatory & Development Authority (PFRDA) are discussing amendments to the law to ensure the regulation of a large number of superannuation funds that currently escape the required scrutiny, reports The Times of India.

Why it's important: Although there are no official estimates, around 400-500 are seen to be “unregulated” superannuation funds, with 50-60 being large players.

There are at least three regulators for the pension business, with PFRDA handling the National Pension System , while the insurance regulator deals with annuities sold by life insurers. Mutual funds also sell pension schemes and are regulated by Sebi.

PFRDA Chairman Supratim Bandyopadhyay, says: “We are of the opinion that regulatory control is necessary to ensure that the purpose for which the trust was created is being fulfilled by the Trustees and funds are being managed in the best interest of its beneficiaries or employees.”

Piyush Goyal wants 10x jump in textiles sector capacity

Piyush Goyal, the new textiles minister, has set an ambitious target of scaling up the industry’s capacity by 10 times, The Times of India reports.

Why it's important: It's amid indications that the government is planning more steps to boost investment and employment in the sector.

The size of the textiles industry is estimated at around $140 billion (over Rs 10 lakh crore), with apparel accounting for over half the share.

Textiles’ share in India’s GDP is estimated at around 2.3% and is the largest employer, employing about 45 million workers.

Goyal wants the team of officers in the ministry to prepare a detailed action plan for each segment — ranging from fibres and garments to handloom and handicraft — along with the deadline.

Man-made fibre along with technical textiles and handloom have been identified as key thrust areas.

Govt to first gauge investor response to IDBI stake sale

The government will likely wait till the completion of its stake sale in IDBI Bank and watch investor response before going ahead with the privatisation of other state-run lenders, The Economic Times reports.

Why it's important: The response and challenges will be assessed and, based on that, a strategy will be formulated for future privatisation in the financial sector.

The privatisation of state-run banks and financial institutions is a longterm agenda.

Bank of Maharashtra, Bank of India and Indian Overseas Bank are frontrunners to be privatised next. Central Bank of India may also be taken up based on its financial recovery.

ED stance strikes at the heart of cryptocurrencies

The stand taken by the Enforcement Directorate (ED) on cryptocurrencies can unsettle crypto trading and all bourses in India.

Why the move: The agency, in its recent notice to WazirX, has asked the country’s largest crypto exchange to explain why ‘withdrawal from crypto wallets’ is not a violation of the FEMA.

The ED notice puts a question mark on the very essence of cryptos and fundamental structure of the underlying digital ledger, blockchain.

That allow holders of cryptos to freely transfer coins from their wallets to another wallet and to anyone, anywhere in the world.

Main concern: Since money has crossed borders, the law of the land applies and one needs to be sure that this money isn’t cheap money (cheap money is low-interest loan) or dirty money (used for illegal activities).

MNCs await global tax recast, but fear hostile stance in India

Several multinationals with significant India presence are analysing options for their inter-group transactions, centralised invoicing centres, and cloud infrastructure ahead of a global tax deal, reports The Economic Times, even as they fear aggressive stance by Indian tax authorities.

Why it's important: As multinationals and social media giants undertake global overhaul of their tax structures, India’s data protection laws combined with tax frameworks, guidelines and recent rulings are set to create complications for them.

Several countries are joining hands together to come up with a global tax structure under the OECD’s Base Erosion and Profit Shifting (BEPS) framework to counter tax evasion by global companies.

While a global tax deal is still a couple of years away, multinationals are looking to create a ‘fact pattern’ so that they can argue in future that realignment or restructuring of their tax structure was not done merely for saving taxes.

NPCI in talks to take UPI, RuPay to global markets

National Payment Corporation of India (NPCI) is in talks with several global agencies to expand the global footprint of indigenous payment networks RuPay and UPI (unified payment interface), possibly in West Asia, the United States, and Europe, The Economic Times reports.

What the plans are: “We are aiming to expand RuPay and UPI acceptance across world destinations, where Indians travel for holidays, study or profession or even stay,” said Ritesh Shukla, chief executive of NPCI International Payments (NIPL).

Those international agencies may include regulatory authorities, large banks, fintech companies, or even umbrella payment organisations from respective countries.

Some of the likely destinations include Gulf countries like Saudi Arabia, the UAE and Bahrain, European and North American countries, Mauritius and Singapore.

Banks to exit ARCs as they set up ‘bad bank’

Lenders have started looking for buyers for their stakes in asset reconstruction companies (ARCs), says a Mint report.

Why it's important: According to RBI data, 7.5% of all bank loans had turned bad by the end of March 2021.

It is to free up capital for the launch of the National Asset Reconstruction Co. Ltd (NARCL), the ‘bad bank’ they will jointly own.

Who they are: In February, state-run PNB put its entire 10.01% stake in Arcil, one of India’s oldest ARCs with assets worth ₹12,000 crore under management, for sale.

This was followed by private lender IDBI Bank, which, too, has begun looking for a buyer to sell its 19.18% stake in Arcil.

Three public sector banks—Union Bank of India, Indian Bank and Bank of India—said they jointly intend to sell up to 88.4 million shares, constituting up to 90.31% of the total equity share capital of ASREC.

Indian steelmakers set to gain as China weighs taxes on exports

Indian steelmakers are likely to reap bumper profits if China imposes an export tax on its steel to cool domestic prices.

Why it's important: A potential imposition of export duty on steel in China will make exports for Indian steel players lucrative.

Strong demand, domestically as well as globally, could support strong steel prices.

China’s steel exports rose 23% in June to 6.5 million tonnes (mt) from the preceding month (75% from a year ago) despite the removal of export rebates.

