BQuick On April 23: Top 10 Stories In Under 10 Minutes
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This is a roundup of the day’s top stories in brief.
1. Forex Swap 2.0 Concludes
The Reserve Bank of India concluded its second long-term forex swap to infuse liquidity into the domestic banking system. By purchasing $5 billion in foreign exchange for a tenure of three-years, the central bank has infused Rs 34,874 crore, it said in a release on Tuesday.
According to auction details put out by the RBI:
- Bids worth $18.65 billion were received.
- This was spread across 255 offers. The RBI accepted five offers worth $5 billion.
- The cut-off premium was set at 838 paise, higher than the 790 paise forecast by a Bloomberg poll of five forex traders.
Separately, the RBI announced two rounds of bond purchases in May. Here are the details.
2. Bankers Seek 30-Day Breather
The Indian Banks’ Association has written to the Reserve Bank of India seeking relief from some provisions included in the regulator’s Feb.12, 2018 circular, which was scrapped after an order from the Supreme Court.
- The RBI is in the midst of issuing a revised circular to help guide banks through the process of stressed asset resolution.
- According to two senior bankers, who spoke on condition of anonymity, banks have requested that the process of resolution begin 30 days after a default.
- In its original circular, the RBI had asked banks to begin resolution even if the account is overdue by one day.
- The provision had been seen as impractical by bankers.
RBI had argued that banks must recognise and begin resolving stress as soon as it is visible.
3. ITC Accuses Hotel Leela Of Oppression
ITC Ltd. has filed a petition against Hotel Leelaventure Ltd. with the National Company Law Tribunal, accusing the luxury property owner of “oppression and mismanagement”.
- “ITC, through their advocates, today mentioned the matter at 10:30 a.m. before the NCLT, Mumbai Bench. The learned bench of NCLT has placed the said application for hearing tomorrow,” Hotel Leela Venture said in an exchange filing.
- To file such an application, the petitioner must have one-tenth of the issued share capital of a company or represent 10 percent of the total number of members.
- ITC held 7.92 percent of Hotel Leelaventure's shareholding at the end of March.
- ITC’s petition comes after JM Financial ARC administered a Rs 3,950-crore deal involving the sale of five Leela hotels in March.
Such a petition can be filed if affairs are being conducted in a manner that is prejudicial to members' interests.
4. Even Bulls Like It Cheaper
The current valuations of Indian companies are too steep but that hasn’t stopped Aberdeen Standard Investments from betting on the world’s fastest growing large economy.
- “We would love India to be cheaper. We are reluctant to pay very high prices,” said Hugh Young, Asia Pacific head at the Edinburgh-based investment company, which has about $643.3 billion in assets under management.
- “We wish we were able to buy good companies at 10 times the earnings rather than pay 20-30 times.”
- The market veteran said there’s a lot of scope for financials to prosper in India.
But the past few years have been disappointing, said Young.
5. Nifty Drops, U.S. Stocks Advance
Indian indices fell for the third trading session in a row to register their lowest level since March 28, dragged by losses in auto stocks.
- The S&P BSE Sensex ended 0.21 percent lower at 38,564.
- The NSE Nifty 50 closed at 11,575, down 0.16 percent.
- The broader market index represented by the NSE Nifty 500 Index ended 0.13 percent lower.
- Seven out of 11 sectoral gauges compiled by NSE ended lower.
Follow the day’s trading action here.
U.S. equities climbed on the back of better-than-forecast earnings, while the dollar strengthened and Treasury yields dipped.
- The S&P 500 Index, trading near the highest valuation since September, extended its advance as Twitter, Coca-Cola and Hasbro climbed following favorable first-quarter reports.
- Banks were the worst performers in the Stoxx Europe 600 Index, which advanced as many markets reopened following the long Easter weekend.
- The pound weakened as U.K. Prime Minister Theresa May confronted further challenges to her leadership.
- West Texas oil rose 0.8 percent to $66.24 a barrel.
