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SC's Refusal of AGR Review Plea Gets Mutual Fund Investors Worried and Other Top Business News of the Week

Professor of Financial Economics and Part-time Value Investor, Transfin.
Jan 19, 2020 10:12 AM 8 min read

Retail inflation rises to 7.35% in December. Wholesale inflation in India rises to 2.59% in December. Michael Patra appointed as the Deputy Governor of the RBI. Reliance Industries reports 13.55% rise in Q3 profit. SC rejects AGR plea by Airtel, Vodafone Idea. US, China sign massive purchases deal but US tariffs remain. 



Retail inflation rises to 7.35% in December.

Out of Control: Retail inflation in India rose to 7.35% in December (breaching RBI's medium-term target of 4%) vs 5.54% in November and 2.11% in December 2018. Business Today


Once promising economies such as Mexico, Brazil, or Turkey could never break into the ranks of rich nations. Unfortunately, they fell into what economists call the “middle-income trap.” Coined in 2006 by World Bank economists Indermit Gill and Homi Kharas, the term refers to a sustained economic slowdown following a period of strong growth.


Is India, which began sprinting towards the goal of a high-income economy after economic liberalisation in the 90s, headed for such a trap? Read in full here.  


India's 10-year bond yield spikes to 6.68% as retail inflation rises. 

Red Arrow Pointing Up: The yield on India's 10-year government bond surged 10bps to hit a five-week high today following a spike in India's retail inflation, deepening worries of a prolonged pause in rate cuts by the RBI. 


FYI: Bond yield and prices move in opposite direction. Livemint


Wholesale inflation in India rises to 2.59% in December.

Flaring Up: Wholesale prices-based inflation in India rose to 2.59% in December vs 0.58% in November on the back of increasing prices of food articles.


Food inflation rate rose to 13.24% during December vs 11% in the previous month. Within this category, onions saw an inflation rate of 455.8% compared to 172.3% in November.


The news comes a day after rise in retail inflation was reported at 7.35% in December - reaching a five-year high. NDTV Profit


India's forex reserves inch up by $58m to record high of $461.21bn.

Stop Only At The Summit: India’s foreign exchange reserves rose by $58m to reach a life-time high of $461.21bn in the week to January 10, according to the RBI data.


Good to Know: India's forex reserves comprise foreign currency assets (FCAs), gold reserves, special drawing rights (SDRs) and India''s reserve position with the International Monetary Fund (IMF). Outlook


Exports contract for fifth straight month in December, imports shrink 8.8%.

A Mixed Bag: Exports from India shrank 1.8% to $27.36bn in December - contracting for the fifth straight month, on the back of lower receipts of processed petroleum exports and ongoing broad-based decline plaguing all major foreign exchange earning sectors. 


Meanwhile, imports were down 8.83% to $38.61bn - higher than the 0.3% fall in November, bringing down the trade deficit to $11.25bn during the month under review. BS


Michael Patra appointed as the Deputy Governor of the RBI.

New Boss in Town: The Government today appointed Michael Debaprata Patra as the Deputy Governor of the RBI for a duration of three years, nearly six months after former Deputy Governor Viral Acharya’s pre-mature resignation.


Patra currently serves as an Executive Director at the RBI. 


The Central Bank currently has three Deputy Governors - NS Vishwanathan, BP Kanungo and MK Jain. Financial Express



SC rejects AGR plea by Airtel, Vodafone Idea.

Objection Overruled: In a blow to telecom operators Bharti Airtel and Vodafone Idea, the Supreme Court yesterday dismissed pleas to review its earlier judgement that had asked the telecom operators to pay more than 1tr ($14.10bn) of dues to the government. Bharti Airtel has to pay outstanding dues worth 35,586cr ($5,028m), while Vodafone Idea owes the government 50,000cr ($7,064m). 


Meanwhile, the telecom operators have said that they were evaluating filing curative petitions. Livemint


SC's refusal of AGR review plea gets mutual fund investors worried.

In a severe blow to telecom operators Bharti Airtel and Vodafone Idea, the Supreme Court yesterday dismissed pleas to review its earlier judgement that had asked them to pay more than 1tr ($14.10bn) of dues to the government. 


Now while Bharti Airtel has to pay outstanding dues worth ₹35,586cr ($5,028m), already debt-laden Vodafone Idea owes the government ₹50,000cr ($7,064m). 


This mounting debt on Vodafone Idea has gotten mutual fund investors worried. Debt mutual funds have a combined exposure of ₹3,390cr ($478m) to Vodafone Idea, according to data from Rupeevest, a mutual fund distributor. Here are some of the biggets exposures.


Among the asset management companies (AMCs) holding the paper, Franklin Templeton AMC has the highest exposure, but others like UTI and Nippon India also have significant investments in the company. Livemint


Meanwhile...: As per sources, Vodafone Idea may offer the government a small part of its statutory dues by January 23 to ensure it doesn’t get a defaulter’s tag, and then seek relief, in a bid to avoid insolnvency proceedings. 


