Financial Regulatory

Environment
Component 2

Submitted to
Mr. Rishi Manrai

Submitted by
Utkarsh Arya
336
 Index
1.How Sensex, Nifty could be impacted by
the surge in oil prices
2.India Inc gets its mojo back
3.Cabinet approves ban on e-cigarettes,
shares of cigarette makers jump
4. UK travel giant Thomas Cook faces
collapse
5.GST Council Meet highlights: Cuts rates
on various items

 What happened?
 Drone attacks on Saudi Arabia damaged 5 million barrels of its national oil
company Aramco.

Impact
 Saudi Arabia accounts for 10% global oil supply. By cutting production by 50%, the
supply has declined to 5%. Brent Crude has risen from 59 to 69 USD. Petrol prices
have increased by Rs 2 – 3.
 World Economy is based on cascading effect.
Direct Negative Impact
 Oil Marketing Companies – Bharat Petroleum, Hindustan Petroleum, Indian Oil
Corporation ltd. Indirectly controlled by government as PSUs.
Indirect Negative Impact
 Paint Companies (Crude oil is the raw material for paint production) – Asian
Paints, Berger Paints, Kansai Nerolac Paints, Akzo Nobel India Ltd, Shalimar Paints.
Their share prices declined as crude oil prices rise.
 Airlines (fuel) – Spicejet, Indigo
 Tire (raw material for tire production) – MRF, Apollo, CEAT, JK
 Current account deficit rise – India is the third largest oil importer. Currency
depreciate from Rs 71 to Rs 72/ USD.
 If government uses its funds from Fiscal Deficit then it will rise which will result
negatively for overall economy growth. Bank’s interest rates will rise.
Indirect Positive Impact
 Oil Exploration & Production Sector – GAIL, ONGC (parent company of Hpcl)
 Dollar Appreciation will give more returns to IT, Pharma in terms of exports to US.
 IT firms - TCS, Infosys, HCL, Wipro
 Pharma – firms Sun Pharma, Dr Reddy’s, CIPLA

What happened?
 Corporate Tax cut to 25.17% including surcharges and other related taxes.
 Impact
 Rs 1.45 lakh crore of revenue loss is estimated.
 Corporate India (listed companies) Profitability up Rs 1 lakh crore. Market
Capitalization Rs 140 lakh crore of companies with corporate tax ranging from 30
to 37%. Price to earnings ratio is 25. Up to Rs 25 lakh crore rise in market
capitalization that add to the total Rs 165 lakh crore.
 Goal: Sensex touch 50,000 points in 12 – 18 months
 TCS comes in special economic zone (SEZ) so it had 24% corporate tax hence, no
benefit.
 Companies with revenue up to Rs 400 crore had already decreased corporate tax
 Most of the large cap companies have 35% tax slab. Large Cap Companies has
usual growth of 10 -15%. Now, 20 – 25% of rise is expected.
 Small and Medium cap companies won’t benefit.
 New Manufacturing Companies will get uniform 15% tax slab with surcharges &
taxes total 17%.
 Apple had announced manufacturing unit in India. Similarly, it will attract more
multinational companies. India will get attract more foreign direct investment.
Finally, India is inching closer towards $ 5 trillion economy.
 NIFTY at 15,000 & Sensex at 50,000 is estimated.

What happened?
 According to the Finance Minister Nirmala Sitharaman, the cabinet passed a
decision making the production manufacturing import-export transport sale
distribution or advertisements of e-cigarettes a cognizable offence as they pose
 health risks to people especially the youth the Finance Minister cited in US
reports saying that there has been a 77 percent.
Background
 The proposal to ban the battery-operated products was part of the first hundred
days agenda of the Modi government. Now according to the government data
more than 460 e-cigarettes brands are available in India with various
configurations of nicotine delivery and in over 7700 flavors.
 The Indian Council of medical research has also issued a white paper
recommending a complete ban on e-cigarettes based on available scientific
evidence. once the ordinance is issued those holding e cigarette stocks must
declare in deposits stocks with the nearest police-station.
Impact
 The share of cigarette makers which were already up on 18th September 2019 with
expectations of such an announcement it gained further on the news while the
shares of ITC rose by 1.8%, Godfrey Phillips India rose by 7.8%, VST industries
went up by 1%and Golden tobacco went up by 4.5%.

What happened?
 Thomas Cook Group, founded in 1841 in London, failed to raise 200 million pound
out of 1.25 million pound long pending debt and it collapsed on 22 nd September
2019. Thousands of workers could lose their jobs with the staff of 22,000. Up to
150,000 tourists were left stranded abroad. British government hired chartered
 planes to rescue them. The losses occurred due to Brexit uncertainty and fierce
online competitive pressure.
Background
 Thomas Cook Group sold Thomas Cook India to Fairfax Financial Holdings Ltd
(Canada based) in 2012.
 After the decline, the company issued a public letter that it is an entirely different
entity from Thomas Cook Group and will not be affected by the debt situation of
the same.
 Travel Industry
 The shutdown of Thomas Cook Group would impact inbound travel as it had a
good presence in countries such as UK, Germany and Italy. The whole travel
industry is struggling.
Impact
 On the very next day, 23rd September, Thomas Cook India shares declined by 3.7%
in BSE.

What happened?
 Finance Minister Nirmala Sitharaman on 20th September 2019 announced the
reduction of GST rates on a few items which will come in effect from October 1.
 GST council cuts tax on hotel room tariffs of Rs 1,000 to Rs 7,500/ night to 12%
from 18%, above Rs 7,500 to 18% from 28% with an aim of boosting hospitality
sector. There will be not GST on tariffs of below of Rs 1,000 /night.

Impact
 Investors welcomed the GST cut on hotel room tariffs and Hotel stocks soared on
22nd September
 Shares of premium luxury hotels such as The Indian Hotels Company, Hotel Leela
Venture and EIH rose by about 5%.
 Even mid -size hotels such as Taj GVK Hotels Ltd, Chalet Hotels Ltd and Kamat
Hotel Ltd rose significantly.
 Hotels will pass on the tax rate cut by charging lower room rates to customers and
this will boos demand across Hotel sector which will become more attractive and
competitive as a tourist destination too.
 Since the hotel occupancy rates was low at about 65-66% in June due to low travel
business and general elections in May this will positively hit in a short span.

References
1. https://www.livemint.com/market/stock-market-news/how-sensex-nifty-could-be-impacted-by-
the-surge-in-oil-prices-1568610475470.html
2. https://www.livemint.com/politics/policy/india-inc-gets-its-mojo-back-1569004867655.html
3. https://www.livemint.com/news/india/cabinet-approves-ban-on-e-cigarettes-shares-of-
cigarette-makers-jump-1568800260557.html
4. https://www.livemint.com/news/world/uk-travel-giant-thomas-cook-faces-collapse-
1569152039198.html
5. https://www.livemint.com/politics/policy/gst-council-meet-in-goa-live-updates-fm-nirmala-
sitharaman-1568992298758.html