This is a roundup of the day’s top stories in brief.
1. Banks Pull Out All The Stops To Lure Buyers
The festive season will not be the same this year. Covid-19 infections are still high. Mobility is restricted. Many consumers are grappling with the loss of jobs and income. Against this backdrop, lenders are going the extra mile to make home and auto loans seem attractive.
State Bank of India has brought home loan rates to the lowest they have been in years. Punjab National Bank, too, is offering similar rates.
Private banks liked HDFC Ltd., Kotak Mahindra Bank Ltd. and Axis Bank Ltd. are matching some of these offers by public lenders.
A similar story is unfolding for auto loans, too.
Can these sops help improve credit offtake for lenders?
2. MPC 2.0 Widens The Debate
India’s reconstituted Monetary Policy Committee widened the economic debate beyond the committee’s mandate of controlling retail inflation using a single benchmark policy rate, showed minutes of the October meeting released on Friday.
In doing so, the committee chose to stay focused on growth with some members suggesting that room for further rate cuts may open up as inflation falls in the second half of the year.
In contrast to the August meet, the MPC this time struck a sanguine note on inflation.
Most members of the inflation targeting-MPC gave primacy to growth.
3. Earnings: JSW Steel, Nestle India, Tech Mahindra
JSW Steel Ltd.’s quarterly profit plunged but India’s most valuable steelmaker was confident it had turned a corner.
Net profit fell 38% over last year to Rs 1,590 crore.
Revenue rose 9.6% to Rs 19,260 crore.
Rural demand and exports spearheaded a revival in consumption.
Nestle India Ltd.’s net sales rose on improving demand in the first full quarter of operations after India eased lockdown curbs and factories limped back to normal capacities.
Revenue increased 10% over the year ago period to Rs 3,541.7 crore.
Profit, however, declined 1% to Rs 587 crore.
Maggi noodles maker's margin expanded.
Tech Mahindra Ltd.’s quarterly profit rose as the pandemic’s impact on information technology firms started to fade.
Net profit rose 11% sequentially to Rs 1,063 crore.
Revenue in U.S. dollar terms rose 4.8% to $1,265.4 million.
Margin expanded 390 basis points to 18.2%.
Get more details here.
4. Nifty Inches Higher; U.S. Stocks Trade Mixed
Indian equity markets ended a rangebound session with modest gains, registering a weekly advance in the process.
The S&P BSE Sensex ended 0.3%, or 127 points, higher at 40,685.
The NSE Nifty 50 index too ended 0.3% higher at 11,930.
Auto stocks were the top performers today.
Follow the day’s trading action here.
U.S. stocks were mixed, with Intel Inc.’s poor results dragging technology shares lower while banks rallied again as Treasury yields held near a four-month high.
Most stocks in the S&P 500 advanced, helping the index pare its weekly slide.
Gilead Sciences Inc. jumped after its antiviral therapy become the first drug formally cleared to treat Covid-19.
West Texas Intermediate crude rose 0.2% to $40.73 a barrel.
Get your daily fix of global markets.
5. Flipkart Strikes A Deal With Aditya Birla
Walmart Inc.-backed Flipkart will buy a 7.8% stake in Aditya Birla Fashion & Retail Ltd., paving the way for the apparel retailer to sell goods online amid the pandemic-fueled e-commerce boom.
The board of Aditya Birla Fashion approved issuance of equity shares on a preferential basis to Flipkart Investments Pvt., aggregating to Rs 1,500 crore, the owner of Pantaloons clothing chain said in a statement.
The promoter and promoter group companies of Aditya Birla Fashion will hold about 55.13% after completion of the issuance, it said.
Flipkart will now also be able to sell and distribute of various brands of Aditya Birla Fashion.
6. Swedish Steelmaker Eyes Tata Europe Deal
Swedish steelmaker SSAB AB is exploring a combination with Tata Steel Ltd.’s European business as a back-up plan to a deal with Thyssenkrupp AG amid industry consolidation, people familiar with the matter told Bloomberg News.
SSAB is holding preliminary talks with Tata Steel of India as it seeks merger options, the people said, asking not to be identified as the matter is private.
Still, the Swedish pursuit of a deal was complicated last week. Find out why.
7. ‘Fog Of Uncertainty’ Remains; Consumer ‘Paranoia’ Lifts
Bajaj Auto Ltd. is not sure how sales in the festive season will pan out. Yet, the two-wheeler maker pushed stocks to dealers.
In the domestic motorcycle business, the fog of uncertainty is still around, Rakesh Sharma, executive director at Bajaj Auto, said during a post-earnings investor call.
If retail sales don’t match up, Bajaj Auto will have to take some action in November.
India’s biggest paintmaker said demand is rising every month as Indians have started to spend again.
“There has been a sequential demand increase (July-August-September), which is very encouraging. We are definitely seeing positivity in the environment,” Amit Syngle, managing director and chief executive officer at Asian Paints Ltd., told Bloomberg Quint in an interview.
“The paranoia seems to be going away...and the consumer is preferring to spend,” he said.
Find out what aided demand for Asian Paints during the previous quarter.
8. Surprise Boost For Truck Parts Suppliers
As the pandemic decimated demand at home, Indian suppliers of truck components such as Bharat Forge Ltd. and Motherson Sumi Systems Ltd. have something to cheer about: rising demand for heavy trucks in the U.S.
Sales of Class 8 trucks—gross vehicle weight rating of more than 16.5 tonnes—rose to a 12-month high of 32,000 units in September in the U.S., according to data from FTR, a transport intelligence provider.
The U.S. accounts for 24% of India’s $8.8-billion auto-component exports, most of which are for the Class 8 truck market.
Read more to see how Indian firms can tap this spike.
9. Storm In A Teacup?
Raw tea prices have fallen off their peak seen earlier this year. Yet, margins of producers in the world’s second-biggest market for the commodity may remain under pressure.
Prices of raw tea rose between June and September after a decline in output as there weren’t enough pickers to pluck tea leaves as India announced one of the world’s strictest Covid-19 lockdowns.
While tea has since turned cheaper, it’s still costlier than a year ago.
And producers are also saddled with inventory purchased when prices were high.
Here’s what India’s biggest tea producers are saying.
10. A Cure For Banks, Worse Than The Disease Itself?
When India went into a clean-up of bank balance sheets, it was anticipated that the impact would play out over an extended time period, in many ways. But one assumption has worsened its impact.
It was thought that as a truer picture of bank balance sheets emerges, these lenders will be able to at least partially raise capital from the markets.
On that assumption, the recapitalisation of government-owned lenders was staggered over a period of three years.
The lack of upfront and adequate recapitalisation led to a significant fall in credit flow, a surprising increase in lending to zombie firms, and eventually, lower economic growth, said a paper co-authored by Yakshup Chopra, Krishnamurthy Subramanian, Prasanna L. Tantri and published in the Review of Financial Studies.
“The cure can possibly be worse than the disease itself,” the paper said.
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