Sources in the know said that the telecom operator may offer under ₹4,000cr ($564m) “as a token amount on January 23”, following which it may ask the Centre to refund or adjust some of the ₹9,000cr ($1,269m) pending input tax credit under GST that it believes the government owes it. ET Telecom News



Reliance Industries reports 13.55% rise in Q3 profit.

Like a Star: Oil-to-telecom conglomerate Reliance Industries Ltd (RIL) reported 13.55% YoY rise in Q3 profit, beating estimates at ₹11,640cr ($1,644m), on the back of robust growth in telecom and retail verticals.


Consolidated net profit for the December quarter rose to a record ₹11,640cr ($1,641m) while revenue fell 1.4% to ₹1,68,858cr ($23,811m) because of weaker prices of oil and chemicals. On a standalone basis, net profit rose 7.4% to ₹9,585cr ($1,351m) while revenue fell 13.1% to ₹93,741cr ($13,218m). 


Revenue from the petrochemicals segment stood at ₹36,909cr ($13,218m) for the quarter, falling 19.1% from ₹45,619cr ($6,431m) in the same quarter last year.


Telecom venture Reliance Jio Infocomm reported 62.5% rise in net profit to ₹1,350cr ($190m). Its subscriber base grew 32% annually to 370m, with each user spending an average of ₹128.4 a month during the quarter, the company said in a statement.


Reliance Retail also posted robust YoY revenue growth of 27 per cent to ₹45,327cr ($6,391m).  ET Earnings


OYO might cut more jobs.

To Fire or Not to Fire: Meanwhile at OYO, senior company executives say job cuts are likely to intensify. Company spokespersons, on the other hand, deny any further retrenchments in the offing. Click here to read more.



US, China sign massive purchases deal but US tariffs remain.

Rejoice...: The US and China have signed Phase One of a trade deal which is expected to see sharp increases in sales of US goods and services to China. The eight-part agreement will also see Beijing further open its markets to foreign firms and agree to new protections for trade secrets and intellectual property. This represents a truce in a two-year trade war that has roiled global markets and businesses.


...For Now: But the deal leaves in place US tariffs on about $370bn of Chinese goods - ot three-quarters of Chinese imports to the US. Possible tariff reductions will be left to later negotiations, which will cover many controversial issues like Chinese subsidies to domestic firms and its oversight of state-owned firms. US President Donald Trump has said the remaining tariffs “will all come off” if future talks produce a second agreement, although this is not expected to happen before the US Presidential election this November. WSJ


GDP grows at its weakest pace in 29 years. 

 Deceleration: China's GDP grew at its slowest pace in 29 years in 2019 at 6.1%, lower than the 6.6% growth seen in the previous year, data from the National Bureau of Statistics showed on Friday. Growth in the final quarter of 2019 equalled the 6% logged in the July-September period.


The Y-o-Y decline in the growth rate is 0.5 percentage points, which is the biggest since the 1.7 percentage points decline seen in 2012.


The downturn in numbers come as weaker exports, dampening investments, trade turmoil and lacklustre consumer sentiment weigh on the economy. Nikkei Asian Review



Debit, credit cards to be disabled for online transactions if not used before, mandates RBI.

Who Moved My Card?: In a bid to enhance the security features of debit cards and credit cards, the RBI has mandated that while issuing and reissuing debit and credit cards, banks must ensure that all debit cards and credit cards are enabled only for domestic transactions at ATMs and point of sale (PoS) terminals.


If customers want to use their cards for online transaction, international transactions and contactless transactions, they have to separately apply for these services. If any individual has not used his or her cards for online transaction, international transactions and contactless transactions before, their card will be disabled for these services, RBI noted. Financial Express


RBI allows banks to complete KYC rules using videos.

The RBI has allowed banks to complete Know Your Customer (KYC) rules using videos, thereby easing the process of opening a bank account online.


Under the new rules, banks can carry out a seamless, secure, real-time and consent based audio-visual interaction with the customer, which shall be treated as equivalent to face-to-face process. 


The customer will be display his/her PAN card during the video recording. Those with e-PAN would be exempted from producing a physical copy. Besides the live video recording, a photograph of the customer will also be captured separately. The bank will also capture the live location during the video recording with the help of geotagging to ensure that customer is physically present in India. Livemint


Government launches first e-commerce housing portal,

The government has launched a first of its kind ecommerce housing portal for people looking for ready-to-move-in properties, Here's all you need to know about the new portal. 


Let's Go House Shopping: As as per this fascinating report, while London remains the top choice for billionaire buyers, a newer crop of millennials prefers assets in markets that offer higher rental yields, such as Spain, Portugal, and Malta.


Anuj Puri, Chairman, Anarock Property Consultants, says many investors choose to buy a property in a certain country if its market sees a downturn and prices become attractive. “We had seen this happening during the US subprime crisis, and more lately during the Brexit angst in the UK. The slow-moving Indian real estate market has also pushed a not-inconsiderable number of Indians to consider property investment outside the country.” 



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