BQuick On Sept. 25: Top 10 News Stories In Under 10 Minutes
This is a roundup of the day’s top stories in brief.
1. Yes Bank Seeks To Extend Rana Kapoor’s Term
The board of private sector lender Yes Bank Ltd. has decided to request the Reserve Bank of India for an extension on Rana Kapoor’s term as the bank’s managing director and chief executive officer.
...it was decided that Reserve Bank of India be requested for an extension up to minimum April 30, 2019 for finalization of audited financial statements for fiscal year ending 2019; there after subject to RBI approval, upto September 30, 2019 in order for the statutory AGM process to be completed.Yes Bank Statement
- The banking regulator in a letter last week had said that Kapoor’s term as MD & CEO of Yes Bank would only extend up to Jan. 31, 2019.
- The board had earlier approved a three-year term for Kapoor, starting September 2018.
A search and selection committee to find a new CEO has been formed.
2. Why IL&FS Picked This Route To Solvency
Insolvent infrastructure finance firm Infrastructure Leasing & Financial Services Ltd. has sought to reorganise its financial affairs under a scheme of arrangement involving itself and 40 group companies. The company has filed an application for such a scheme with the National Company Law Tribunal, it said in a statement today.
- The resolution of IL&FS presents a complex challenge because of its need for capital and debt restructuring and the lack of a specific legal framework.
- IL&FS is a core investment company as per classification of the RBI. That is, a non-banking financial company whose core business is to make investments.
- In RBI parlance, it is better described as a CIC - SI - ND or a Systemically Important Non-Deposit Accepting CIC.
- This classification is important as it determines what route IL&FS can take to resolve its insolvency.
And IL&FS’ 24 direct and 132 indirect subsidiaries only add layers of complexity.
3. Indian Markets Snap Losing Streak; U.S. Stocks Rise
Indian equity benchmarks snapped their worst losing streak of 2018 led by HDFC twins, Kotak Mahindra Bank Ltd. and Infosys Ltd.
- The S&P BSE Sensex Index rose 1 percent or 347 points to 36,652.
- The NSE Nifty 50 Index climbed 0.9 percent or 100 points to 11,067.
- For most part of the day, the benchmarks were highly volatile as Nifty swung 20 times between gains and losses.
- However, the sentiment improved after the LIC Chairman VK Sharma said that LIC will ensure IL&FS doesn't collapse and did not rule out raising stake in the beleaguered company.
- S&P BSE Healthcare Index was the top gainer, while the S&P BSE Realty Index was top loser.
Follow the day’s trading action here.
U.S. stocks struggled for direction after two days of declines, as surging oil prices lifted energy producers while automakers declined.
- The S&P 500 Index was little changed as of 10:40 a.m. in New York; the Nasdaq 100 was little changed.
- The tech-heavy Nasdaq 100 lagged behind other gauges as Facebook Inc. fell after Instagram’s founders said they were leaving the company.
- West Texas Intermediate crude climbed 0.5 percent to $72.47 a barrel, near the highest in almost four years.
- Treasuries fell as the Federal Reserve started its two-day policy meeting.
Get your fix of global markets update here.
4. India Not Attractive For FIIs, BofAML Says
The valuations of Indian equities aren’t compelling enough to attract foreign investors. That’s the word from Sanjay Mookim, India equity strategist at Bank of America Merrill Lynch.
Indian equities have overshot and are trading at all-time highs compared with other emerging market economies.Sanjay Mookim, India Equity Strategist, BofAML
- “The domestic risk off is very likely in India with the elections coming due to which we are cautious on equity markets for a while,” he said.
Here’s why BofAML expects further downside in Indian equities.
Also Read: India Loses Asia’s Best Stock Market Crown
5. Analysts Call For Faster Liquidity Infusion By RBI
With banks borrowing more from the Reserve Bank of India than they have in at least the last two years, market participants feel that the central bank needs to intervene more decisively to calm nerves.