Get your daily fix of global markets here.
6. Trouble At Other Anil Ambani Firms
Two financial services firms of the Anil Ambani-led Reliance Group — Reliance Capital Ltd. and Reliance Home Finance Ltd.—have seen their credit ratings downgraded for a second time in recent weeks. The firms have also seen their share price fall, with Reliance Capital stock declining 35 percent since the start of April and Reliance Home Finance slipping 19 percent since April 4.
What’s plaguing the two companies?
- While non-bank lenders have all been under pressure since September 2018 when Infrastructure Leasing and Financial Services Ltd. defaulted, the recent concern around the Anil Ambani group companies stems from their deteriorating liquidity profile.
- Brickwork Ratings Ltd., which downgraded debt securities of Reliance Capital and Reliance Home Finance on April 19, cited the group’s deteriorating financial flexibility.
- Care Ratings, which downgraded securities of the two companies a day before, highlighted similar concerns.
- Both agencies have kept the debt instruments on “rating watch with negative implications”.
Reliance Home Finance is facing collateral damage from Reliance Capital’s woes.
7. Why India Does Not Declare ‘Droughts’ Any More
Whatever Indian Meteorological Department’s definition, management of a drought cannot wait until July or August. Prudence requires that we prepare in advance, writes Siraj Hussain.
- In the last five years, the country has faced two large failures of monsoon.
- In 2015, IMD changed what it defined as a drought.
- Then in 2016, ‘drought’ was done away with, replaced by ‘deficient year’.
What impact has that had on crops across the country? Read here to find out.
8. Supreme Court Pulls Up Rahul Gandhi
The Supreme Court on Tuesday issued a contempt notice to Congress President Rahul Gandhi for his remarks on the Rafale judgment, which the apex court had said were "incorrectly attributed" to it.
- The top court said it will hear the criminal contempt petition filed by Member of Parliament Meenakshi Lekhi of the Bharatiya Janata Party, against Gandhi on April 30, along with the pending review petition against the Dec. 14, 2018 verdict in the Rafale jet deal.
- The top court rejected Gandhi’s plea to close the criminal contempt petition filed by Lekhi.
9. Weaker Leaders Are Better For India
For three decades, until elections in 2014, India’s voters refused to give any single political party a majority in Parliament. It was an age of coalitions. It was also the era when the Indian economy came of age. The country opened up, reformed, achieved high growth rates and lifted hundreds of millions of people out of poverty.
Yet many proponents of reform seem to think coalition governments are inherently a bad idea, writes Mihir Sharma.
- The facts argue otherwise. Modi’s government hasn’t been especially reformist.
- Compare that with the record of past coalition governments: even the shakiest of them, the United Front, pushed forward reform.
- Even the reforms of 1991 themselves were introduced by a government that lacked a majority.
If coalition governments work just as well, if not better, why does India’s pundit class dread them so much?
10. India’s Largest Urban Makeover
In the next eight years, the rundown structures in Naigaon area of central Mumbai will make way for 142 skyscrapers in Lower Parel, Worli and Naigaon—kind of mini townships with 17- to 66-storeyed towers, playgrounds, community centres, gardens, clubs and a school. About 15,584 tenants who will get a 500-square-foot two-bedroom apartment each—the biggest offered in any such scheme in India.
- BDD Chawls, built in the 1920s on land reclaimed from the sea, offered cheap housing in erstwhile Bombay, then a manufacturing hub.
- Four clusters came up in Lower Parel, Worli, Naigaon, and Sewri. Maharashtrian, North Indian, Telugu and Tamilian families who came to the city in search of jobs, mostly in the spinning mills, made it their home.
- Every building, with a row of 20 tiny homes called kholis on each of its three floors, looks onto a courtyard. Each tenement opens into a corridor—where women dry laundry, kids play and families store anything that doesn’t fit within the 160 square feet.
But as families grew, the homes became even more crammed. Here’s the story of those who live in the crumbling BDD Chawls.