Fuel tax cut: Inflation could fall to 6.5-7.3% in May

Analysts say the government’s reduction in fuel taxes and measures to reduce the prices of iron, steel, coal, plastics and cement could reduce retail inflation in the short term. They added, however, that due to the stickiness of price pressures, more needs to be done to ease supply constraints and significantly control inflation during the current fiscal year.

Retail inflation is likely to fall to 6.5-7.3% in May, they predicted. In the near term (after June), inflation could fall to 40 basis points. Consumer price index-based inflation reached a 95-month high of 7.79% in April.

Over the next 9-12 months, however, food inflation could rise comparatively unless the prices of most imported edible oils and vegetables are significantly eased. Furthermore, higher subsidy bills have led to an increase in the fiscal deficit from the budget level of 6.4% of GDP (some analysts now expect it to be as high as 6.8%) and the potential pass-through for a complete low-recovery through oil-marketing. Some analysts say companies could put upward pressure on inflation next month. If the Russia-Ukraine crisis subsides in the first quarter, the outlook will certainly improve dramatically.

Nomura analysts have maintained their FY23 inflation forecast for India at 7.2%, as against 5.5% in the previous fiscal, the risk still remains. The steep low recovery for oil marketing companies continues (as of May 16, the under-recovery of diesel and petrol was Rs 12 and Rs 11 per liter, respectively). So, as OMCs now fully pass on the benefits of lower excise duties to consumers, they are likely to raise prices to maintain their margins in the coming months.

“Beyond fuel prices, we still see significant reverse inflationary risks from other drivers. High food inflation, pending electricity tariff hikes, continued passage of higher input costs from companies to consumers and other second-tier effects (house rent, wages) are likely to drive inflation, ”Nomura analysts said.

Of course, in the near term, the direct and indirect effects of fuel tax cuts on inflation will probably be 30-40 basis points, they added.

Some other economists are more cautiously optimistic. Aditi Nair, chief economist at ICRA, said the reduction in excise duty would help soften the pace of inflation and complement monetary policy. “We project CPI inflation in May 2022 to be between 6.5-7.0%,” Nair said. ICRA, however, maintained its FY23 retail inflation forecast at 6.5%.

DK Pant, chief economist at India Ratings, said the direct impact of the excise deficit could be around 20-25bps and the indirect effect, possibly at least a month later, could be around 15-20 bps. Retail inflation in May could be between 7% and 7.3%. “Reducing excise duty on petrol and diesel is unlikely to bring down inflation quickly,” he said. We have seen that the last round of excise / VAT cut did not translate into sharp decline in inflation. Unless commodity prices cool and internal supply-related constraints ease, it will be very difficult to observe a sustained fall in inflation, “Pant said.

“We’re almost halfway there,” said Intel’s CEO

Pat Gelsinger, CEO of the generally-optimistic Intel, has offered a surprising perspective on when the shortage of semiconductors can reduce the shortcomings of everything from automakers to PC makers.

“We are about half way [the chip shortage]Gelsinger told Yahoo Finance Live on the sidelines of the World Economic Forum in Davos, Switzerland on Monday. “My expectation now is that this will continue until 2024 ৷ and the biggest problem we’ve tackled in the last six to nine months is the tool that goes to Fabs.”

Constantly low-level semiconductors reflect the frantic shopping spree across the COVID-19 epidemic that seeks to power home-based technologies such as video games and crypto from PCs.

U.S. President Joe Biden holds a semiconductor chip as he speaks before signing an executive order aimed at filling the global semiconductor chip deficit at the White House State Dining Room in Washington, USA, on February 24, 2021.  REUTERS / Jonathan Ernst TPX Day Photo

U.S. President Joe Biden holds a semiconductor chip as he speaks before signing an executive order aimed at filling the global semiconductor chip deficit at the White House State Dining Room in Washington, USA, on February 24, 2021. REUTERS / Jonathan Ernst TPX Day Photo

Demand for chips has risen 17% from 2019 to 2021, according to a recent report from the Commerce Department. Inventory between semiconductor products highlighted by buyers has fallen from 40 days in 2019 to less than five days in 2021, the report said, and inventories in key industries are even smaller.