- The liquidity deficit has moved closer to Rs 1.5 lakh crore in recent weeks driven by reasons ranging from advance tax outflows and increased demand during the festive season, to intervention in the currency markets.
- Other factors such as the approaching election season, when demand for currency increases, could mean that liquidity tightness will persist.
- Open Market Operations by the central bank can help contain the domino effects of liquidity tightening in the financial markets, said Bank of America Merrill Lynch in a report on Tuesday.
- The RBI will need to inject $40 billion (about Rs 2.8 lakh crore) by March 2019, the report estimates.
Here’s what analysts and economists are saying.
6. Fiscal Deficit Hits 94.7% Of FY19 Target
India’s fiscal deficit rose further in August, inching closer to the government’s budgeted target for financial year 2018-19. However, it remained lower than what it was during the same month last year.
- Fiscal deficit—the gap between the government’s revenue and expenditure—stood at Rs 5.91 lakh crore at the end of August.
- The gap was 94.7 percent of the budgeted estimate of Rs 6.24 lakh crore for 2018-19.
- It stood at 96.1 percent in August last year.
Here’s a breakdown of deficit numbers.
7. Oyo's $1 Billion Boost
Oyo Hotels is raising $1 billion to fund expansion into China and other global regions.
- Existing investors including SoftBank Vision Fund, Sequoia Capital and Lightspeed Venture Partners have put in $800 million, with commitments for another $200 million, the company said on Tuesday.
- About $600 million of the total will be plowed into China where Oyo began operations only 10 months ago.
- The funding values the startup at $5 billion, according to a person familiar with the matter who asked not to be identified because the matter is private.
Oyo is now India’s most valuable startup after Paytm's parent .
8. Decriminalising Politics: Ball In Parliament’s Court
The Supreme Court today ruled that candidates cannot be disqualified if charges have been framed against them in criminal cases, and left it to the legislature to frame laws to clean up India’s politics.
The time has come for the Parliament to take steps to ensure people facing serious criminal charges do not enter politics.Supreme Court Judgement
- The apex court said there was a need for a law to prevent persons with serious criminal cases pending against them from entering the legislature and be a part of lawmaking.
- It held that all candidates will have to declare their criminal antecedents to the Election Commission before contesting polls.
- A five-judge Constitution bench, headed by Chief Justice Dipak Misra, said that citizens have a right to be informed about the antecedents of their candidates.
The top court termed the criminalisation of politics as "unsettling".
9. Khan Vs Modi = $35 Billion Opportunity Lost?
India and Pakistan’s bitter rivalry is costing them $35 billion worth of annual trade, the World Bank said in a report.
- Someone might want to tell the two countries’ leaders -- both of whom want to boost trade to battle widespread poverty.
- The World Bank called for South Asia, the world’s least economically-integrated region, to start cooperating instead of feuding.
- Trade between India and Pakistan, the region’s two largest economies, could jump to $37 billion from $2 billion if New Delhi and Islamabad tore down artificial barriers, last week’s report found.
Here’s how South Asia’s trade potential is being wasted.
10. U.S. Fed To Stick With Quarterly Hikes?
The Federal Reserve will raise interest rates this week and continue its quarterly drumbeat of 25-basis-point increases straight through to June 2019, according to economists surveyed by Bloomberg.
- That’s a more aggressive pace for hikes over the coming months than Fed watchers anticipated in June, when they predicted the Federal Open Market Committee would skip a move at its December meeting.
- Such a pause won’t come until next September, economists now say.
- In a poll conducted Sept. 18-20, economists expected the upper boundary of the Fed’s target range for the federal funds rate to hit 3 percent in June 2019 and stay there until the fourth quarter, when they saw a third hike for the year.
- That’s a slight step up in pace from the previous survey three months ago when the median estimate was for 2.75 percent in June.
Here’s why economists have fast-tracked their expectations.