Infrastructure status accorded to affordable housing projects with certain riders. Positive HDFC Ltd, DLF, Ashiana Housing, Prestige Estates, Sobha Developers etc
The RBI has issued new rules for home loans to individuals up to Rs 50 lakh (for houses of value up to Rs 65 lakh) in metros and loans up to Rs 40 lakh (home value Rs 50 lakh) in other centres to be considered as affordable housing. Extending these loans will entitle banks to float infrastructure bonds up to seven years.
Money raised under these bonds will not be subject to reserve requirements such as cash reserve ratio (CRR) and statutory liquidity ratio (SLR). Eligible bonds will also get exemption in calculating priority sector lending targets. We believe this to be positive for all parties especially developers as they will get funds at cheaper rates.
The Reserve Bank of India said it will allow long-term bonds raised by banks for infrastructure lending to be exempted from mandatory reserve requirements and has issued the norms for the infrastructure bonds. Some of the key norms for issuing the bonds are: a) bonds will be required to have a minimum tenure of seven years b) The bonds would need to be “plain vanilla”, without a call or put option, and can be issued with a fixed or floating rate of interest c) Bond sales can be done through public issuance or private placement d) Bonds raised by banks that qualify for reserve exemptions cannot be sold to other lender. We believe this to be positive for the entire infrastructure space as liquidity will be infused and long term cheap funds will be available.
Adani ports SEZ gets environmental clearance. Positive for the company from medium to long term perspective.
Adani Ports & SEZ (APSEZ) has received environment and coastal regulation zone clearance from the central government for its special economic zone (SEZ) at Mundra Port. The company had faced a major setback in January this year when the Gujarat High Court ordered 12 out of 21 units in Mundra SEZ to shut down, in response to a public interest litigation filed by some villagers who had claimed that construction activities at the SEZ were affecting their livelihood. We believe to be very positive for Adani ports in the medium to long term as the overhang has been removed and the SEZ can attaract more investments going forward.
Delhi Electricity Regulatory Commission (DERC) hikes the power tariff in Delhi. Positive in short to medium term for Reliance power.
Reliance Power Ltd has received environmental clearance for its 5 mn-tonne-a-year coal mine at Chhatrasal, Madhya Pradesh, meant for its 3,960 mw Sasan ultra mega power plant (UMPP). The mine is the last of the three coal blocks allotted for the project, with the other two – Moher and Moher–Amroli extension – being in operation since 2012. According to plans prepared by the company for these mines, and subsequently approved by the coal ministry, the aggregate coal reserves of these mines are around 700 mt with a production level of 25 mt a year. The Chhatrasal block, located in Singrauli district, has a coal reserves of about 150 mt and peak-rated capacity of 5 mt a year.We believe this to be positive for Reliance power in short to medium term.
National Economic News
Inflation eases in June
CPI-based inflation fell to 7.31% in June, the lowest since its launch in January 2012. Its wholesale counterpart declined to a 4-month low of 5.43% in the month. Even so, experts felt the RBI was likely to keep rates as they are in its policy review next month, given the fear of a sub-normal monsoon and geopolitical uncertainty. In June, the retail price inflation was lower in both urban parts and villages
compared to May. The WPI inflation moved down as the rate of food price rise declined and onions turned cheaper. Food inflation dipped to 8.14% against 9.50% over the period. Data showed onion prices fell 10.7% against a dip of 2.83% a month before.
India’s Q1 trade deficit down 31% to $33.1 bn
Driven by growth in exports and a sharp fall in gold imports, India’s trade deficit for the first quarter of the current fiscal came down by 31% YoY to $33.1 billion. Continuing the healthy pick-up in exports, shipments from the country rose 10.22% in June, even though a sharp 65.13% rise in gold imports whittled the otherwise healthy set of numbers. However, June a saw sharp spike in the inward shipment of the metal.
World Economic News
Eurozone Industrial Output Declines Most Since 2012
Eurozone industrial production declined in May for the second time this year, denting hopes that economic recovery continued into the second quarter. Industrial production fell 1.1% MoM in May, the biggest drop since September 2012, and reversed the 0.7% rise in April. This was also the second monthly decline so far this year. Output was expected to drop 1.2%.
U.S. Weekly Jobless Claims Unexpectedly Dip To 302,000
First-time claims for U.S. unemployment benefits unexpectedly showed a modest decrease in the week ended July 12th. The initial jobless claims edged down to 302,000, a decrease of 3,000 from the previous week’s revised level of 305,000. Economists had expected jobless claims to climb to 310,000 from the 304,000 originally reported for the previous week.