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Markets to rebound on Monday

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The week gone by saw markets under pressure and lose ground on four of the five trading sessions. Post announcement of budget they simply crashed on Saturday when a special trading session was held, and ended the week with big losses.

BSE SENSEX lost 1,877.66 points or 4.51 percent to close at 39,735.53 points while NIFTY was down 586.40 points or 4.79 percent to close at 11,661.85 points. The broader markets saw BSE100, BSE200 and BSE500 lose 4.96 percent, 4.88 percent and 4.78 per cent, respectively. BSEMIDCAP was down 4.44 percent while BSE SMALLCAP was down 3.38 percent.

The Indian Rupee was down 2 paise or 0.03 percent to close at Rs 71.34 to the US Dollar. Dow Jones had a very poor showing on Friday when it lost 600 points to end the week with losses of 733.70 points or 2.53 percent at 28,256.03 points. January futures expired at 12,035.80 points losing 90.75 points or 0.75 percent.

Coronavirus has assumed serious proportions in the sense that global supply chain is being disrupted with serious time implications. This is becoming a matter of concern as globally people are worried about importing from China.

Further travel is being affected between countries and no one knows for sure who could the next carrier of the virus be. This has also caused crude prices to soften significantly as world demand is expected to slow down. The nagging doubt is how long could this affect the world before it could be presumed that coronavirus is behind us and whether there is an antidote for the same.

The budget was presented on Saturday and saw mayhem in the markets post that. The one thing that could be responsible to a large extent is no change in LTCG (long term capital gains tax). There were expectations of a roll back on the same with or without modifications in timeline or holding period and streamlining capital gains holding period uniformly across asset classes.

Markets have been pounded out of shape and the last hour sell-off could have got exacerbated by margin calls. Going forward one is bound to see a sharp rebound on Monday when markets resume trading and also as the ethos of the budget is better understood.

The key takeaway from this budget is the emphasis on infrastructure and here the personal rapport of the Prime Minister would come in play where he gets the sovereign funds of various countries to invest in building our infrastructure.

One must also remember that infrastructure spending kickstarts the economy, provides job and has a multiplier effect of anything between 5 and 8 times.

It is for this reason that the budget has extended 100 percent tax exemption to the interest, dividend and capital gains income on investment made in infrastructure and priority sectors before 31st March 2024 with a minimum lock-in period of 3 years.

Further the Finance Minister through the period September to November 2019 made a number of announcements including the cut to corporate income tax rates and as a coincidence, many of these announcements and press conferences happened on a Friday. One needs to add these announcements and benefits to the budget announced yesterday and then look at the same in totality.

The focus besides infrastructure concerns the farmer whose income is to be doubled in the next 4 years. Accordingly initiating measures to reach the produce from farm to table are being introduced which include adding refrigerated coaches to goods and express trains and also airlifting produce.

Thirdly to boost consumption, thrust has been given to increase disposable income in the hands of the middle class by reducing income tax rates minus the tax breaks.

It is expected that the younger generation who was saving money under the compulsion of tax-saving will opt for doing away with the saving and splurge. It is with this idea that the same is mooted and further the elimination of tax breaks would simplify tax returns.

The idea of bringing LIC to the markets would open up the sector further and help the government garner precious funds through divestment. It is expected that the minimum divestment of LIC could yield as much as 1 lac crs.

The government has received subscription of over Rs 22,500 against the base offer of Rs 10,000 crs and greenshoe of Rs 8,000 crs for the CPSE ETF. In the process of this issue, the price of the ETF has been hammered to Rs 20.28, a loss of Rs 1.67 or 7.61% for the week.

At this price, many of the shares in future are trading at a discount to the cash market. A bounce when markets resume is on the cards and one needs to take note of the fact that all of these companies are Nav Ratnas and dividend-paying companies.

In conclusion expect a bounce on Monday and then wait for the FM to complete the customary visits to various chambers of commerce and clarity on some of the finer points of the budget.

(Arun Kejriwal is the founder of Kejriwal Research and Investment Services. The views expressed are personal)

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Sagging electoral prospects behind Trump’s H-1B action

The real impact of the presidential proclamation, therefore, will be two-fold. First, as long as Trump is President, it will undoubtedly cause many international students, who are looking at the US as a potential destination for higher studies to reconsider their decisions.

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On June 22, US President Donald Trump issued an executive order suspending the entry of a number of non-immigrant work visa holders into the US till the end of the year. The visa categories affected include, most notably, H-1B, which has been used by more than a million Indian information technology professionals since the 1990s and L1 visa used by US companies to bring in workers from their Indian offices.

During his campaign for President four years ago, candidate Trump consistently railed against the H-1B programme. However, after he moved into the White House, Trump left the visa programme untouched in the first 43 months of his presidency, even as he delivered on most of his controversial campaign promises, such as the Muslim ban and dumping of multilateral treaties like NAFTA and Paris Agreement, through executive actions.

There were two compelling reasons Trump didn”t act on the visa programme until now. The US economy had been doing very well until Coronavirus hit the American shores early this year. And, the tech industry, which employs three-fourths of the H-1B visa holders, has been doing even better.

The second reason is the formidable lobbying power of the industry. The four most valuable companies in the world, Amazon, Google, Apple and Microsoft, and Facebook have historically used the H-1B workforce to augment their profits. They were not going to let it go without a fight.

The influence these organizations wield was evident when Trump spared H-1B in his first executive order to curb nonimmigrant work visa holders issued on April 22. According to reports, H-1B was to be part of that proclamation but the White House was talked out of it by the industry.

