This is a roundup of the day’s top stories in brief.
1. More RBI Relief In The Works
The Reserve Bank of India has started the ground work for a one-time restructuring scheme to help companies which are affected by the Covid-19 pandemic.
- The regulator is discussing contours of the plan internally and informally with senior bankers before a final decision is taken, said two people with direct knowledge of the matter, who spoke on condition of anonymity.
- The one-time restructuring scheme would likely cover companies which have defaulted between March 1, 2020 and March 31, 2021.
- As per unofficial conversation between bankers, the restructuring scheme will help companies extend the repayment schedule and reduce interest rates, without attracting an asset classification downgrade, as is required currently.
In terms of the structure of the scheme, it will likely follow the relief provided to micro, small and medium enterprises last year.
2. ITC Delivers A Mixed Q4; Coal India’s Profit Slumps
ITC Ltd.’s quarterly profit rose, aided by the government’s cut in corporate taxes even as sales declined during a national lockdown that was imposed to contain the Covid-19 outbreak.
- Net profit rose 9.1% year-on-year to Rs 3,798 crore in the quarter ended March, according to an exchange filing. That compares with the Rs 3,511-crore consensus estimate of analysts tracked by Bloomberg.
- Revenue declined 6.4% over the year-ago period to Rs 11,420 crore. Analysts had pegged the metric at Rs 11,832 crore.
- Operating profit fell 8.9% to Rs 4,163 crore.
Operating margin dropped.
State-run miner Coal India Ltd. reported a decline in quarterly profit due to flat sales growth and lower realisations.
- Net profit fell 23% year-on-year to Rs 4,638 crore in the quarter ended March.
- Revenue fell 3.5% to Rs 27,568 crore—higher than the estimated Rs 26,596 crore.
- Margin narrowed to 24.4% from 28.8% earlier.
Find out why sales remained flat during the quarter.
3. Nifty Sees Late Surge; Dow Opens Weak
Indian equity markets witnessed a late surge, and ended near the highest point of the trading day.
The S&P BSE Sensex ended 0.94% higher at 35,171 while the NSE Nifty 50 index ended just below the 10,400 mark at 10.383, up 0.91%.
For the week, the Sensex gained 1.27% while the Nifty advanced 1.35%.
Both Sensex and Nifty have posted weekly gains in four out of the last five weeks.
Follow the day's trading action here.
U.S. stocks fell and Treasuries rose as a resurgence in new virus infections began halting progress on reopening the American economy.
The S&P 500 extended its weekly loss toward 2%, as the Texas governor rolled back some reopening measures.
Data showed consumer spending surged by a record in May as Americans spent relief payments, though incomes slumped.
Big banks slid after the Federal Reserve capped dividends and banned buybacks through September.
West Texas Intermediate crude declined 1% to $38.33 a barrel.
Get your daily fix of global markets here.
4. Life’s A Beach In The Bond Markets
Indian bond markets have seen some degree of calm restored after a few months of turbulence. This, despite the fact that the Reserve Bank of India has remained relatively conservative in its actions, even though its words promised both conventional and unconventional measures to ensure the smooth functioning of financial markets.
- Since the Covid-19 crisis-hit Indian shores, apart from lower interest rates, RBI has provided long-term liquidity to the markets and dipped in to buy government securities a few times.
- It has, however, not announced any large scale primary or secondary market government bonds purchases unlike developed market peers.
- “The short-end of the yield curve is very well anchored, and that has spilled over into the corporate bond market as well where yields have come down and access to credit has broadened, to even somewhat weaker players now,” Abhishek Upadhyay, senior economist at ICICI Securities Primary Dealership, told BloombergQuint.
There are a handful of signals suggesting improved debt market conditions.
5. The New Normal — Masks, Social Distancing And Lower GDP Growth
The Covid-19 pandemic is likely to push India into the deepest recession the country has seen since independence. But it may have an even more ominous impact — on India’s potential growth.
- Potential output refers to the level of output that is consistent with full capacity utilisation along with low and stable inflation.
- India’s potential growth rose steadily from 5% in the 1980’s to a peak of about 8% during the 2003-2008 period, according to a 2016 RBI working paper, ‘India’s potential output revisited.’
