This is a roundup of the day’s top stories in brief.
1. KV Kamath Committee’s Recommendations
A Reserve Bank of India appointed committee, headed by veteran banker KV Kamath, has recommended that the banking industry look at at least four financial parameters before taking a decision on restructuring.
- The five member committee has recommended minimum and maximum thresholds for five parameters, which lenders must assess before approving a restructuring request. The committee has specified different thresholds for 26 sectors which may have been impacted by the Covid-19 pandemic.
The committee which submitted its report on Sunday suggested that lenders track the following parameters:
- Total outside liabilities/Adjusted tangible net worth
- Total debt/Ebitda
- Debt service coverage ratio
- Average debt service coverage ratio
Here are the other recommendations.
2. Raghuram Rajan Calls India’s GDP Alarming
Raghuram Rajan said India’s GDP data should “alarm” all of us. The reported 23.9% contraction in the economy is likely to worsen when informal sector data is accounted for, the former Reserve Bank of India governor wrote in a post on his LinkedIn page on Sunday night.
- The damage to the Indian economy is far worse than in the U.S. and Italy—two of the worst affected by the pandemic, said Rajan, adding that the discretionary spending in India will remain weak until the virus is contained.
- The pandemic is still raging in India, so discretionary spending, especially on high contact services like restaurants, and associated employment, will stay low until the virus is contained. Government provided relief becomes all the more important, Rajan said.
- This relief from the government has been meagre, Rajan said.
Rajan highlighted the need for the government to expand resources and spend cleverly.
3. Nifty Edges Higher; Oil Slump Continues
Indian equity markets ended a volatile and rangebound session little changed, but with a positive bias.
- The S&P BSE Sensex ended 0.16% higher at 38,417 while the NSE Nifty 50 index ended 0.2% higher at 11,355.
- Among sectoral indices, the Nifty Bank index recovered nearly 250 points from the day's low during the final minutes of trade to end little changed.
Follow the day’s trading action here.
Bharat Iyer’s Advice
While the central bank’s liquidity push is driving India’s stocks and their valuations higher, Bharat Iyer, former JPMorgan head for Indian equities, said it may be time to take money “off the table”.
Find out why Iyer thinks the ammunition has already been fired and priced in.
European stocks climbed as analysts speculated the market could be relatively resilient to the tech-led downdraft in the U.S.
- The pound weakened on concern the U.K. is inching closer to a no-deal Brexit.
- Oil slumped on a price reduction by Saudi Arabia.
- The dollar strengthened while Treasury yields were little changed.
- Stock futures pointed to further losses for American shares
when markets re-open on Tuesday after the Labor Day holiday as
Nasdaq futures slid 0.8%.
Get your daily fix of global markets.
4. Riskiest Bond, Record Low Price
State Bank of India priced one of the riskiest bank capital securities at a record-low coupon, in the latest sign that investors are confident policymakers’ stimulus steps will help large issuers weather the pandemic.
- India’s biggest bank will sell Rs 4,000 crore ($545 million) of the so-called Additional Tier 1 bonds at a coupon of 7.74%.
- That’s the lowest pricing on such debt, which can be fully written down in a crisis, issued by any lender since the country started implementing the stringent Basel III capital rules in 2013.
- Unprecedented stimulus steps from the authorities in India have reduced average borrowing costs in the local credit market to the cheapest in more than a decade.
The measures have also given investors confidence that the country’s lenders will be able to beef up capital ratios.
5. Lockdown Fatigue Lifts Business Activity
After a brief plateauing in July, the pace at which economic activity is normalising rose in August and the uptrend continued into early September despite mounting Covid-19 infections.
- Nomura's India Business Resumption Index, which tracks business activity on a weekly basis, rose to 77.4 for the week ended Sept. 6 from 75.7 at August-end and 70.3 at July-end, it said in a note.
- That suggests the lockdown fatigue may have set in.
- But "as the number of virus cases continues to rise, within and outside major economic centres, the durability of the recovery remains in doubt", the research firm said.
The pickup in retail and recreation mobility suggests consumers are stepping out for purchases.