“This is a crisis,” Commerce Secretary Gina Raymondo said of the deficit on Yahoo Finance Live in January.

The situation has reached such a critical stage that automakers like General Motors and Ford have shipped vehicles without specific chips.

A simplified look at the global semiconductor supply chain for smartphones.  Reuters

A simplified look at the global semiconductor supply chain for smartphones. Reuters

Industry giants such as Intel and AMD are waiting for the US government to play its part and pass $ 52 billion in chips for US law. In June 2021, the Senate signed into law legislation aimed at encouraging U.S. semiconductor manufacturing, but the bill is still being debated in the U.S. House of Representatives.

President Joe Biden said in the bill earlier this month in the presence of a metal maker, “Pass the curse bill and send it to me.”

Brian Suzy A great editor and Yahoo is anchored in finance. Follow Suzy on Twitter @ Briansoji And then LinkedIn.

Read the latest financial and business news from Yahoo Finance

Follow on Yahoo Finance Twitter, Facebook, Instagram, Flipboard, LinkedInAnd YouTube

Bond Market: The bond market is now a two-way street

MUMBAI: The Centre’s decision to reduce motor-fuel taxes seems to have split India’s bond market in the middle, with yields on the short end of the curve falling on expectations of a moderate policy rate hike and fixed debt yields on expectations of higher North Block loans.

Parul Mittal Sinha, head of financial markets at Standard Chartered Bank for India, said: “This has narrowed the short-term yield curve across the bond market. At the same time, concerns over high revenue deficits are boosting long-term yields.”

This trend could continue unless the Bond market is convinced of the North Block’s ability to collect higher revenues despite the reduction of fuel taxes.



To be sure, New Delhi’s debt is expected to increase by more than ₹ 1 trillion due to higher fertilizer subsidies.

According to Bloomberg data, government bonds maturing in the next two to five years are down 4-7 basis points. In contrast, 10-year benchmark yields rose six basis points throughout the day but closed at 7.39% on Monday, up from 7.36% on Friday. One base point is 0.01%. Bond yield and price have an inverse relationship.

“Perhaps the target for the second half of the loan is to cut the excise duty and amend the higher subsidy bill,” said Rajiv Radhakrishnan, chief investment officer, fixed income.

Mutual funds.

Bond


Steps taken

Radhakrishnan said, “Currently, short-term yields are being checked as government measures will help increase rates in the future.”

The relatively low liquid 14-year and 30-year sovereign gauges increased 1-3 basis points.

Over the weekend, the Center decided to reduce the central excise duty on petrol and diesel. It also provided a subsidized window for cooking gas cylinders in the face of rising consumer prices. Inflation, measured by the Consumer Price Index, reached an eight-year high of 7.79% in April, with the wholesale inflation gauge rising to a record high of 15.08%.

On May 4, the Reserve Bank of India (RBI) raised the policy repo rate by 40 basis points in an unspecified monetary policy announcement, citing the risk of consumer prices skyrocketing. Subsidy burden and auto-fuel revenue sacrifice could prompt further borrowing by the government, which had earlier planned to borrow Rs 14.21 lakh crore. Sellers expect the total debt target to be overshot.

“With the move on fuel prices, it is now a two-pronged attack on inflation,” said Vijay Sharma, executive vice president.

Gilt. “The first is through financial response and the second is through financial response. It will have a financial impact – on the revenue of the lower government.”

This could further tighten the curve where short-term securities are better supported by expectations of lower rate growth, while longer securities are under pressure due to the hidden danger of increased debt, dealers said. Analysts expect that the headline reduction in excise duty on petrol and diesel could have an impact of about half a percentage point on CPI inflation, factoring both the direct and secondary effects.

