March Newsletter - 2020

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EPFO subscribers can withdraw the lower of 75% of their savings or up to a maximum of three months' basic pay and dearness allowance from their PF account - during the current Coronavirus scare. However, the withdrawn amount cannot be reinvested into the corpus after the current situation is over. Unlike, other EPF withdrawals which take anywhere between three days to three weeks, request of withdrawal under the new pandemic rules of the pension fund will be honoured within three days. Subscribers who are KYC compliant and have seeded their UAN (universal account number) with Aadhaar and bank account can make a request online.

The withdrawal rules in normal times have been mentioned below as follows:

EPFO subscribers can withdraw the accumulated corpus completely only after retirement. Early retirement can be considered if the person has reached 55 years of age. 90% of withdrawal can be done if the person has reached 54 years of age.

Other than the new pandemic withdrawal provision, subscribers are currently allowed to withdraw for house construction, marriage and education of children, illness, and unemployment before the age of 55.

If withdrawn before 5 years, then the employee will be taxed and is not taxed only under exceptional situations like disability or unusual termination by the employer.

Last October, India had issued a circular raising the statutory FPI (Foreign Portfolio Investment) % limit in Indian companies to the level of the sectoral foreign investment limit, with effect from April 1, 2020. However, MSCI (Morgan Stanley Composite Index) in the last week of March put off the rebalancing reasoning that it would wait for the practical implementation of these changes and the systematic publication of the new sectoral limits applicable to Indian securities before making any changes to the MSCI indices. Following this, depositories CDSL and NSDL revised FPI limits for stocks listed on domestic stock exchanges in the last week of March. Following which from April, the FPI limit has been increased to the sectoral foreign limit, thus giving more headroom for FPIs. India' weight in the MSCI Emerging Market Index would rise to 8.1% from the current 7.6%.

SEBI has prohibited promoters and insiders from buying company shares during the period between April 1, 2020, to June 30, 2020. On March 19, the SEBI released a circular providing relaxation from compliance to certain provisions of the SEBI's (Listing Obligations and Disclosure Requirements) Regulations, 2015 which included an extension of quarterly and annual financial results reporting by one month, from May 30 to June 30, 2020. The beneficiaries of such relaxation are listed entities, stock exchanges and depositories. SEBI’s decision to prohibit promoter buying may have happened as a result of the additional time given to companies to report their financial results.

Effective from 23rd March for a month, SEBI said foreign portfolio investors, mutual funds, proprietary desks, and large traders cannot take short positions in index derivatives beyond a notional value of Rs.500 crores without owning the underlying stocks. The regulator has been under pressure from a section of market participants to ban traders from short selling especially following the recent 30% plus market fall. Several countries in Europe and Asia have temporarily banned short selling in various stocks. Any exposure beyond Rs.500 Cr would require depositing twice the margin and will be blocked for 3 months. SEBI has also cut the cumulative market-wide positions limit in derivative contracts to 50% from 95% at present. A market-wide position limit is the maximum outstanding positions allowed across all stock derivative contracts.


Tax Harvesting steps

  1. Utilise the 1 lakh exemption on long term equity gains effectively by booking and re-entering if the portfolio is aggressive else treat the 1 lakh gains as part of income if the portfolio is conservative. Up to 1 lakh gains can be booked every year from equity investments that have completed a duration of 1 year and more. 
  2. An effective way to reduce bad investments in the portfolio is to book losses and offset the loss with the gains. This exercise of booking loss in bad investments should be a regular annual event as the loss can be carried forward to 8 assessment years if not utilized in the year of exit itself.
  3. Short term losses can be used to offset short term and long-term gains. Long term losses can be used to offset long term gains only.
  4. Capital losses can be used to offset Capital gains across assets and not just inside a particular asset.

FM’s Relief Package

The Finance Minister Ms Nirmala Sitharaman announced the Garib Kalyan Yojana. The highlights of the relief package are:

  1. Payout given to 8.69 crores farmers under PM-KISAN will be front-loaded.
  2. Wages under MGNREGA to be hiked to Rs.202 from Rs.182, which would mean an additional Rs.2,000 to every worker. 
  3. Three crores poor senior citizens, widows, disabled to get one-time ex-gratia amount of Rs.1,000 in two instalments. 
  4. 20 crores women Jan Dhan account holders will get an ex-gratia amount of Rs.500 per month for three months. 
  5. Women in 8.3 crores below-poverty-line families covered under Ujjwala scheme will get free cylinders for three months. 
  6. Doubling collateral-free loan amount to Rs.20 lakh for women in self-help groups. Seven crores households to benefit through 63 lakh self-help groups. 
  7. The government will pay provident fund contribution for both employer and employee for three months for establishments which have up to 100 employees and 90% of employees to earn less than Rs.15,000 per month. 
  8. Provident fund scheme regulations to be amended to allow the non-refundable advance of 75 per cent of the amount in the account or three months of wages, of wages. 
  9. State government to utilise Rs.31,000 crores under the Building and Other Construction Workers Fund to support 3.5 crores construction sector workers. 
  10. The government will provide a medical insurance cover of Rs 50 lakh per person to those at front-lines of fighting the virus. This would cover doctors, nurses, paramedical staff, sanitation and ancillary workers.

The last date for filing of income tax returns was pushed ahead by three months from March 31 to June 30. Goods & Services Tax (GST) returns for the three months of March, April and May can now be filed by the end of June. The Union Finance Minister increased the default threshold for triggering bankruptcy cases by a massive margin up from Rs.1 lakh to Rs.1 crores in a move to benefit MSME companies.