So, what has changed between late April and today?

A number of things, but primarily it is Trump”s dimming re-election prospects. A steady stream of polls in the past few weeks has shown that the incumbent is trailing badly in the race against presumptive Democratic nominee Joe Biden. The President”s handling of the Covid-19 pandemic — his initial refusal to see it as a threat and then his inability to provide the leadership to contain it — has shaken people”s confidence in Trump”s presidency.

Prior to the onset of the Coronavirus, Trump was banking on making the election a referendum on his stewardship of the economy. But the pandemic, which has claimed more than 125,000 American lives, has also eliminated up to 40 million jobs.

Although some of the jobs have come back thanks to the multitrillion dollar stimulus package, the re-opening plans promoted by Trump have not produced substantial results. Now, with parts of the country closing down again, and the deadly virus spreading in southern and western states, there”s no sign of the economy turning the corner before the November election.

Consequently, Trump needs to be seen as doing something to save the economy and American jobs. H-1B, which has been a bogeyman for the protectionists and economic nationalists, is an easy target during this downturn, even though study after study has documented that the visa programme actually helps create jobs. The administration claims that the executive order is going to save more than half a million American jobs without giving details.

It should be noted that the order mainly impacts petitioners who are outside of the US who have not gotten their visas stamped on their passports yet. As a result, it will only have little impact in the short term on those seeking work in the US.

The US Citizenship and Immigration Service issues roughly 85,000 new H-1B visas annually of which 20,000 are for those with US master”s degrees. Most petitioners in this category are already in the US and they will not have any problem in starting their jobs in October, typically the time new visa holders enter the work force.

According to immigration attorneys, a significant percentage of the remaining 65,000 visas are claimed by dependents of H-1B and L-1 visa holders, as well as foreign students who have graduated from US schools, but did not get the visa under the master”s degree quota. These groups will also not come under the purview of the executive order, as they are already in the country.

The real impact of the presidential proclamation, therefore, will be two-fold. First, as long as Trump is President, it will undoubtedly cause many international students, who are looking at the US as a potential destination for higher studies to reconsider their decisions. During the Trump era, the US has already been losing potential students to nations such as Canada, Britain and Australia.

Second, despite the massive job losses in the broader economy, there are still vacancies in the tech industry that will have to be filled to move its economy forward. The US tech sector has said for years that the country doesn”t produce enough skilled workers and the industry will suffer without the intake of manpower through H-1B and L1 visa programmes. If it becomes more difficult for these companies to hire foreign workers, they would probably outsource more and more of these jobs to foreign destinations, including India.

It is an irony that, while Trump is trying to bring manufacturing jobs back to the US, his nonimmigrant worker visa policy could force more high-paying service jobs offshore. What makes it doubly ironic is that this action which Trump has taken to try to save his job as President will not do so.

Given the current state of affairs, it is likely that on election day November 4, the American people will fire Donald Trump. After that, the decision on what to do with information technology visas in 2021 and going forward will be in someone else”s hands. And, Trump will have to find a new place of employment for himself.

The good news is Biden has already stated that his administration will lift the H-1B ban.

(Frank F. Islam is an entrepreneur, civic and thought leader based in Washington DC. The views expressed are personal)

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Corona impact: CAIT demands de-sealing of Delhi shops

According to CAIT National Secretary General Praveen Khandelwal, estimates show that about 6,000 shops have been sealed in Delhi.

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New Delhi, July 4 : The Confederation of All India Traders (CAIT) on Saturday demanded that shops in Delhi be de-sealed immediately without further delay.

Accordingly, in a letter to the Union Urban Development Minister Hardeep Singh Puri, CAIT demanded that “Delhi sealed shops should now be de -sealed immediately without further delay”.

Besides, the traders’ body also called for the finalisation of Delhi Rent Act, “ending a long running dispute between the land lords and tenants in Delhi”.

Furthermore, CAIT demanded that traders should be allowed to participate in the consultation process of Master Plan 2041 which is being prepared for Delhi.

According to CAIT National Secretary General Praveen Khandelwal, estimates show that about 6,000 shops have been sealed in Delhi.

“Corona started since the beginning of the year 2020 and the traders of Delhi are faced with a big crisis of livelihood and in such a situation, it has become imperative that shops are immediately de-sealed,” he was quoted as saying in a statement.

“Keeping this in view, the Central government should take an initiative in this matter and pass an ordinance in which all sealed shops should be opened and all other problems related to sealing should be postponed for the time being thereby giving all traders a fair chance to do business.”

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Congress to PM Modi: Roll back imposition of tax on disability pension of defence forces

He cited that 20 Indian soldiers including commanding officer also had attained martyrdom on the fateful night of June 15. He insisted that some of them, god forbids, may also be disabled.

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New Delhi, July 5 : Leader of Congress party in the Lok Sabha, Adhir Ranjan Chowdhury, has written to Prime Minister Narendra Modi seeking a review and roll back the decision of the imposition of tax on disability pension of defence forces including Army, Navy, and Air Forces.

“I must appreciate your visit to the army hospital (crisis expansion capacity of 100 beds) at Leh where scores of Indian soldiers have been admitted who have sustained grievous injuries during their valiant fight against Chinese intruders at Galwan Valley,” said Chowdhury in a letter to the PM.

He cited that 20 Indian soldiers including commanding officer also had attained martyrdom on the fateful night of June 15. He insisted that some of them, god forbids, may also be disabled.

“In future how would those disabled army personals earn and run the livelihoods? Disability pension comes as succour to those brave soldiers,” he added in the letter.

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