Blockchain tide out

Siddhartha Pai wrote

The carnage we’ve seen in the market over the last few weeks has been as absurd as a bad hangover that just won’t go away. Meanwhile, crashes in blockchain-based cryptocurrencies have been much more brutal. As of November 2021, the market value of cryptocurrency was about $ 3 trillion, according to The Economist. It dropped to 2 2 trillion in mid-April, and as I write this, it dropped another 40% to about $ 1.2 trillion. The market has also witnessed the shocking deception and complete collapse of cryptocurrency-based ‘virtual banks’ such as Beanstalk and stable currencies such as TerraUSD / Luna.

Governments do not like alternative currencies because they interfere with their own fiat currency and, more importantly, macroeconomic policy in their own country. In addition, it allows fraudulent activities on a large scale without any recourse to the law. Critics of cryptocurrency have long argued that it is useless — unless you are a money launderer or conman — and predict its ultimate death. The current crash will deepen their faith.

Separately, I wrote an invitation to this place a few weeks ago stating that I was optimistic about Web3, the promise of a decentralized web that would blockchain’s use of non-cryptocurrency. Blockchain as a technology is interesting when its use outside of cryptocurrency can be successfully instant. Loosely, Web1 was fixed and decentralized, Web2 (today) became centralized and created platforms like Facebook and Google, and Web3 is a return to the decentralized nature of Web1, retaining all the advantages of Web2.

I further mention here that opponents are saying that all that Web3 is going to do is take control of the Internet from today’s behemoths like Facebook and Google to another set. (Or, in fact, to the same behemoths who would simply re-brand and re-position or pivot themselves in the center of gravity).

I’m playing with Web3 to get a better handle on what it looks like. I have created a Web3 domain and am considering what to do next with it
So far, I have no cryptocurrency, nor have I created any non-fungible tokens. I’m so far away because the varied versions of 2007 vintage technology are moving so fast, and the hype is so high that my risk choices still won’t allow me to take an active part. (And yes, however, blockchain technology is 15 years old but it is now beginning to catch everyone’s attention when used outside of the cryptocurrency world).

I now realize that I may have been too stupid and that the critics may be right. First, it takes a generational mindset to allow all aspects of one’s life to be transferred to the digital world. My generation of kids seems to be much more willing to live with it than I am; I just have a vicious fear of roller coaster rides হোক whether in real-world amusement parks or financial markets.

Also, doing something on Web3 is incredibly confusing. If you want to do something and not be someone who can write your own code or drag and drop from the code library to run a bunch of sub-routines, just click ‘OK’ at some prompts you don’t understand, causing seeding Take control of a centralized mediator who can help you do whatever you want. The convenience of doing things quickly appeals to our nature as human beings and we ourselves are not patient enough to do everything. And if the service is ‘free’, we have more reason to click that button.

Web 2 aggregators are no different than how they accessed all of our personal data — we just clicked ‘OK’ এখনওand still do যখন when to deal with the data, or face a long legal agreement with the cookies we allow. On our phones and PCs. Let us not forget that the centralization of Web2 began as a result of our foolish transfer of this information.

If we think about how Web2 has been turbo-charged, a key principle becomes clear. Ordinary people (at least my generation) don’t want to run their own server 24 × 7 and probably never will. The whole premise of Decentralized Web1 was that everyone would be both a consumer and a data publisher, we would have our own website, mail server and much more, all connected via a network only. In the end it didn’t happen.

We’ve turned to aggregators who have made things easier থেকে from Hotmail to Yahoo to Google. What’s more, with the move to the cloud in recent years, even large companies that were accustomed to running their own IT infrastructure have happily handed over control to outside companies such as Amazon Web Services, Google Cloud and Microsoft Azure.

