BQuick On Sept. 14: Top 10 News Stories In Under 10 Minutes
This is a roundup of the day’s top stories in brief.
1. Rupee, Nifty Rally; U.S. Stocks Struggle
India’s rupee and sovereign bonds climbed as slowing inflation added to optimism that policy makers will take steps to stem a rout in Asia’s worst-performing currency. That in turn helped equity benchmarks rise for a second consecutive day, with the NSE Nifty 50 Index posting its best two-day rally of 2018.
- The rupee jumped 0.5 percent to 71.82 per dollar, adding to Wednesday’s 0.7 percent advance that was its largest since May 25.
- The yield on India’s benchmark 10-year bonds dropped three basis points to 8.11 percent, after falling five basis points on Wednesday.
- The S&P BSE Sensex Index rose 0.99 percent or 373 points to 38,091.
- NSE Nifty 50 Index climbed 1.28 percent or 145 points to 11,515.20.
- All 19 sector gauges compiled by the BSE ended higher led by the S&P BSE Realty index’s 3.3 percent gain.
Follow the day's trading action here.
U.S. equities struggled to push higher after a report showed retail sales rose by less than forecast in August.
- Stocks in Europe gained earlier as prospects for U.S.-China trade talks and action by Turkey and Russia to support their currencies helped foster a positive mood.
- The dollar strengthened for the first time in three days.
- Oil was poised for a weekly gain as traders keep watch on Hurricane Florence.
Get your fix of global markets here.
2. Forex Reserves Fall Below $400 Billion For The First Time In 2018
India’s foreign exchange reserves fell further as the central bank continues to intervene in the currency markets to cushion the fall in the rupee, which has depreciated more than 12 percent so far this year.
- Forex reserves fell to $399.3 billion as on Sept. 7, 2018, a drop of $819 million over the previous week.
- Foreign currency assets, the largest segment of reserves, fell $887 million in a week, showed data released by the RBI.
- India’s forex reserves have fallen from a peak of $426 billion in April to just below $400 billion now.
Much of the decline is from the dollar sales.
3. Brokers Seek Delay In Extended Derivative Trading
Brokerages are urging India’s market regulator to modify a plan to extend equity derivatives trading hours due to concerns over their readiness and the costs of implementing the proposal, according to people with knowledge of the matter.
- Local and foreign brokers have asked the Securities and Exchange Board of India to postpone until January its plan to introduce longer trading hours, citing the need for more testing.
- They also discussed extending trading till 5 p.m., a shorter day than the 11:55 p.m. close that SEBI had said it would allow, the people said
- India is trying to woo foreign investors across different time zones to trade onshore after a fight between the National Stock Exchange of India Ltd. and the Singapore Exchange Ltd. left investors looking for new ways to manage their exposure to Indian stocks.
Here’s what the brokers are lobbying for.
4. Mutual Fund Houses’ Top Bets In August
Inflows into equity mutual funds declined for the fourth straight month in August even as markets scaled new peaks during the period.
- Yet, the mutual fund industry witnessed a total inflow of Rs 1.74 lakh crore, led by the liquid/money market category.
- Total assets under management touched a record of over Rs 25 lakh crore.
- Total equity assets, too, rose 4.2 percent to Rs 8 lakh crore.
Here’s what India’s top three mutual funds bought and sold in August.
5. No Wind In Its Sail
Shares of Cochin Shipyard Ltd., which listed in August last year, have eroded all gains in the last month to trade below the issue price as a weaker rupee increased costs of the state-run shipbuilder.
- The stock has fallen more than 20 percent so far this year.
- The company—which specializes in ship building and repairing—reported weak numbers in the quarter ended June, in part due to high raw material costs.
- Revenue rose 18 percent and margins slipped by 300 basis points to 17.5 percent.
- The rupee depreciated over 12 percent against the U.S. dollar and 10 percent against the euro this year.
- With most of Cochin Shipyard’s purchases made or denominated in these currencies, its cost of future capital expenditure is set to rise.
