BQuick On Sept. 10: Top 10 News Stories In Under 10 Minutes
This is a roundup of the day’s top stories in brief.
1. Rupee Response
The Indian rupee closed at a new low of 72.44 against the U.S. dollar, and bonds sunk after the current-account deficit widened to the most in five years.
RBI Asked To Do More
- The government has asked the Reserve Bank of India to bolster its efforts to support the local currency, which is Asia's worst performing right now, Bloomberg News reported citing people familiar with the matter.
- Last week, government officials told the central bank to intervene more aggressively in the market to support the rupee, according to the report.
The Centre is also considering a plan to tap its citizens overseas by bringing in deposit schemes for non-resident Indians.
YV Reddy’s Warning
- Former RBI Governor YV Reddy cautioned on the risks of government officials commenting on the exchange rate.
- He noted that comments related to the exchange rate from different quarters can send confusing signals to the market.
There should be an understanding of the relative roles. My understanding of the situation is that the exchange rate regime is prescribed by the government. The exchange rate is managed by the RBI. Those respective roles have been respected by and large.YV Reddy, Former Governor, RBI
- JPMorgan’s Chief India Economist Sajjid Chinoy told BloombergQuint that the rupee is going through a “healthy correction”.
- There’s “no need to panic” since the depreciation will boost the competitiveness of the Indian economy, he added.
Also read: The Rupee Is Falling and India Should Let It
2. India Rules Out Tax Cut Even As Fuel Prices Trigger Strikes
A cut in taxes on petrol and diesel has been ruled out for now as neither the central government nor some states have the appetite to stomach revenue loss from such a move, a top government official said today.
- While a cut in excise duty that the central government levies will impact fiscal deficit, states like Bihar, Kerala and Punjab are not in a position to cut sales tax, the official added, requesting anonymity.
- The government, he said, anticipates that international oil prices will moderate in coming days to take pressure off.
- Rising fuel prices have triggered India's opposition parties to unite and observe a nationwide strike.
- Violence erupted in Bihar, Maharashtra and other states as protesters damaged vehicles, burned tires and disrupted business operations.
Here’s when the government might be able to lower taxes on fuel.
3. Sensex’s Worst Day In Six Months; U.S. Stocks Rise
Indian equity benchmarks posted their worst day in nearly six months as rupee depreciated to record low amid President Donald Trump’s threat to escalate the trade war with China.
- The S&P BSE Sensex Index fell 1.2 percent or 468 points to 37,922.
- The NSE Nifty 50 Index tumbled 1.3 percent or 151 points to 11,438.
- 18 of the 19 sector gauges compiled by BSE ended lower.
- S&P BSE Auto index was the top loser, while the S&P BSE IT index was the sole gainer.
Follow the day's trading action here.
Stocks pared earlier gains as shares of Apple Inc. and Asia-based suppliers slumped after President Donald Trump insisted his trade war with China will spur more manufacturing jobs in the U.S.
- The S&P 500 had opened higher, breaking a four-day slide.
- The pound jumped after European Union chief Brexit negotiator Michel Barnier said a deal with the U.K. is “realistic” and “possible” within eight weeks.
- West Texas Intermediate crude gained 0.5 percent to $68.07 a barrel, the largest rise in more than a week.
Get your fix of global markets, here.
4. ArcelorMittal Revises Bid For Essar Steel
ArcelorMittal, in partnership with Japan’s Nippon Steel & Sumitomo Metal Corporation, is said to have offered Rs 42,000 crore to repay creditors of Essar Steel Ltd. under the insolvency and bankruptcy process, two people in the know told BloombergQuint.
- The Lakshmi Mittal-led bidder revised its initial offer at a meeting of the committee of creditors on Monday.
- The initial offer was to repay Rs 31,000 crore to Essar Steel’s lenders.
- While submitting its revised offer, ArcelorMittal said that it will repay lenders of Uttam Galva Steels Ltd. and KSS Petron Ltd. Rs 7,000 crore to settle their dues, after the National Company Law Appellate Tribunal ordered them to do so.
Here’s how Mittal’s offer compares with other bids.
5. IL&FS Board To Meet Again On Sept. 15 To Seek Loans From LIC, SBI
The board of Infrastructure Leasing & Financial Services Ltd. has decided to meet again on Sept. 15 to seek approval for a Rs 3,000-crore loan from the Life Insurance Corporation of India and State Bank of India, two people in the know told BloombergQuint.
- A meeting on Friday to discuss the same proposal remained inconclusive, the people said requesting anonymity.