6. Can Ashok Soota’s Happiest Mind Beat The IT Industry?
Ashok Soota expects Happiest Minds Technologies Ltd. to grow at an annualised rate of 20% compared with the industry as the mid-sized information technology firm earns almost all of its revenue from the margin-accretive digital segment.
- “The IT market is growing at 8-10% annually,” the promoter and executive chairman of the company said in an interview with BloombergQuint.
- Digital revenue for Indian software services exporters, he said, ranges between 30% and 50%.
- While peers are on track to increase their exposure to this segment, Happiest Minds already earns 97% of its revenue from digital services, he said.
- The company has launched its three-day initial public offering on Sept. 7.
Happiest Minds will use the net proceeds from the maiden offer for long-term working capital and general corporate purposes.
7. Vodafone Idea’s New Avatar; Airtel-Jio’s New Battleground
Vodafone Idea Ltd. has rebranded itself as ‘Vi’, read as ‘we’, nearly two years after the two telecom operators merged as a result of a brutal tariff war unleashed by Reliance Jio Infocomm Ltd.
- "The brand integration not only marks the completion of the largest telecom merger in the world, but also sets us on our future journey to offer world-class digital experiences to one billion Indians on our strong 4G network," Ravinder Takkar, managing director and chief executive officer at Vodafone Idea, said in a statement.
Vi will continue to invest in developing infrastructure and newer technologies such as high-speed and secure leased lines.
Reliance Jio Infocomm Ltd., which disrupted mobile telephony in India with its dirt-cheap tariffs and data plans, has set its eyes on fixed broadband.
- Mukesh Ambani’s telecom unit had announced new tariff plans for fixed broadband connections, starting at Rs 399 plus taxes per month for 30 Mbps for unlimited broadband, from Rs 699 previously, according to a company release.
- Bharti Airtel Ltd. on Sunday responded by lowering its base tariff to Rs 499 plus taxes per month for 40 Mbps speed for unlimited broadband, from Rs 799 earlier.
- In doing so, Jio Fiber and Bharti Airtel have ensured that their tariffs are on a par with those offered by MTNL and BSNL.
With broadband penetration in India in single-digits, a large chunk of the market is up for grabs.
8. Covid-19: India Is Now Second Most Infected Country
India is now the country with the second-highest Covid-19 infection in the world, as it topped Brazil while adding cases at a record pace.
- India added over 90,800 fresh cases in a matter of 24 hours, taking the total tally to over 42 lakh, according to the health ministry's update.
- This includes 32.5 lakh who've been discharged and 71,642 who've died.
- Despite higher recoveries, deaths due to Covid-19 remain elevated.
- The country has reported more than 1,000 casualties due to the highly contagious pathogen for six straight days.
Track all Covid-19 related news and updates in India, here.
Globally, cases crossed 2.71 crore leaving nearly 8.9 lakh dead.
- Concerns in U.K. mount as the country’s infection rate accelerated as millions of children return to school.
- Around Europe, hot spots are spiking again, with the pathogen spreading in France at a “worrying” pace.
- While U.S. cases steadied, governors across the country urged citizens to be cautious during the Labor Day holiday weekend.
Follow the global spread of the virus here.
9. Soaring Gold Prices Turn Headache For Vault Keepers
Surging demand for gold means business is booming at the companies that store and protect the world’s bullion. But record prices come with a catch: All those piles of yellow bars are suddenly much trickier to insure.
- For centuries, gold has been an irresistible target of heists both real and fictional. And though theft on a major scale is rare, it can be hugely expensive.
- The difficulty is that insurers place a cap on how much financial exposure they’ll assume for each vault.
- As the price of gold rises—it gained as much as 37% this year—the number of insurable ounces at each site naturally shrinks.
For storage facilities surging gold prices can require a juggling act to ensure that the of the gold they hold doesn’t exceed their coverage.
10. Biden’s Trade Tools In A Trump-Altered World
What would U.S. trade policy would look like under a Joe Biden-Kamala Harris administration? Raj Bhala has some answers.
- Foreign policy in a second Trump-Pence Administration is certain: “America First.”
- But, what if the Biden-Harris ticket wins? What would American trade policy become?
- Four guiding principles would beam light on what Democrats see as four dark areas of the world altered by ‘America First.’
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