Business News at 09:30 am on 4th December 2023

Let’s begin…Direct tax receipts will likely show a robust performance for the third year in a row post-pandemic, giving enough space to the Centre to keep the fiscal deficit within the targeted limit. This is despite additional spending expected on food, fertiliser and job guarantee programmes, and a lower than expected growth in nominal GDP as a fraction of which the deficit is usually expressed. Official sources said the Centre’s gross direct tax collections (after refunds but before devolution to states) could exceed the budget estimate by over Rs 1 trillion in 2023-24. According to FE estimate, the Centre’s direct tax revenue before transfers to states could exceed BE by even Rs 1.3 trillion, fetching the Centre around Rs 0.8 trillion extra on a net basis. Next up, Google’s rich communication services messaging (RCS) platform is emerging as an effective competitor to WhatsApp’s business feature, finding takers across sectors, such as AJio, HDFC Bank and Mamaearth. Industry experts say that if it continues at this pace, the Google platform stands a good chance of significantly narrowing the gap with WhatsApp over the next two years. RCS is a modern version of plain text messages, through which businesses and consumers can send rich media such as images, videos and even files using the native messaging app in smartphones. For businesses, it enables interactive consumer engagement with its scope for two-way interaction — just like how they are using WhatsApp to drive sales. Additionally, Many mom-and-pop shop owners in the country are struggling with the excess fast-moving consumer goods (FMCG) inventory in their stores after witnessing poor sales. The festive season of October-November, in particular, was lacklustre for kiranas as the offtake of products such as beauty, cosmetics, chocolate and confectionery was hit hard as consumers chose to cut back on expenditure in rural and semi-urban areas, officials at the All India Consumer Products Distributors’ Federation (AICPDF), an apex body of FMCG distributors, said. Kiranas are a vital distribution channel for FMCG companies which constitute 80% of their business. The inventory pile-up within general trade, said Patil, has led to the average closing stock for distributors, reaching 25 to 30 days, compared with the normal range of 7 to 15 days. In other news, Higher-than-expected GDP figures buoyed sentiments last week, but the subdued expansion in private consumption has cast a shadow on the prevailing optimism. The sluggish consumption growth has come at a time when personal loans are experiencing robust growth, raising questions about the borrowers’ spending destination. Bankers believe a significant portion of these funds is either being used to repay existing loans or invested in the stock market for speculative purposes. Usually, higher personal loans should lead to higher spending by borrowers on consumer durable goods, but this has not been the case so far. Private final consumption, which includes money spent by consumers on buying goods and services, grew by just 3.1% in the second quarter of the current financial year. On to some serious news….The Income Tax (IT) Department is likely to file an appeal in the Supreme Court (SC) against a Delhi High Court (HC) ruling which declared any IT assessment order issued without Document Identification Number (DIN) has no legal standing. The Delhi HC, in April, had upheld the provisions of a 2019 Central Board of Direct Taxes (CBDT) circular which had made DIN mandatory for documents issued. As per a CBDT circular dated August 14, 2019 issued by the CBDT, any communication by any Income Tax Authority (ITA) without DIN shall be treated as invalid and shall be deemed to never have been issued. Meanwhile….Investors are increasingly preferring arbitrage funds over liquid and ultra-short-term funds for parking their short-term capital to capitalise on the price differentials between cash and derivative markets. The tax structure is also making these funds attractive for individuals in the highest tax bracket. On a pre-tax basis, arbitrage funds have delivered an average return of 7.1% in the last one year, outperforming liquid funds (6.7%). While the differences might seem modest on a pre-tax basis, the post-tax differentials are substantial, nearing 200 basis points, enhancing the attractiveness of arbitrage funds as an investment option. The fund manager simultaneously buys shares in the cash market and sells them in futures or derivatives markets and the difference in the cost price and selling price is the return that the investors earns. Lastly, Here’s a look at the key stocks to watch in trade – Hindustan Unilever, Cochin Shipyard, Hindustan Aeronautics, Alkem Laboratories, Siemens. GIFT Nifty traded up 285 points or 1.40% at 20,638, indicating a positive opening for domestic indices NSE Nifty 50 and BSE Sensex on Monday. Previously, on Friday, the NSE Nifty 50 advanced 0.67% to settle at 20,267.90, while the BSE Sensex added as much as 492.75 points to 67,481.19.