- IL&FS is in the midst of a special audit by the Reserve Bank of India after the company failed to repay inter-corporate deposits worth Rs 350 crore to the Small Industries Development Bank of India.
- On Monday, the company defaulted on an additional Rs 100 crore repayment to SIDBI. This is in a series of such defaults which started on Aug. 27.
Here's why the loan from LIC and SBI is crucial.
6. N Chandrasekaran On JLR’s Challenges
Protracted Brexit talks are weighing on the recovery prospects of Jaguar Land Rover, the carmaker that is already under pressure to keep up as the global automobile industry moves toward electrification and automation.
- The focus of Tata Motors Ltd. is to ensure Jaguar Land Rover, that contributes almost 90 percent of its revenue, remains financially strong in the face of challenges, Tata Sons Chairman N Chandrasekaran said in a Bloomberg TV interview.
For them, because they are in the U.K., they don’t know what the outcome of Brexit is and results of trade agreements are going to be. So there are three or four things, all happening at the same time, so they are having to deal with all of this.N Chandrasekaran, Chairman, Tata Sons
A “bad Brexit” can jeopardise JLR’s £80 billion spending.
7. Once-In-A-Lifetime Dealmaking Spree
The biggest mergers-and-acquisitions boom in Indian history has investment bankers preparing for even more dealmaking to come.
- Transactions involving Indian companies have reached $104.5 billion in 2018, trouncing the previous annual record with almost four months left in the year.
- The combination of a new bankruptcy law, a race for dominance in the e-commerce industry and a record war chest at Asia-focused private equity funds has created what some are calling an unprecedented opportunity for dealmaking in the world’s fastest-growing major economy.
Here’s where the tally for 2018 could reach, according to PwC India.
8. The Hunt For Content To Feed India’s Data Addiction
For India’s telecom operators, fighting a bruising tariff war, cheap data is not enough to retain users.
- Having hooked Indians to online consumption, carriers now hunt for a steady stream of soaps to movies to feed the addiction.
- Content is the key beyond tariffs to defend market share, CLSA said in its August report. That, according to the brokerage, has started paying off for Bharti Airtel Ltd.
- That’s why both Bharti Airtel and Vodafone offer free Netflix and Amazon Prime memberships, besides having Eros and AltBalaji on board. Even, state-owned Bharat Sanchar Nigam Ltd. has partnered Eros now.
- Reliance Jio, on top of partnerships with the likes of Hotstar, bought about 25 percent stake in Balaji Telefilms Ltd. and Eros and acquired music streaming platform Saavn. Reliance Jio is locking in content owners to strengthen its offerings.
Find out which operator is leading the race to provide exclusive content.
9. The Global Financial Crisis And All The Prime Minister’s Men
With the collapse of Lehman Brothers, the global economy and markets worldwide plunged into the worst crisis seen since the days of the Great Depression of 1929. Despite being relatively insulated due to the dominance of domestic demand and macro-prudential measures, India was no exception.
Former deputy chairman of the erstwhile Planning Commission, Montek Singh Ahluwalia recalls that then Prime Minister Mannohan Singh called for a meeting soon after Lehman Brothers filed for bankruptcy, inviting the RBI governor, the Finance Minister and Ahluwalia.
Generally, on macro-economic matters, you wouldn’t have a meeting chaired by the PM. That made it evident to everybody that it is unusual and different. After that, I think, the system worked the way it should.Montek Singh Ahluwalia, Former Deputy Chairman, Planning Commission
- “The world didn’t collapse and developed countries did limp back to some kind of normal,” he said while remembering that the prognosis at the time was far worse than what the actual outcome has been.
- But the global economy is not necessarily a safer place, he added.
Read how the Manmohan Singh government reacted to the crisis.
10. Retirement Isn’t The Plan Jack Ma Needs To Work On
One year is a long time in business. For Alibaba Group Holding Ltd., it may not be enough. As Jack Ma has plans to hand over the reins as chairman to current Chief Executive Officer Daniel Zhang in 12 months from now, he hasn’t put in place a new business model for Zhang to build upon, writes Tim Culpan.
- Alibaba’s operating margin has fallen to historic lows as it has failed to find new businesses to replace its aging e-commerce model.
- It’s marketing model only works when turnover is brisk, but is strained when things slow and rivals come knocking.
- Then there’s Ant Financial. The world is in a tizzy about what the online financial provider could or might be in future.
Here’s why Alibaba is in no man’s land.