Here’s more on India’s most profitable shipbuilder’s challenges.
6. NCLT Allows Shivinder Singh To Withdraw Case Against Brother
The National Company Law Tribunal allowed Shivinder Singh to withdraw the petition he filed against brother Malvinder Singh and long-time associate Sunil Godhwani for alleged “oppression and mismanagement” of group companies.
- The primary goal remains resolving the group’s issues through constructive and transparent engagement with Daiichi Sankyo and our other creditors, Shivinder said in a press statement today.
I intend to use the mediation process to get to a critical decision. Namely, whether my brother or I take full responsibility for resolving the group’s issues with Daiichi Sankyo and other lenders.Shivinder Singh’s Statement
- Shivinder Singh has accused elder brother Malvinder of forging his wife Aditi Singh’s signature and conducting illegal financial transactions along with Sunil Godhwani, former top executive of the family’s healthcare-to-financial services empire.
- Yesterday, the brothers entered into mediation, according to an NCLT filing, after “repeated urging” by their mother.
Shivinder will take fresh action if the mediation fails.
7. The Changing Face Of Shareholders: Outsourced Governance
The HDFC episode has touched a raw nerve – the leverage that U.S. proxy advisors have over the governance of Indian companies, writes Umakanth Varottil.
- Company managements have raised alarm bells that U.S. proxy advisory firms resort to a ‘hit and run’ strategy.
- The U.S. proxy advisory firms operate in a duopolistic scenario, with ISS and Glass Lewis enjoying a 97 percent market share between them.
- Proxy firms are prone to gravitating towards a set of ‘check-the-box’ or ‘one-size-fits-all’ metrics.
Consumers of governance recommendations must be discerning in their analysis and acceptability.
8. India’s Growth-Inflation Balancing Act
After a quarter of world beating economic growth and inflation close to target, India has, for now, struck a growth-inflation balance it has coveted for some time. Is this a passing ‘Goldilocks’ phase for the economy? Or have structural changes helped? Economists have differing views.
- One view is that inflation targeting has, in part, helped keep inflation in check. The government and RBI have set a flexible inflation target of 4(+/-2) percent. Since August 2014, inflation has stayed within the band.
- Another analysis of the current growth-inflation mix suggests that India’s potential growth is higher than the 7-7.5 percent that it is currently believed to be.
- A third, and perhaps most likely explanation, is that India and other Asian economies lucked-out because of an extended period of low oil prices.
Has India finally managed to strike a balance?
9. India Should Let Data Roam Free
India has a long history of drafting laws to protect its companies. In the process, Indians themselves often suffer. That’s precisely what will happen if the government proceeds with plans to force companies doing business in India to store all customer data locally, writes Mihir Sharma.
- The first salvo in this campaign was fired in April, when the Reserve Bank of India ordered companies to store the “the entire data relating to payment systems operated by them … in a system only in India.”
- While India isn’t the only country to prevent companies from sending their data offshore, the RBI edict was unusually strict. Even Russia allows copies to be kept elsewhere.
- Google, among others, has complained loudly that the RBI’s six-month deadline, which is approaching fast, is too short. Meanwhile, the government has begun considering a draft data-security law that requires data centers for all companies be physically located within India.
Here’s the case against data localisation.
10. Another Financial Crisis In 2020?
How bad will the next crisis be? JPMorgan Chase & Co. has an idea. A decade after the collapse of Lehman Brothers sparked a plunge in markets and a raft of emergency measures, strategists at the bank have created a model aimed at gauging the timing and severity of the next financial crisis. And they reckon investors should pencil it in for 2020.
- The good news is, the next one will probably generate a somewhat less painful hit than past episodes, according to their analysis.
- The bad news? Diminished financial market liquidity since the 2008 implosion is a “wildcard” that’s tough to game out.
Read this to understand JPMorgan’s model and predictions better.
Catch BloombergQuint’s coverage of life after Lehman, here.