BQuick On Sept. 17: Top 10 News Stories In Under 10 Minutes
This is a roundup of the day’s top stories in brief.
1. Bank of Baroda + Dena Bank + Vijaya Bank!
The Indian government announced the amalgamation of three public sector lenders -- Bank of Baroda, Dena Bank and Vijaya Bank.
- The announcement was made after a meeting of the ‘alternative mechanism’ set up last year to consider consolidation in the banking sector.
- The proposal will now need to be passed by the boards of individual banks.
- The merger will create a lender which will be the third largest in India, said Rajiv Kumar, secretary in the Department of Financial Services.
- Finance Minister Arun Jaitley added that the merger has been conceived in a way that the combined bank does not end up being weaker than the individual entities.
Here's how the merged entity will look like.
2. Goldman Sachs Downgrades India
Goldman Sachs Group Inc. downgraded Indian equities for the first time in more than four years citing elevated valuations and upcoming elections.
- The financial services company has been bullish on Indian stocks since March 2014 on expectations of pro-growth government policies and structural reforms that can lead to a recovery in corporate profits.
- “The risk reward for Indian equities is less favorable at current levels,” said Sunil Koul, analyst at Goldman Sachs. “We lower our investment view from ‘Overweight’ to ‘Marketweight’.”
- The company cut its 12-month Nifty target to 12,000 from 11,900.
We expect markets to consolidate heading into the elections and the Nifty to reach our 12-month target of 12,000 as political uncertainty wanes and earnings accrue.Sunil Koul, Analyst, Goldman Sachs
Here are five reasons for the India downgrade.
3. Rupee, Stocks Fall; U.S. Opens Lower
The Indian rupee halted its two-day gain as the measures announced by the government to curb the local unit’s fall were seen as inadequate. Indian equity benchmarks also followed the currency after Goldman Sachs Group downgraded Indian equities.
- The domestic currency closed 0.9 percent lower at 72.5 versus the dollar.
- The S&P BSE Sensex Index fell 1.33 percent or 505 points to 37,585.
- NSE Nifty 50 Index slumped 1.2 percent or 137 points to 11,378.
- Nine of 11 sector gauges compiled by the National Stock Exchange ended lower.
Follow the day's trading action here.
U.S. stocks started the week lower, while Asian equities slumped and European shares gained, as investors grappled with the latest American threats to expand tariffs on Chinese goods.
- The S&P 500 Index fell Monday morning, as did the Nasdaq 100, pulled down by declines in Amazon.com Inc. and JD.com Inc.
- The dollar slipped and emerging-market currencies declined.
- West Texas Intermediate crude rose 0.8 percent to $69.53 a barrel.
Get your fix of daily global markets here.
4. It’s Raining AIF Investments
Alternative Investment Funds, which pool in money from rich and sophisticated investors, have raised nearly Rs 1 lakh crore since the regulator first allowed them six years ago.
- Of this, they have invested about Rs 75,000 crore (about $10 billion) as of June, according to the data released by Securities and Exchange Board of India. Nearly half these investments came in 12 months through June.
- In the last one year, money raised by all classes of AIFs doubled, with an average commitment of nearly Rs 7,000 crore and monthly fundraise of over Rs 4,000 crore.
- AIFs started operations in India in December 2012 after the Securities and Exchange Board of India brought in new regulations governing them that replaced the erstwhile venture capital regulations.
5. Add To Amazon Cart: Insurance
Amazon.com Inc. plans to sell insurance in India as the world’s largest online retailer looks to join local rivals in strengthening financial services offerings.
- Amazon India wants to start by selling life, health and general insurance, according to its filings with the Registrar of Companies.
- The Seattle-based giant said it aims to carry out the business of soliciting, procuring and servicing insurance as a corporate agent.
- India’s insurance industry is expected to be worth $280 billion by 2020, according to estimates by an Assocham-APAS report.
But Amazon will face intense competition.
6. CLP India Gets A Canadian Investor
Canadian institutional fund Caisse de dépôt et placement du Québec - or CDPQ - is set to acquire a non-controlling stake in clean energy producer CLP India Pvt. Ltd, expanding its investments into India’s power sector.
- CLP Group will transfer a 40 percent shareholding in its wholly-owned subsidiary CLP India for Rs 2,640 crore in cash.
- The group will maintain the remaining 60 percent stake with itself.
- CLP India - a subsidiary of CLP Holdings Ltd. which is listed on the Hong Kong Stock Exchange - is one of the largest foreign investors in the Indian power sector with a total committed investment of over Rs 14,500 crore.
Here’s more on the deal dynamics.
7. Small Businesses Turn To Private, Non-Bank Lending
Private and non-bank lenders increased their share in lending to small businesses, as state-run peers pulled back on fresh loans due to a build-up of bad debt on their books.
- The contribution of private banks and non-bank financial companies in loans to micro, small and medium enterprises rose to over 41 percent as on June 30 from 37.7 percent a year ago.
- The share of private banks rose from 28.1 percent to 29.9 percent, while NBFCs held on to 11.3 percent of the market compared to 9.6 percent a year ago.
- Public sector banks, excluding State Bank of India, have already lost market share in the retail loans segment where loan growth has been strong over the last few years.
- Lending activity is now shifting towards small and medium sized enterprises and data suggests that private lenders are gaining ground here too.
Find out more on why PSU banks are losing market share.
8. India Rues Its Own Belt-and-Road Debt Fiasco
It’s remarkable that India – itself a vocal critic of belt-and-road – allowed a local financier to do something similar on home turf, with little accountability or supervision, writes Andy Mukherjee.
- A perennial paucity of budgetary resources has forced taxpayers to outsource infrastructure — not to the Chinese, but to local public-private partnerships led by Infrastructure Leasing & Financial Services Ltd.
- However, in many instances, only the returns became private. Risks remained with the public.
- IL&FS and its associates have $12.5 billion in debt, of which $500 million is due over the next six months.
- The group has only $27 million of liquidity at hand, sparking a debt-repayment crisis that threatens to engulf Indian banks and mutual funds to insurance and pension funds.
Here’s how the risks have come back to bite India.
9. Congress Stakes Claim In Goa
With Chief Minister Manohar Parrikar hospitalised, Goa's main opposition party, the Indian National Congress, submitted a memorandum to Governor Mridula Sinha on Monday, staking claim to form an alternate government.
- The move came at a time when the Bharatiya Janata Party high command has sent three senior leaders—Ram Lal, BL Santhosh and Vinay Puranik—to Panaji to meet the state party leaders and allies to take stock of the political situation.
- Parrikar, 62, who is suffering from a pancreatic ailment, is currently admitted to the All India Institute of Medical Sciences in Delhi for treatment.
- The Congress, which has 16 members in the 40-member state Assembly, submitted a memorandum to the governor, urging her not to dissolve the Assembly and instead invite the party to form the government, Leader of Opposition Chandrakant Kavlekar said.
Here’s more on Congress’ power move.
10. Airport Of The Future
Imagine landing at a major airport and the only human official you meet on your way through the terminal is a customs officer.
- Singapore’s Changi Airport, voted the world’s best for the past six years by Skytrax, is pursuing that goal of extensive automation with such vigor that it built an entire terminal to help test the airport bots of the future.
- Changi opened its Terminal 4 last October partly with the idea of using its smallest and newest facility to test and develop automation.
- The goal is to have it all working for its gigantic Terminal 5, a monster building that would be able to handle 50 million passengers a year when it opens at the end of the next decade, making it one of the largest and most automated passenger terminals in the world.
Here’s how an airport without humans will work.