Daily Financial News Analysis – 7th Jan’20 – Free PDF Download

US-Iran tensions & Markets

• Stocks, bonds and the rupee all sold off sharply on Monday amid fears of continued geopolitical tensions.
• Markets across Asia — Shanghai, Hong Kong, Tokyo and Seoul — lost value of anywhere between 0.8% and 1.3% while European markets saw weak openings.
• Trump warned Iran that it would retaliate if Tehran carried out an attack against the US.
• Gold soared to six-year highs as investors rushed to move money to safe haven assets.
• US also threatening very big sanctions against Iraq if it called for a vote in Parliament to expel US troops based in the country.
• Brent crude prices have shot up by more than 5% higher in the last two sessions.

India-Iran ties

• Tehran tends to import more from India when it is hit hard by sanctions and reduces its reliance on the country when times are relatively good.
• But this time around, exporters fear the stakes are much higher if the US imposes fresh sanctions against Iran.
• India has stopped purchasing Iranian oil, which accounts for around 90% of its imports from the Islamic nation.
• The rupee-rial payment mechanism for exporters is inching closer to a collapse.
• Uncertainties about payment to exporters, unless sorted quickly, will likely hit bilateral trade very hard.
• India’s agriculture and pharma exports could get hit.
• Cereals, especially basmati, made up for about 40% of India’s exports to Iran last fiscal.

Iranian Foreign Minister to visit India

• Zarif will also be a key speaker at India’s premier foreign policy event — Raisina Dialogue.
• Last month, Zarif hosted Indian foreign minister S Jaishankar in Tehran and later met him at the Oman-Iran-India trilateral in Muscat.
• India remains deeply concerned about the levels of tension.
• Stabilising Straits of Hormuz is imperative for energy imports by India.

Black Money

• The CBI has booked 51 entities for allegedly remitting Rs 1,038 crore of black money to Hong Kong during  2014-15.
• Mostly owned by Chennai residents in connivance with unidentified officials of three state-owned banks — Bank of India, SBI and Punjab National Bank.
• The agency has named three individuals — Mohammed Ibramsa Johney, Zinta Midhar and Nizamuddin, besides 48 companies in the FIR, the officials said.

PM Narendra Modi meets top industrialists

• Prime Minister Narendra Modi on Monday met top industry leaders ahead of the Union Budget for 2020-21.
• The Union Budget will be presented on February 1.
• Deep downturn in the economy, led by tepid consumption, investment and lack of jobs.

• Centre has taken a slew of measures, including a sharp cut in corporate tax to address the slowdown in the economy, these steps are yet to yield significant results.
• The Prime Minister has been meeting industry leaders across various sectors to seeking feedback and suggestions to boost economic growth.
• Discussed steps to improve business sentiment and boost job creation.

Action against corrupt

• Prime Minister Narendra Modi on Monday said action against a few corrupt entities should not be seen as the government crackdown on the corporate sector.
• PM said the attempt was to allow the industry to create wealth fearlessly in a transparent environment where there are no obstacles.
• The attempt has been to bring transparency, efficiency and accountability in tax system, and reduce human interface with the tax department, he said.
• Also, corporate tax has been reduced to their lowest so as to propel corporates to invest, he said.
• The Prime Minister asked industry to shun pessimism, saying the government will stand shoulder to shoulder with India Inc in its attempt to expand business in any nook and corner of the country.

Carbon tax waiver on coal

• Fitch Solutions: the centre’s proposed carbon tax waiver on coal may pose substantial downside risks to India’s renewable sector growth.
• In a bid to alleviate significant debt levels in the power industry, India has proposed to waive carbon taxes on coal (Rs 400 rupees/tonne).
• This comes at a time where aggressive bidding and rapid fall in tariff prices in country’s renewable power auctions have squeezed profit margins for project developers and threatened the economic feasibility of the project pipeline in the renewables sector.
• Fitch Solutions said, adding that the carbon tax waiver was likely to make coal-fired power cheaper, increasing the use of coal.

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