- After that it decelerated and the paper pegged it at close to 7% in the 2009-15 period.
- Policymakers and economists now worry that India’s potential growth could drop further in the aftermath of the Covid crisis, pushed lower by a fractured financial sector and weaker capacity utilisation.
BloombergQuint spoke to economists to understand what could impact India’s potential growth.
6. Bank Of Baroda’s Road To Recovery
India’s Bank of Baroda expects to step up bad loan recoveries this financial year despite the temporary relief on repayments imposed by the central bank during the lockdown on the economy.
- That will help the country’s third-largest state-run bank improve its capital ratios and boost new lending, according to Executive Director Shanti Lal Jain.
- “We will be focusing on all avenues to recover bad loans including asset sales, one-time settlements,” said Jain, who heads stressed assets management and credit monitoring.
- “Recoveries will help in bolstering our capital and give us further room to lend,” he added.
Here’s how much Bank of Baroda expects to recover by the end of the fiscal.
7. India-China Tensions Continue
Indian and Chinese troops are still locked in a standoff on their contested Himalayan border and Beijing accused New Delhi of “vile” acts, showing that tensions remain high after their worst military clash in 45 years.
- About 50 square kilometers (20 square miles) previously controlled by India in the Pangong Tso area -- a glacial lake high on the Tibetan plateau -- is now being held by Chinese personnel, Indian officials with knowledge of the matter told Bloomberg News.
- The lake sits in the disputed Ladakh area, which also includes the Galwan Valley, where fierce fighting earlier this month killed 20 Indian soldiers and an unknown number of Chinese troops.
- India is monitoring a separate incursion in the Depsang Plains -- about 120 kilometers (75 miles) from the Galwan River -- where Chinese troops have pitched tents and other infrastructure, the officials said, asking not to be identified due to rules on speaking to the media.
The fresh round of tensions come after a commander-level meeting on Monday ended with an agreement to de-escalate.
8. Truckers’ Nightmare
The pandemic has left the lifeline of India’s cargo movement battling a triple whammy.
- As the nation limps out of the world’s strictest lockdown, transporters are struggling to find enough load to get trucks back on road.
- There aren’t enough drivers as they returned home in the nation’s biggest migration since the partition.
- Now, higher fuel prices and the increased toll is making business unviable.
Transporters said the increase in freight rates is more than offset by costlier fuel, higher toll, and a rise in drivers’ wages amid manpower crunch.
9. Covid-19: India Edges Closer To 5 Lakh Cases
Over 4.9 lakh people have been infected by the deadly Covid-19 virus in India, as new cases poured in from across the country.
- The country added nearly 17,000 new Covid-19 cases, taking the total tally to 4,90,401, according to Health Ministry’s 8 a.m update.
- Over 2.8 lakh of these cases have been declared as “cured/discharged”.
- The Union Home Ministry said that a serological survey will be carried out in Delhi to prepare a broad strategy for combating the pandemic.
- Meanwhile, in Assam, the city of Guwahati has been put under lockdown again amid rising cases.
Track the latest developments around the Covid-19 outbreak in India here.
Globally, cases topped 96 lakh while deaths crossed 4.89 lakh.
- The U.S. saw a record number of new cases, with a wave across the Sun Belt stoking concerns about the economic recovery.
- European Central Bank President Christine Lagarde warned that a recovery from the pandemic will be restrained and will change parts of the economy permanently.
- A fresh surge in coronavirus cases prompted Rwanda’s government to place six districts of the capital, Kigali, back under a strict lockdown.
Follow the global spread of the virus here.
10. Byju’s Overtakes Oyo
Byju’s surpassed budget hotel room operator Oyo Hotels & Homes to become India’s second-most d startup after the online education platform raised funds from Bond Capital, a venture capital firm co-founded by Mary Meeker, a person aware of the matter said.
- This is the first time Bond Capital has backed an Indian startup.
- While Byju’s confirmed the funding, it declined to comment on amount and valuation.
- The person quoted above, however, told BloombergQuint on condition of anonymity that the edtech startup secured the funding at a valuation of $10.5 billion.
- The valuation of the Byju Raveendran-led company has nearly doubled in the last one year.
Bond Capital’s investment into Byju’s comes at a time online education in India is seeing its moment of reckoning.
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