The food subsidy bill for FY22 is expected to be less than Rs.400,000 crore compared to Rs.529,000 crore in FY21. Out of this nearly Rs.225,000 crore is by way of food subsidy for procurement and distribution of food grains under the National Food Security Act while Rs.147,000 crore is towards Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY). NFSA provided subsidized food grains at Rs.1-3 per KG to nearly 81 crore persons. The scheme was extended till March 2022 to ensure food security during the pandemic period.
The hawkish notes of the US Fed and the rising bond yields in India have resulted in compounding the Omicron fears. This has resulted in nearly $3.7 billion of portfolio outflows from Indian markets in Dec-21. This the largest single monthly portfolio outflow since the pandemic began in Apr-20. Next year, the LIC IPO and a slew of other digital IPOs are expected to keep FPI demand buoyant. There were risk-off flows out of EMs and into dollar assets as the dollar is expected to strengthen due to hawkish policies.
The situation at RBL Bank appears to be worsening as the stock touched a 52-week low of Rs.131. The fears were triggered after the bank wrote off loans worth Rs.300 crore within 7 months of sanctioning. That had been one of the key reasons for RBI nominating Yogesh Dayal to the board of RBL Bank leading to the CEO Vishwavir Ahuja proceeding on long leave. RBI has reiterated that RBL Bank is healthy and also well capitalized with net NPAs under 2.2%. However, market are not taking any chances with the stock.
One of the key agenda items in the 46th GST meeting will be a debate on the recently announced hike in GST on textiles from 5% to 12%. The new rates go live from January. The GST Council may either scrap this proposal or put off the implementation. The rate hike in textiles had been proposed to rectify the inverted duty structure. However, the objections came in the light of the stiff competition Indian textiles are facing from Bangladesh. It is estimated that this rate hike may result in 15 million job losses in textile industry.
IT stocks are expected to report stellar earnings in the December quarter and the impact was evident in the performance of the IT index. The BSE IT index hit a life-time high. The focus in the current year has been on mid-cap IT stocks like Birlasoft, Persistent Systems, KPIT etc, which are expected to benefit from better growth traction. Among the largest caps, even Wipro and Infosys more than doubled during the year. The trigger came from Accenture upping its guidance. Most mid-caps have given solid guidance.
After nearly 3 years of outperformance, gold is likely to end 2021 with negative returns. Gold has been pressured by higher treasury yields in the US since higher bond yields increases the opportunity cost of holding gold and makes gold unattractive. Globally, gold has dipped below the $1,800/oz mark as the interest in gold is normally inversely proportional to the interest in equities. After scaling a high price of Rs.56,200 per 10 grams on the MCX, gold has fallen by nearly Rs.9,000 per 10 grams in the current year.
In its board meeting on 30-Dec, IDFC First Bank considered the proposal for merger of IDFC Ltd and IDFC Financial Holdings into the Bank. The board has given its approval to the merger deal in-principle, subject to the final approval of the shareholders, creditors and regulators. There will be a separate committee that will work on the terms of the proposed merger, including the valuation aspects of the deal. This news has kept the markets excited since it would save IDFC from the pressure of holding company discount.
Shareholders of Interglobe Aviation (Indigo Airlines) passed a resolution to amend a contentious ROFR clause in the articles of association. As per the filing, 99.99% of shareholders voted for the resolution. The two co-promoters (Rahul Bhatia and Rakesh Gangwal) have had deep differences over the management of the company The resolution states gives the two owners, the Right of First Refusal (ROFR) with respect to each other’s stake. Currently Rahul Bhatia holds 37.83% and Rakesh Gangwal 36.61% in Indigo Airlines.
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