Teji Mandi: Three things investors should know on October 30, 2020

India's fiscal deficit breaches the annual target in the first half itself:

During the first six months of the current financial year, the government's fiscal deficit has already surpassed the annual budget estimate. The fiscal deficit for the said period has climbed to Rs 9.14 lakh crore, about 114.8% of the annual budget estimate.

The surge in fiscal deficit during the current financial year is mainly on account of poor revenue realization due to the lockdown. The government had pegged the fiscal deficit target for 2020-21 at 3.5% of GDP but it is now estimated to shoot up to 8-9%.

With an expanding fiscal deficit, India runs the risk of rating downgrade from international rating agencies. That, in turn, will raise India’s risk profile in the international market and could adversely affect the sentiments of foreign investors.

India increases the foreign ownership limit:

As per the government's order, Indian depositories such as National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL) have increased the foreign ownership limit for all listed companies to their sectoral limits.

The Morgan Stanley Capital Investment (MSCI) has confirmed the changes. It will also implement the new regime on foreign ownership limits (FOL) in the MSCI Global Indexes effective December 1, 2020.

Due to the older way of calculating Foreign Ownership Limit (FOL), India had a lower weight in the MSCI. Now, with India moving towards a new regime on foreign limits, India’s weightage on the index is expected to increase to 9% from 8.1%. With this changes, the Indian market will witness an additional foreign fund flow of around Rs 19,000 crore in December.

Maruti Chairman doesn't want GST rate cut for Auto Industry:

Maruti Suzuki's chairman, R C Bhargava has stated that there is no immediate need for GST rate cut on passenger vehicles with demand looking good for the next few months. However, he added that the government can look at the GST relief if demand tapered off in the future.

The auto industry has gone through major changes in the last couple of years. The rising cost of vehicles due to BS-VI implementation and the rising cost of third-party motor insurance adversely impacted the consumer sentiments. Covid crisis only made the matter worst.

The auto industry was demanding to cut GST rates citing poor demand for the vehicles. However, the industry seems to have come out of the stressed period, there is a resurgence in demand for vehicles. Such improving sentiment is the likely reason that prompted MR R C Bhargava to suggest GST cut at this juncture may not be required.

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Free Press Journal