With Web3, it’s very difficult — or almost impossible লেখা to write code on your phone that will interact with an underlying blockchain. According to Wired, almost all Web3 apps rely on one of two companies, Alchemy and Infura, to do it. The same goes for digital wallets in which users store crypto resources Almost every Web3 product relies on an intermediary to tell you what’s going on in the blockchain It is more than an oxymoron that users must rely on one or two (centralized) intermediaries to transact in a system that presumably undermines the centralized trust in institutions such as banks.
Be prepared — but watch from the sidelines for now.

Co-founder, Siyana Capital; The author, “Techproof Me, The Art of Mastering Ever-Changing Technology

By invitation

Five things to know about Broadcom’s potential deal for VMware

Font size

SEBI: SEBI continues to deepen liquidity in passive funds

MUMBAI: The Securities and Exchange Board of India (SEBI), the market regulator, has come up with a number of measures to improve liquidity in passive funds and make it more transparent for retailers to increase their participation and make it easier for them to buy these products.

Currently, many exchange-traded funds (ETFs) are liquid, with high spreads preventing investors from buying them. To address this, SEBI has said that each fund house will hire at least two market makers to provide uninterrupted liquidity on the stock exchange platform.

In addition, direct transactions with investors for over ₹ 25 crore with the fund house will be facilitated. “This will push up a lot of transactions on the exchange, which will increase demand and supply and is structurally good for liquidity,” said Niranjan Awasthi, head-product.

MF



SEBI further specified that iNAV (Indicative Net Asset Value) must be disclosed regularly – 15 seconds lag for equity ETFs and at least four times a day for debt ETFs.

Mutual fund investors seeking tax savings will now have the opportunity to invest in a passive fund, allowing regulatory fund houses to introduce such a passive equity-linked savings scheme or ELSS. However, a fund house can choose only one of active or passive ELSS.

In the case of Sebio Passive Fund, the ratio of expenditure in the Investor Awareness Program (IAP) has been reduced from 2 basis points to 1 basis point, reducing costs.

The regulator has also laid down guidelines on how to manage debt default funds so that it replicates a varied underlying index.

Where the index has 80% exposure to corporate debt securities, the single issuer limit for AAA-rated securities is set at 15%, for AA-rated securities, 12.5% ​​and the weight of A-rated securities will not exceed 10%. An indicator. For an index based on G-Sec and state government bonds, a single issuer limit will not apply.

Future energy needs to push savings today

Written by Ajay Shankar

Storage options are essential for the decarbonization of power systems. To replace fossil fuels with wind and solar energy যার whose generation requires non-stop and variable-storage. The need for storage is almost at an angle for us, especially since solar energy, generated only during the day, is going to be the main driver in achieving the extremely ambitious 2030 goal, announced in COP26, to produce 500 GW of non-fossil fuels. Power of power.

India is looking forward to this. The Solar Electricity Corporation of India has invited bids for renewable energy, including storage, and has signed agreements with two bidders for a new domestic coal-fired power plant at a comparable rate. The move sparked confidence that accelerating the decarbonization of the power system was cost-effective. This further indicates that there is no need to build new coal-fired thermal power plants in India to meet the additional demand on purely minimal considerations, especially since existing thermal power was unused, some plants are idle and several are in pipelines
Guidelines for inviting bids for storage have been issued. SECI has recently started the process of procuring 500/1000 MWh battery energy storage system.
Since we are going to be one of the first in the world in large-scale storage, it would be wise to adopt a medium-term strategic approach aimed at increasing technology, potential price movements, and internal value addition and self-reliance. It is advisable to invite a few competitive bids for moderately sized projects for storage technology that is mature and ready for installation without battery storage. Based on operating experience and cost, it will be easier to choose to increase the scale — the determining factor should be whether their costs can be expected to be reasonable or reduced in volume. Local production, with a progressive increase in value addition, can be promoted in parallel.

