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Top News Today: EPFO Likely to Cut Interest Rate by 15-25bps and More

Professor of Financial Economics and Part-time Value Investor, Transfin.
Jan 6, 2020 1:44 PM 5 min read

India's services sector activity rises to five-month high in December. As Middle-east tensions escalate, Sensex and Nifty fall while oil and gold rise. EPFO likely to cut interest rate by 15-25bps. NCLAT dismisses RoC plea to modify its judgement in Cyrus Mistry-Tata Sons case.




India's services sector activity rises to five-month high in December.

On A Rising Tide: India's services sector activity rose to a five-month high in December, propelled by new business orders that boosted output as well as employment.


The IHS Markit India Services Business Activity Index improved from 52.7 in November to 53.3 in December, raising hopes of an economic recovery. Firstpost


The news comes on the heels of the manufacturing PMI data released last week, which showed that India's factory activity accelerated at the fastest pace in seven months in December.


Power of Habit: Goods and Services Tax (GST) collections in December accelerated to cross the 1trn mark for the second consecutive month, up 8.9% Y-o-Y, and changed GST Council norms for claiming input credit may have contributed to the increase in collections.


The changed norms mandate companies to match their purchase invoices with those uploaded by their vendors. Input credit claims have been limited to 20%, which is now further reduced to 10%, where details are not uploaded by suppliers. As a result, a larger number of companies have to upload GST returns with corresponding invoices into the system. This led to an increase in GST returns filed in December for sales in November, from 7.2m a year ago to 8.1m now.  


Now while this might be a welcome news, it needs to be noted that GST collection trends will have to be increased and sustained in a similar fashion in the next few months to come in order to bridge an increasing fiscal gap.


FYI: The fiscal deficit has inched up to 115% of the budget estimates until November. Livemint



As Middle-east tensions escalate, Sensex and Nifty fall while oil and gold rise.

Red Arrows, Pointing Up: Indian shares and oil markets were in the red today on account of the delicate situation the Middle-east. Sensex and Nifty ended the day trading 1.90% and 1.91% lower.


The Rupee hit its lowest point in almost two months, falling beyond ₹72 to a US dollar, and oil prices surged more than 2%.


Gold prices surged to new highs. On MCX, February gold futures surged 2.3% or ₹918 to a record high of ₹41,030 per 10gm. On Friday, gold prices had surged over 2% or ₹850 per 10gm. Livemint


Shares in oil marketing and refining firms fell on fears of falling margins due to the surge in crude prices. Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd and Hindustan Petroleum Corp Ltd fell 1%-4.7%. Reuters


Why the Worry?: The US recently conducted an air strike in Iraq that killed Iranian General Qassem Suleimani, widely seen as the second-most powerful man in Iran. This set off a series of events that further deteriorated US-Iran relations and increased the prospects of an all-out military confrontation.


Meanwhile, the Iraqi Parliament voted in favour of expelling all US troops from the country. This provoked US President Donald Trump to threaten the second-largest oil producer in OPEC with sanctions.


All these factors have increased uncertainty about the region's fragile political and economic set-up. And this in turn is hurting India, which is the world's third-largest oil consumer. Fears of supply disruption and soaring oil prices could hurt India's economic recovery, as it battles an economic slowdown that has plagued virtually all sectors of its economy.



NCLAT dismisses RoC plea to modify its judgement in Cyrus Mistry-Tata Sons case.

Judgement Day: On December 18th 2019, the National Company Law Appellate Tribunal (NCLAT) passed a judgement reinstating Cyrus Mistry as the Executive Chairman of Tata Group. It also termed the conversion of Tata Sons from a public to a private company by the Registrar of Companies (RoC) as "illegal".


Now, the NCLAT has dismissed the RoC's petition seeking modification of this judgement, saying there is "no ground to amend" the same. Business Insider


Ratan Tata fights to secure his legacy as he petitions the Supreme Court.

Meanwhile: The Supreme Court, fresh out of its winter break, will soon hear pleas by Tata Sons and Ratan Tata to quash the same order that reinstated Mistry. The apex court's verdict could have implications on Tata's 21-year-long legacy as Chairman when the company embarked on major expansion, including snapping up Jaguar Land Rover and Corpus Group Plc. Mistry's moves to undo some of Tata's projects in order to trim debt drew the latter's ire, which eventually cost Mistry his job. NDTV Profit



Amazon India enters into long-term deals with Future Group.

Inking a Deal: Amazon India has reported that it has entered into long-term business agreements with Future Group focussing on key categories - grocery and general merchandise, and fashion and footwear - in a bid to extend the reach of the latter’s retail stores and consumer brands through its online marketplace.


The development comes shortly after Amazon had agreed to buy 49% stake in Future Coupons, which holds stake in Future Retail. The Hindu


DHFL share price soars as creditors allow the company to resume lending.

Shares of DHFL soared c. 5% today as the Committee of Creditors (CoC) approved a plan that would enable resuming the company's lending business beginning with 500cr a month to arrest the decline in its loan book.


Blast From the Past: DHFL became India’s first non-banking finance company to face bankruptcy proceedings, after the RBI superseded DHFL’s board and later referred the mortgage lender to the NCLT. The Central Bank had cited governance concerns and payment defaults by the mortgage lender as reasons for superseding the Board. Moneycontrol



EPFO likely to cut interest rate by 15-25bps.

Rates Slashed: The Employees’ Provident Fund Organisation (EPFO) is likely to reduce the interest rate offered to its subscribers by 15-25 basis points for this fiscal, as per sources. 


EPFO is likely to announce the revised interest rate by January 31st post meetings with its investment officials, Central Board of Trustees and the executive committee members.


The decision to lower the interest rate has been taken in wake of the economic downturn, lower yields on debt-market instruments and lower interest rates on similar offerings such as the public provident fund and government provident fund. 


Earlier last year, on October 9th, the EPFO had hiked the interest rate to 8.65% for the financial year 2018-19. Livemint


Extra Bite: Traditionally, while it has been easier for individuals with income proofs and a healthy credit score to get loans, many others such as gig workers, part-time workers, freelancers or young students, who have never accessed any credit, have struggled rather hard to avail loans. However things are soon changing around the block - many new-age lenders are coming up with innovative tools to provide lending to hitherto unattended segment of borrowers. Read more on these players here.


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