Goldmine Update – 19/03/19

Banks are rising on hopes of recovery in NPAs through NCLT mechanism. The mechanism is still slow and full of legal hurdles A few cases have been resolved. Also, looking at the slow and long legal process seen in case of Essar Steel, potential buyers could stay away in future auctions. Or the Government and NCLT would have to lay down clear guidelines and the court intervention needs to be restricted. Personally feel that there will be takers initially but once the strong industrial groups of Tatas, Jindals, Vedantas, Ambanis etc buy some of these assets, there will be few takers for the remaining long list of NPAs. Markets are also ignoring new set of NPAs coming from IL&FS, Anil Ambani Group, Airways, even telecommunication companies like MTNL,.BSNL etc. Many of these companies are bleeding badly. BSNL’s total losses have crossed Rs 90000 crores.

Net direct tax collection during April-January of this fiscal stood at Rs 7.89 lakh crore against Rs 12 lakh crore targeted for the entire fiscal To meet the shortfall, CBDT chairman P C Mody held a meeting with senior tax officials to review collection figures ahead of the deadline of advance tax payment of Friday. A gap of Rs 1 lakh crores may still remain despite good intentions. The current quarter has not been that great. The Government had increased the budget target from Rs 11.5 lakh crores to Rs 12 lakh crores in the interim budget. Actually there will be shortfall even on the basis of the original target of 11.5 lakh crores.

Last week, RBI has bought about $ 5 billion from banks and paid off banks with Rupee equivalent amount. They will reverse the trade in 2022. This was to suck up dollar and release rupees into the system to stop rupee appreciation. But that did not happen. On the contrary, rupee has started appreciating sharply. Actually we are missing one major thing. While all Global central banks and countries are over leveraged, India as a country is much less leveraged, when we see external debt as a percentage of GDP. So, may be Indian currency would appreciate really well, if crude oil prices remain under check.

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