The most mature technology for storage that has been established in the last century is the pump hydroelectric project. We have a plant with a capacity of about 3 gigawatts. Greenco has started work on a large 1,680 MW pump hydro plant in Andhra Pradesh as part of its 5,230 MW renewable energy project. For the Pump Hydro project, the main challenges are the issue of land acquisition / acquisition and its maintenance, human resettlement and civil works. Off-river pump storage projects are a recent concept with considerable promise. Site identification, project reporting, and land assembling are best done by a state agency. The PSUs of the Ministry of Power can set up a special purpose vehicle for this purpose. There will be uncertainty about construction costs and time as well as maximum electricity tariffs in the future. For projects that may be difficult to obtain private investment, a state-owned enterprise can absorb and develop risk with the state’s underlying guarantees. Long-term loans can be taken from new development financial institutions. These would also be good candidates for emerging global green finance.

Other promising storage technologies that offer easy scalability and fast cost reduction are solar thermal with storage using molten salt. Large mirrors at different angles reflect sunlight and concentrate on molten salt which stores energy. The stored energy is then used to run a conventional thermal turbine and to generate electricity to meet demand. In India, when mirrors are made on a larger scale, the cost of production will go down. An additional advantage is the availability of thermal power plant sites in the country where they can come as additional plants or as replacements. In addition, they offer the possibility of self-reliance. Site-specific studies of solar radiation require optimal design, high efficiency, and low tariffs. The competitive bidding process could give us plants that use thermal energy from LNG and imported coal to supply electricity at a rate comparable to new coal plants, where international gas and coal prices have risen in recent weeks. The goal of bringing tariffs down to 5 cents per unit / kilowatt hour through potential technological advances is being pursued in the United States.

Lithium-ion batteries are currently the world’s first runner in terms of battery storage. Costs are coming down. They are being used in electric vehicles by Auto Major. Demand for electric vehicles has begun to grow worldwide. These batteries use rare earths which can cause supply-like problems and increase demand in the future. There are other battery technologies suitable for grid storage, such as sodium ions and molten metal batteries. We should try that too.

It would be better for India to follow all storage options and have global borders on storage – in installation as well as in production. Early availability of storage can also become an affordable option to meet the growing maximum demand using off-peak surplus power.

Distinguished colleague, TERI; Former Secretary, Department of Industrial Policy and Publicity, Government of India

Sit down for the next few months, these analysts say. A recession is inevitable.

Font size

itc: Suppliers cancel ITC, Kargil wheat purchase agreement

And exporters like Cargill have started canceling wheat procurement contracts with local traders after the ban on overseas sale of food grains, leaving them in trouble due to lack of capacity of suppliers.

ITC, the country’s largest wheat exporter, has called for Force Magio. “The Government of India has immediately banned the export of wheat … This has led to a coercive incident. As a result, all our balance sheets with you have been immediately canceled,” ITC said in an email to suppliers that ET had seen. “The wheat purchase agreement entered into between you and ITC for delivery at the port location was for export from India.”

Cargill has told wheat suppliers that it will accept loaded deliveries by May 14. No wheat company will accept loads after this.

Lurch

“Since the MNCs have started sending out order cancellation notices, it seems there is no hope now that the government will allow further relaxation in the May 13 export ban notification,” said a Madhya Pradesh-based businessman who did not want to be identified. Because our case cannot stand in the court of law, where the government is only concerned with farmers and consumers. ”

‘Government collection stopped’

India imposed the ban after domestic wheat and flour prices rose and heatwaves were expected to affect crops. Gopaldas Agarwal, a veteran grain trader from Indore, said, “The government has stopped buying in many places due to poor response from farmers who were getting good prices in the market.”

