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demonetisation: need2know: 8 macro triggers that matter for market today

Fiscal consolidation may come under threat at the central and state level due to the immediate effects of the goods and service tax (GST), loan waivers and pay revisions, putting pressure on the overall growth matrix, the Reserve Bank of India said in its annual report.

Here’s a lowdown on eight macro triggers that are likely to impact the market on Thursday. This report was compiled from agency feeds.

Luxury Car Cess
Luxury cars, sports utility vehicles (SUVs) and big cars are set to get more expensive. The cabinet approved an ordinance that will allow the cess levied on them under the goods and services tax (GST) regime to be raised to as much as 25% from 15%. The exact quantum of the increase and its timing will be decided by the GST Council. The move is aimed at eliminating an anomaly that led to prices of such vehicles dropping after the implementation of GST, while those of smaller autos didn’t change, Jaitley said. Saying it is an unfortunate decision, the Society of Indian Automobile Manufacturers said will request the government and GST Council to reconsider the hike.

99% of Junked Money Back in Banks
Almost all the currency demonetised in November found its way back into the banking system, seemingly belying the contention that it would help eradicate black money. It had been thought that income tax evaders wouldn’t deposit any unaccounted wealth in banks for fear of prosecution, indirectly swelling the government’s coffers. On the other hand, the cost of withdrawing the old Rs 500 and Rs 1,000 currency notes is showing up on the books of the Reserve Bank of India. Its cost of printing currency notes has more than doubled, RBI said in its annual report for FY17.But bankers such as Uday Kotak, vice-chairman of Kotak Mahindra Bank, and JPMorgan’s regional head Kalpana Morparia said India should look beyond these numbers and pointed to demonetisation’s intangible benefits.

Delay in PSB Merger?
The government may be forced to put its state-run bank consolidation push on the back burner since at least a dozen of them are staring at a big hole in the balance sheet this fiscal year after RBI told them to get cracking on resolving as many as 50 bad loan accounts or initiate bankruptcy proceedings against them by December end. RBI said on Wednesday that banks will have to set aside 50% of debt the moment a company is referred to the National Company Law Tribunal as part of the insolvency process. This will pinch the banks even more. The government wants to reduce the number of state-owned banks from the current 21 through consolidation to create fewer but stronger entities. But that may be delayed as none of the potential acquirers will be keen on taking over weak banks due to capital constraints.

July GST Collections Exceed Target
The impact of Goods and services tax (GST), according to Finance Minister Arun Jaitley, will not just be on indirect tax, but also lead to a more efficient system of direct tax. “Then, the possibility of detection because of technology is also very high,” he has explained. GST collections have exceeded estimates in the first month of the landmark levy’s rollout despite a significant number of assessees not having filed returns yet. The total collection under GST for July is pegged at Rs 92,283 crore. Extrapolating Budget targets, the central government’s July tax revenue should be Rs 48,000 crore and that of states Rs 43,000 crore, adding up to Rs 91,000 crore. As only 64.42% of the total returns have been filed so far, by the time all returns are filed, the tax kitty could swell further.

Government Sells 7% in NTPC
The government has received bids for 7% stake in India’s largest power producer NTPC, which will fetch about Rs 9,100 crore to the exchequer. At the end of the two-day offer for sale (OFS), the government retained over-subscription it had received from institutional investors after retail investors bid for only 73% of the quota allocated for them. The government had planned to sell over 41.22 crore shares, or 5% holding, through the two-day OFS, with an option to retain a similar portion in case of over- subscription.

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FUNDAMENTALS
Rupee Flat : The rupee surrendered its early gains to end the session on a flat note at 64.01 against the US dollar today amid the American currency gaining some lost ground against its major rivals overseas.

Bonds Slip : Government bonds (G-Secs) slipped on selling pressure from banks and corporates. The 6.79% 10-year benchmark bond maturing in 2027 fell to Rs 101.7850 from Rs 101.81 previously, while its yield edged up to 6.54% from 6.53%. The 6.79% G-Secs maturing in 2029 slid to Rs 99.44 from Rs 99.57 previously, while its yield moved up to 6.86% from 6.84%. The 7.35% G-Secs maturing in 2024 dipped to Rs 103.46 from Rs 103.4750 previously, while its yield inched up to 6.71% from 6.70%. The 7.68% G-Secs maturing in 2023 was quoted lower to Rs 105.3550 from Rs 105.3650 previously, while its yield remained steady at 6.62%.

Call Rates Stable : The overnight call money rates ended stable at its Tuesdays level of 5.80%, It resumed higher to 6.00% and moved in a range of 6.05% and 5.40%.

Liquidity : The Reserve Bank of India, under the Liquidity Adjustment Facility, purchased securities worth Rs 25.75 billion in 5-bids at the overnight repo operation at a fixed rate of 6.00% as on today, while it sold securities worth Rs 213.44 billion in 42-bids at the overnight reverse repo auction at a fixed rate of 5.75% as on Aug 29.

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