During the second half of March, yields on corporate bonds in the secondary market rose significantly between 100 to over 200 basis points for various issuers. To resolve the tight liquidity situation, RBI announced targeted long-term repo operations (TLTRO) up to three years for a total amount of Rs.1 lakh crores. These will be issued at a floating rate linked to the benchmark repo rate. Banks shall be required to acquire up to 50% of their incremental holdings of eligible instruments from primary market issuances and the remaining 50% from the secondary market. The bonds purchased via the targeted LTROs will be in the held-to-maturity portfolio of banks and not subject to mark-to-market gains or losses. Investments made by banks in debt papers under this facility can be in excess of 25% of the total investment permitted to be included hold-to-maturity portfolio. Banks could use up to 2% of their (Statutory Liquidity Ratio) SLR for borrowings under the Marginal Standing Facility. This has been increased to 3% of the SLR applicable up to 30 June 2020.

In addition, the 100 basis point CRR cut announced will release Rs. 1.37 lakh crores into the system. These three measures relating to TLTRO, CRR and MSF will create total liquidity of Rs.3.74 lakh crores in the financial system.


RBI reduced the Repo rate by 75bps from 5.15% to 4.40% and the Reverse repo rate reduced by 90bps from 4.90% to 4.00%.

Bank rate stands adjusted at 4.65%. The Marginal Standing Facility (MSF) was increased from 2% of the NDTL to 3%, for up to June 30, 2020. This amounts to INR1.37tr of additional liquidity. CRR (The cash reserve ratio or CRR is the amount of money a bank sets aside with RBI as buffer not earning any interest) reduced by 100 bps to 3% of NDTL with effect from 28 March 2020 for 1 year.

The net direct tax collection declined 8% year-on-year to Rs.10.27 lakh crores in the financial year ended on March 2020 as per a government official thus marking a decline on an annual basis for the first time in last two decades. The total implies a shortfall of Rs 1.43 lakh crores from the government’s revised target of Rs.11.70 lakh crores for the year. The revised target of Rs.11.7 Lakh crores was 1.6 lakh crores downward revision from the previous estimate due to the cut in corporate taxes announced last September.

Fitch Ratings slashed India’s gross domestic product (GDP) growth forecast for fiscal 2021 to 4.6% from 5.4% earlier. S&P Global Ratings cut its forecast on India’s economic growth to 3.5% for fiscal 2020 from 5.2% earlier.

The Indian government is expected to borrow Rs.4.88 lakh crores in the first half of fiscal 2021. Bonds fell sharply in the final session as the Centre frontloaded the financial year’s borrowing and ruled out a direct placement of debt with the central bank. The Centre notified that it would borrow a total Rs.4,88,000 crores via issuance of dated securities over the April to September 2020.

The government’s goods and services tax collections fell below the Rs 1-lakh-crores mark after four months as GST collections for February was Rs.97,597 crores against Rs.105,366 crores in January. This marks a decline of 7.37% over January and 8.42% over the year-ago period.

As per Tata Power’s CEO Praveer Sinha, demand for electricity has declined drastically over the last two weeks till March 31st and it will take a while before power plants start operating at normal capacities again. Many of the plants which were operating at 80-90% capacity are now operating at about 50-55% capacity. He also expects demand to normalise from 2nd quarter of FY21.

The Cabinet cleared three schemes worth over Rs.48000 crores to boost electronics and components manufacturing.


At a time when India’s real estate developers are struggling to raise funds after the IL&FS Group default in September 2018 apart from facing issues of lower sales and rising inventory, the sector may face further problems due to the ongoing economic slump in the US caused by the coronavirus issue as per the chairman of Anarock Property Consultants. As per Mr Anuj Puri, on an annual basis, the US Corporates book more office spaces than the Indian corporates and therefore the continuing slowdown implies freeing up of more office space and lower office rent prices.

Hindustan Unilever Ltd. has completed the takeover of GlaxoSmithKline Consumer Healthcare Ltd. The board of directors of HUL approved acquiring the Horlicks brand for India from GlaxoSmithKline Plc for Rs.3,045 crores, exercising the option available in the original agreement. Shareholders will get 4.39 shares of HUL for every one share held in GSK Consumer Healthcare. The deal values the total business of GSK Consumer Healthcare at Rs.31,700 crores. As part of the transaction, HUL will distribute these Consumer Healthcare brands, which include market-leading Sensodyne, Crocin, Otrivin and Eno, for GSK in India. GSK will continue to be responsible for demand generation, portfolio strategy, R&D and marketing for these brands.

International markets

In a sign of recovery from China, China’s official manufacturing PMI (Purchasing Manufacturers Index) rose to 52 in March from 35.7 in February while non-manufacturing PMI jumped to 52.3 in March from 29.6 in February. China Caixin manufacturing PMI rose to 50.1 in March from 40.3 in February.

US Institute of Supply Management (ISM) manufacturing index dipped to 49.1 in March after edging down to 50.1 in February. US initial claims for state unemployment benefits surged 3.34 million to a seasonally adjusted 6.65 million for the week ended March 28 - double the previous all-time high of 3.31 million in the previous week.

Oil tumbled to an 18-year low as coronavirus lockdowns cascaded through the world’s largest economies. Futures in London plunged by 9% to the lowest level since March 2002, while New York crude dipped below $20 a barrel before settling just above that level. A huge oversupply is further collapsing the oil market’s structure, and there may be more weakness to come as the world quickly runs out of storage capacity.

Based on the tepid recovery seen so far from the Chinese production output, Morgan Stanley Chief Economist Chetan Ahya foresees a slow pace of recovery until the second quarter of 2020 gets over. The global output is expected to reach pre-Covid19 levels from the 3rd quarter of 2020. As per his estimates, global output could contract by 2.3% in the first half of 2020 compared to the first half of 2019. It is expected that there will be a 1.5% growth in the 4th quarter of 2020 based on the assumption that the COVID-19 outbreak peaks by April/May.


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