“Now, since the export ban, the open market and APMC (Agricultural Produce Market Committee) rates in Indore market have come down from 12% to 13% because there is no buyer for wheat in the open trade … there is no official collection that all traders sell wheat to big companies They are struggling to unload wheat at Kandla port. ”

Fall on steel stock export tax

Steel stocks plunged on Monday, with the BSE Metal Index falling 8.3%, its biggest one-day fall since March 2020, as companies said new export taxes on key primary steel products would reduce their output and push back investment. With Monday’s fall, the index fell 25.2% from its April high, erasing investors’ wealth of 2. 2.6 trillion.

On Saturday, the government announced that from Sunday, effective 15% export tax would be levied on selected flat-rolled products of selected pig iron, iron or non-alloy steel, bars and rods, and various flat-rolled products of stainless steel. .

Although the new impost aims to curb rising mining prices and increase its availability and use in the local market, all primary steel makers consider the government’s decision “untimely” because “steel prices have already been revised”.

Dilip Omen, CEO of ArcelorMittal Nippon Steel India Limited, said the export tax would hit the firm’s exports of 90,000 tonnes of steel per month.

Omen added that it would reduce new investment. Separately, the Indian Steel Alliance said the main primary steel product steel export tariff would “send a negative signal only to investors in the steel sector and adversely affect the sector’s capacity utilization”.

Jindal Steel & Power led the fall in metal stocks on Monday as its shares fell 17.4%, its biggest fall since January 2008. Tata Steel has lost the most since August 2015 at Rs 1,023.60 to end the session on the BSE. Shares of JSW Steel fell 13.2% to close at 547.60 on the BSE, the highest fall since March 2020.

As of Monday’s close, the combined market capitalization of metal stocks stood at Rs 8.34 trillion.

The government has also removed import duties on coking coal and coke to reduce the cost of steel production, but JSW Steel Group CFO Sheshagiri Rao said tax relief for these inputs would have “only a minimal impact” on the steel industry – their prices have risen in recent months.

The government has also increased export duty on new iron ore and concentrated it from 30% to 50% and increased the duty on gram from zero to 45%. Influenced by New Delhi’s decision, benchmark iron ore futures in China – the world’s top consumer of ore – rose nearly 7% in early trade on Monday, tracking their biggest daily jump in two and a half months, Reuters reported. Rao, however, said that the export duty on ore would be “of no use” to Indian steel makers as it would not reduce the price of iron ore in the domestic market in line with international prices.

Rising steel prices, along with a strong balance sheet, have attracted investors late. The BSE Metal Index, which has been an under-performer for three years since 2020, has since bounced smartly with a 52.2% gain. In contrast, the Sensex added 13.7% over the same period. The four largest steel producers simultaneously reduced their debt by 40% and net debt / EBITDA FY2020-22 from 6.2X to 1.1X.

Analysts see the recent tariffs as a very negative development for the sector and expect broad-based, multiple de-ratings. According to them, the tariff will not only depend on the earnings of mills from abroad, but will also reduce domestic prices as a result of excess supply in the market.

According to ICICI Securities, most steel / stainless steel exports will now attract 15% export duty, as opposed to the previous tariff. “We see this as a very negative development for the steel sector and expect broad-based multiple de-ratings,” ICICI Securities wrote in a note.

Domestic flat steel (HRC) prices have risen 88% since January 2020 and have had a negative impact on the consumer sector, such as infrastructure and automobiles. The rise in metal prices has benefited Indian steel players immensely in the last two years due to rising demand and supply constraints due to geopolitical tensions following the Covid-19 disruption.

Analysts at Kotak Institutional Equities expect that the imposition of 15% export duty will lead to an 8-10% correction in domestic steel prices. “Increase in export duty on iron ore and gram will further add to the domestic surplus and reduce the price of iron ore by Rs. 1,250-1,500 / ton. In the end, a 2.5% reduction in import duty on coking coal would reduce the cost for steel producers by Rs 600-800 / ton, “KIE observed in an investor note.

India exported 13.5 million tonnes (mt) of finished steel worth Rs 1 trillion in 2021-22 and the industry expects exports to reach at least 18 million tonnes in the current financial year.