BQuick On Sept. 3: Top 10 News Stories In Under 10 Minutes
This is a roundup of the day’s top stories in brief.
1. Fund Managers Fear Foreign Outflows
Foreign funds have started winding up or reworking their structure after India’s market regulator barred non-resident Indians from controlling them, four fund managers told BloombergQuint requesting anonymity.
- Trident Trust, Mauritius is winding up its Class A of Emerging India Focus Funds due to the restrictions, according to its email to investors.
- Under Class A, the majority shareholders are non-resident Indians, it said
- SEBI, in an April 10 circular, barred non-resident Indians, persons of Indian origin and overseas citizens of India from being “beneficial owners” or “in control” of foreign portfolio investors.
- Nandita Agarwal Parker, president of Asset Managers Roundtable in India, said the government doesn’t realise the severity of the problem it has created for the fund management industry.
Read this to understand the scale of the problem.
2. JSPL Is Studying A Breakup Plan
Jindal Steel & Power Ltd. is considering a breakup plan as part of a restructuring to help trim its Rs 42,000 crore rupee debt pile and boost investor confidence in a company that was once India’s biggest steelmaker by market value.
- The company is looking to split its steel, power and international businesses into three separate entities, Chairman Naveen Jindal told Bloomberg.
- The steel unit will include the coal mines, while international business would have the Oman steel plant.
- Any such plan would need the approval of lenders, regulators and the board, he said.
We are going to be really, really conservative. There is no question of taking more debt.Naveen Jindal, Chairman, JSPL
Here’s how Jindal wants to turn around the steel major.
3. Longest Losing Streak In Three Months
S&P BSE Sensex Index closed over 600 points lower from day's high and clocked its longest losing streak in over three months.
- Sensex closed 0.86 percent or 333 points lower at 38,313.
- NSE Nifty 50 Index fell 98 points or 0.84 percent to close below 11,600.
- The market breadth was tilted in favour of sellers. Ten out of 11 sectoral gauges compiled by NSE fell.
- NSE Nifty FMCG was the worst performer, NSE Nifty Media Index was the best.
Follow the day's trading action here.
Stocks were steady in Europe on Monday while U.S. futures climbed and emerging market shares dropped as investors assessed the complex outlook for international trade.
- Gains in energy shares were offset by declines in automakers and construction firms in thin trading on the Stoxx Europe 600 Index.
- The U.K.’s FTSE 100 Index bucked the broader market.
- The pound slipped as the U.K.’s flagship Brexit proposal came under attack.
- U.S. markets are shut on account of labour day.
Get your fix of global markets action here.
4. Why India’s Bulls May Take A Breather
Another thousand-point milestone is within reach for India’s benchmark equity index. Following the drubbing earlier this year, the S&P BSE Sensex is nearing the 39,000 level, the gauge’s third round-number mark since surpassing its life-time peak two months ago.
- While there's optimism due to India's world-beating growth, lingering external risks particularly from oil and rupee, may give investors a pause.
- “Markets have run up a lot and there’s certainly an element of risk when this happens -- it is never easy to buy in such times,” said Sunil Sharma, who oversees $1 billion of assets as chief investment officer at Sanctum Wealth Management Pvt.
Here are six charts that show why analysts are wary of giving Indian equities the all-clear.
5. What’s Spooking Balkrishna Industries’ Investors
Shares of Balkrishna Industries Ltd. fell the most in three months after the off-road tyremaker announced a surprise capital expenditure plan of Rs 1,700 crore.
- The board of India's second-largest tyre firm has approved a $100 million capex plan to set up a new U.S. plant.
- It will also spend up to Rs 1,000 crore on its India operations.
- The entire outlay will be funded by a mix of debt and internal accruals.
- “Balkrishna Industries has been going overboard with capex, starting with plans to set up a carbon black plant at Bhuj,” Joseph George, analyst at IIFL, said in a note.
Here’s more on the tyremaker’s capex plans.
6. SEBI Goes The Extra Mile To Recover Penalties
To ensure its penalties don’t go unpaid, India’s market regulator plans to recover fines even when appeals are pending provided its orders have not been stayed, according to two people with direct knowledge of the matter.
- The Securities and Exchange Board of India has submitted a draft to the Securities Appellate Tribunal.
- SEBI has already started implementing it in some cases, though the decision has not been made public yet.
- Currently, a fine is recovered only after the tribunal and the Supreme Court dismiss a plea.
Can SEBI prevent fined parties from getting away without paying?
7. Bad Loan Resolution Remains A Distant Dream
After having failed to finalise resolution plans for most of the accounts which were in default on March 1, the Indian banking system is preparing to refer at least 60 stressed corporate accounts for insolvency.
- These 60-odd cases add to the 12 accounts first referred for insolvency in June last year and the 28 sent to the National Company Law Tribunals in December.
- At least three senior bankers, who spoke to BloombergQuint on the condition of anonymity, felt that any material resolution of stressed assets will take another 12-18 months.
- To be fair, banks are chipping away at the pool of stressed assets. Meetings are being held, resolutions plans are being discussed and so on. But at each step, promoters faced with losing their businesses for the first time, are fighting back.
Here’s a status report on Indian bankruptcies.
8. ESOPs By PSU Banks See Mixed Response
Four public sector banks are at varying stages of putting employee stock option plans in place. But neither employees nor analysts expect these plans to see much success. This, more than 18 months after the finance ministry gave an in-principle approval for such plans.
- Allahabad Bank was among the first to announce an employee share purchase plan in February.
- United Bank of India had announced an employee stock option at about the same time as Allahabad Bank but has failed to close the issue so far.
- The other two banks which have board approvals for ESOPs in place include Canara Bank and Punjab National Bank.
The response to these schemes have been lukewarm.
9. Manufacturing Growth Eases Further
Manufacturing activity in India grew at a slower pace for the second consecutive month in August, as operating conditions improved at the slowest pace since May.
- The Nikkei India Purchasing Managers Index fell to 51.7 in August, from 52.3 in the previous month.
- A reading below 50 indicates contraction in activity, while a number above it signals expansion.
- Manufacturing activity in the country has remained above the 50-point-mark for the thirteenth consecutive month.
Find out what the August data means for the economy.
10. The 2008 Crisis: Lessons Learned, Lessons Missed
Paul Sheard was the Global Chief Economist at Lehman Brothers in 2008, and then moved to S&P Global. From this unique vantage point he examines what went wrong and whether 10 years down, the gap between the real economy and financial economy persists. Are we better equipped to deal with the next crisis?
Lessons from the crisis:
- Do everything possible to prevent a financial crisis from developing in the first place.
- Have at the ready a well-crafted lender-of-last-resort function.
- Be prepared to deploy that mechanism quickly and forcefully.
Are we better equipped to deal with the next crisis?