The borrowing target of the central government for H2-FY23 has been lowered by Rs10,000 crore to Rs5.92 trillion. This would include the Rs16,000 crore Sovereign Green Bonds too. The lower borrowing target came amidst robust revenues in FY23. This will take the total borrowings for FY23 lower to Rs14.21 trillion. This will still be the highest borrowings ever. In H1-FY23, the government borrowed Rs7.95 trillion. More than 31% of the borrowings are concentrated in the very long term 30 year and 40 year maturities.
SEBI has allowed FPIs to participate in the exchange-traded commodity derivatives segment. This had been proposed earlier and now it has got a regulatory go-ahead. Normally, it is institutional participation that broadens and deepens any market. To begin with, FPIs would only be allowed to participate in cash based non-agricultural commodity derivatives. Since October 2018, FPI can participate in commodity F&O subject to underlying position. Now with the EFE route scrapped, FPIs can take trading positions in ETCD.
For Q1FY23, India’s current account deficit (CAD) came in at $23.9 billion or 2.8% of GDP. This is higher than the 1.5% of GDP reported in the March quarter, but lower than the 3.4% CAD that India Ratings had warned the markets about. In contrast, the current account had reported a surplus in the year ago June 2021 quarter due to COVID. The biggest pressure on the current account deficit came from the rising trade deficit. However, markets are apprehensive that the CAD could get a lot worse in Q3FY23 and Q4FY23.
For the June quarter, the US economy shrank by -0.6% annualized, representing the second consecutive quarter of negative real growth in GDP. While this would technically qualify as recession, US policy makers are of the view that is due to high inflation since nominal GDP growth is still strong. However, this is likely to raise the debate of inflation versus growth once again and possibly dissuade the Fed from being overly hawkish. While consumer spending grew 2%, it was offset by a drop in business inventories and housing.
Reliance Retail, led by Isha Ambani, launched its first in-house premium fashion and lifestyle store. This will directly compete with the likes of Mango and Zara and is targeted at the young crowd. RRVL is looking to grab a larger share of the lucrative luxury market. Reliance Retail plans up to 40 stores across 12 cities in the next 9 months. The in-house brand will be called Azorte, which looks set to contribute around 15% of incremental revenue of their fashion and lifestyle business. It had a major launch event in Bengaluru.
Indian Oil Corporation (IOC) has set up a subsidiary to pool funds of its overseas units to meet capital and trade finance needs. The new unit will be a finance company which will help IOC to benefit from interest arbitrage amidst rising borrowings as it sells fuel below cost. The finance unit will be based in the IFSC in Gujarat. Companies based in GIFT City (IFSC) get 100% income tax exemption for 10 years. The unit will do fund pooling of foreign companies and utilise for carrying out trade financing of IOC and group units.
The central government has fixed 01st October as the effective date for key legislative changes to the GST, introduced in the Finance Act. These include giving extra time for filing claims regarding input tax credit. The due dates for issuance of credit notes and declaration in returns is also being extended by 2 months. GST registration would be cancelled for sustained default in filing returns. The onus is now on businesses to take note of this change and re-align their processes according to new deadlines prescribed for GST.
Total Energies may sell a small part of its 20% holding in Adani Green Energy to cash in on sharp valuation rally in the stock. The 20% stake, which was bought by Total Energies in 2021 for $2 billion is today worth $10 billion. They may look to monetize part of this accretion in value. However, Total Energies ruled out an exit, saying it remained committed to Adani Green. The stock has been under some pressure in recent weeks due to concerns over its debt levels. Total Energies is also buying 25% in Adani New Industries Ltd.