Motilal Oswal said: As a result, we see higher risk from the Chinese government imposing a tax on steel exports to cool export, and domestic steel prices.

Reit yields at risk as office vacancies rise amid covid

Investors in commercial real estate, including listed real estate investment trusts (Reits), are likely to see a fall in rental yields in the coming months as leases expire and pandemic fears depress fresh leasing, Mint reports.

Why the change: There are three listed Reits in India—Embassy Office Parks, Mindspace Business Parks and Brookfield India Reit—that invest in grade-1 properties.

Since the pandemic outbreak in March 2020, vacancies at office properties have risen by 300 basis points (bps) to touch 16.6% in June 2021 and are expected to rise 200-300 bps this fiscal year, according to ICICI Securities.

This is mainly due to the devastating second wave in April.

The ‘work from home’ will be the norm in the foreseeable future at many large firms that typically lease properties.

Exits, share sales will be sustainable: Inflexor Ventures

In an interview with Mint, Inflexor Ventures Managing Partner Jatin Desai explained why Inflexor dropped plans to access overseas capital, and why fundraising could be easier for domestic venture capital firms going ahead.

What he says:

Our fund’s theme revolving around technology helped.

With the pandemic, a lot of people from the traditional and the non-tech world also began to realise that without technology, things will be more difficult.

What also worked in our favour is that public markets behaved well and startup investments and exits also picked up in the second half.

Raising a fund and investing the fund is not easy. But on a relative basis, it should definitely get easier going forward.

We were hoping to get at least one international institutional investor on board.

OPEC+ ups output but fuel prices to stay high in India

The Sunday agreement of the OPEC and allies (together known as OPEC+) to gradually increase supplies in the market is not enough to meet the growing fuel demand of major global economies, says Hindustan Times.

Why it's important: Hence it may not immediately lead to any significant reduction in domestic petrol and diesel rates.

The move by OPEC+ is more to save the producers’ cartel, which appears to be a compromise reached between the two factions.

Experts say the increase in output is insignificant compared to the growing demand.

‘Hope to get buyer for consumer business by Q4’

Ashu Khullar ,Citi India’s CEO, tells Business Standard that the bank aims to double down on its institutional business, and that India’s story as a financial market remains strong.

What the CEO says:

In India, the consumer business was increasingly becoming a domestic one, where global synergies didn’t fit in as well and were competing with well-funded local players.

We are going to run an orderly sale process.

Hopefully by the fourth quarter, we would have an agreed counterparty.

India will always remain a key talent hub for Citi because of the quality of resources.

There was always a great opportunity for India because of diversification.

No one is going to leave China because it’s a large market.

The money is cheap and available in plenty. The whole liquidity game is very much alive.

I am confident about the capital markets and the mergers and acquisitions.

Two more firms face heat on independent valuation

More companies are in a tricky situation for not appointing an independent valuer while going in for preferential allotment of shares, Business Standard says.

Why it's important: Mortgage lender LIC Housing Finance and restaurant chain Barbeque-Nation Hospitality are the latest companies to face the heat over the issue.

Stock exchanges last week asked them to explain why they did not obtain a valuation report from a registered independent valuer while pricing their preferential allotment.

This came at the heels of a legal dispute between PNB Housing Finance and Sebi over the issue.

Soaring digital thermometer import shows pandemic reading

From Covid-19 essentials, such as Vitamin C supplements and thermometers, to bicycles, laptops, and personal weighing scales, demand for certain items galloped during last financial year as the pandemic altered what Indians used on a day-to-day basis, Business Standard reports.

What it shows: Imports of outdoor sports equipment, handbags for women, and dentures, among others, plummeted.

With outdoor activities coming to a halt last year and schools functioning virtually, imports of sports goods witnessed a decline.

Inbound shipments of laptops and battery chargers saw a sharp uptick.

The import numbers of sporting goods like basketball, badminton shuttlecocks, racquets, tennis balls, and golf balls showed a decline of 3550 per cent year-on-year (YoY).

On the other hand, with several offices shifting to the work-fromhome model, inbound shipments of battery chargers and laptops jumped 80 per cent and 40 per cent, respectively.

Also, as most commercial complexes saw mandatory temperature checks prior to entry, imports of digital thermometers experienced a 2,410-per cent growth, with nearly three-fourths of these coming from China.

7 more firms get licence to sell auto fuel

The Ministry of Petroleum and Natural Gas has granted seven authorisations to companies for selling automobile (auto) fuels in the country, Business Standard says.

Why it's important: These new approvals are under the relaxed guidelines for authorisation to market transportation fuels that were revised in 2019.

This is expected to make the competition more intense in India’s petroleum retail business.

The new licenses have gone to Reliance Industries, Chennai-based IMC, Assam Gas Company, Onsite Energy, Manas Agro and others.

‘Markets priced to perfection; don’t factor in 3rd Covid wave’

Jigar Shah, CEO, Kimeng Securities India, tells Business Standard in an interview that June quarter earnings will be mixed, with the export-oriented, telecom, and consumer staples sectors doing well.

What he says: Auto and cement firms and banks to show a bit of weakness.

The financial year 2020-21 (FY21) was one of the best years in terms of corporate earnings in a decade.

We are sceptical if this can repeat, given that

The valuation comfort is low at 22x one-year forward P/E on the Nifty;

The breakdown of economy and earnings momentum in Q1FY22;

Continued threat from Covid-19 as the vaccination pace is slower than desired;

A pick-up in inflation/interest rates.

Our latest target for the Nifty is 13,000, at 17.8x one-year forward P/E, which is still 17 per cent below the current levels.

The markets are priced to perfection and do not take into account a third wave.