BQuick On Aug. 22: Top 10 Stories In Under 10 Minutes
Here is a roundup of the day’s other top stories in brief.
1. Chidamabaram To Stay In CBI Custody
Congress leader P Chidambaram was sent to four-day CBI custody by a Delhi court which said his custodial interrogation was justified in the INX Media case.
- The court said Chidambaram will be in the CBI custody till Aug. 26, during which the agency will get him medically examined regularly as per the rules, and allowed his family members and lawyers to meet him for half an hour every day.
- "Considering the facts and circumstances, I am of the view that police custody is justified," Special Judge Ajay Kumar Kuhar said.
- After the pronouncement of the order, 73-year-old Chidambaram was immediately taken out of the court room by the CBI team.
Follow the day's developments here.
2. Nifty At 6-Month Low, Rupee Falls To 8-Month Low
Indian equity benchmarks declined for the third-straight session driven by losses in private lenders led by Yes Bank Ltd.
- The Nifty slipped to a six-month low as Chief Economic Adviser batted against offering stimulus for struggling sectors.
- S&P BSE Sensex fell as much as 1.59 percent or 587 points to 36,472.93
- NSE Nifty 50 declined as much as 1.62 percent or 177 points to 10,741.35.
- “The market is getting impatient with regards to the prospects of a stimulus package from the government and the comments made by some government officials have dimmed hopes,” said Vivek Ranjan Mishra, head (Fundamental Research) at Karvy Stock Broking, in an emailed statement.
- Nine out of 11 sectoral gauges compiled by NSE traded lower.
- Shares of DLF Ltd. plunged the most in almost three years after the Hindu BusinessLine reported that the Supreme Court is looking into whether the developer suppressed information about legal battles involving its biggest assets.
Follow the day’s trading action here.
The Indian currency was not spared from the rout either. The rupee fell to its lowest level since December 2018 on Thursday, dragged down by a weaker Chinese currency and continued foreign investor selling in the domestic equity markets.
U.S. stocks pared gains and Treasuries rose as traders parsed mixed economic data and awaited an address by Federal Reserve Chairman Jerome Powell on Friday.
- Traders assessed reports showing labour-market strength and U.S. factory activity contraction.
- Earlier on Thursday, Treasury yields spiked after Fed Bank of Kansas City President Esther George said the U.S. doesn’t need lower rates.
- Most European bonds fell as a gauge of German manufacturers reinforced recession concern and European Central Bank minutes showed officials were worried that investors would lose faith in their ability to revive inflation.
- The British pound jumped amid optimism that a Brexit deal can be reached.
- Gold dipped 0.2 percent to $1,513.20 an ounce.
Get your daily fix of global markets here.
3. Yes Bank Stock In A Tailspin
Private sector lender Yes Bank Ltd. saw its share price fall nearly 14 percent on Thursday, taking the stock down to a six-year low. The bank’s market capitalisation has now fallen about 85 percent from its peak.
- Yes Bank has been in the midst of a clean-up ever since founder Chief Executive Officer Rana Kapoor stepped down at the start of this year.
- Ravneet Gill, who took over in March, identified a watch-list of stressed assets that he is trying to cure. He has also been working to raise capital.
- A week ago, the bank concluded a qualified institutional placement, raising Rs 1,930 crore.
- The news of the fund raise should have come as a relief for investors but it hasn’t played out that way.
Not enough capital? Or the stressed asset pool? What’s behind Yes Bank's plunge?
4. Chief Economic Adviser Bats Against Stimulus
Nearly two weeks after industry leaders met Finance Minister Nirmala Sitharaman, seeking a stimulus package to boost the slowing Indian economy, the chief economic adviser spoke against such interventions.
- Krishnamurthy Subramanian, while speaking at the Mindmine Summit in Delhi today, said sectors go through “sunrise” and “sunset” phases in a market-driven economy.
- Using taxpayers’ money to intervene when sectors face stress, he said, is a moral hazard where “profits are private and losses are socialised”.
- Subramanian, however, said it isn’t precise to assume the situation in the automobile sector is symptomatic of an economic slowdown.
I think we expect the government to use taxpayers money to intervene every time there is a sunset phase. You introduce possible moral hazard from too-big-to-fail and possibility of a situation where profits are private and losses are socialized, which is basically an anathema to the way the market economy functions.K Subramanian, Chief Economic Adviser
At the same event, NITI Aayog Chairman said that the entire financial system is under threat.
5. EPFO Shuns Private Bonds
India's Employees Provident Fund Organisation decided not to invest in debt of private companies amid concerns about the quality of corporate paper.
- The Central Board of Trustees approved the decision to withhold any further investments in private sector company bonds, according to a statement issued after its meeting in Hyderabad.
- The CBT, which has representatives from trade unions, employers and central and state governments, also made it compulsory that one of the two required ratings considered for such investments should be from Crisil, Care Ratings, ICRA or India Ratings.
- EPFO invests in only AA or higher-rated paper.
The series of defaults by IL&FS Group and recent default by Anil Ambani Group subsidiaries triggered the caution.
6. DHFL Proposal: Some Get Paid, Everyone Else Waits
Certain retail investors who participated in non-convertible debenture issuance by Dewan Housing Finance Corporation Ltd. and retail depositors will be repaid in time at contractual interest rates, according to the resolution plan proposed by the beleaguered housing financier.
- Full repayment is applicable for investors and depositors with up to Rs 10 lakh outstanding.
- Any deposits or NCDs beyond Rs 10 lakh would be treated on a par with secured lenders, DHFL has proposed.
- For non-retail NCD holders and banks that have extended term loans and other forms of credit, DHFL has proposed extended repayment periods, lowered interest rates and conversion of a part of their exposure in to long-term equity-like instruments.
BloombergQuint has reviewed a copy of the proposed resolution plan. Here's the fineprint.
7. How TV Broadcasters Are Gaming New Tariff Rules
As new consumer-friendly pay television rules shrunk viewership and sent rankings topsy-turvy, Indian broadcasters found a way around. The telecom regulator is now studying whether discounts should be capped.
- The television tariff rules, rolled out in February end, allow subscribers to pay for what they view, and is aimed at curbing the practice to bundle unwanted channels in bouquets.
- Paying Rs 130 a month gives access to 100 free-to-air channels, and viewers can choose more by paying a maximum of Rs 19 per channel.
- Yet, the number of bouquets has not come down and broadcasters were offering as much as 70 percent discount on the combined price of channels offered in bouquets.
- Some broadcasters have cut bouquet price by 80-90 percent.
Broadcasters have been confusing consumers with too many bouquets resulting in "perverse pricing".
8. Riding A Tractor To Get Out Of The Auto Ditch? Hold On.
Over the last few months, just like a long-incubating infection, the causes of India’s automobile slowdown have been coming to the fore. The unavailability of financing, waning millennial demand as a result of the rise of shared mobility, new emission norms, and the government’s push towards electric vehicles, added to the pressures of a weakening economy.
- One sub-segment of the automotive space has the appearance of being an outlier to these trends, tractors.
- So will tractors avoid the disruption that other auto verticals are facing?
- And will the business cycle for tractors see a revival sooner than others?
There’s reason for caution before jumping to that conclusion, writes Niraj Shah.
9. A Navaratri Economic Re-Boot For A Puritan Modi
Raghav Bahl presents nine ideas to re-think, re-boot and turn around India’s economy.
- Save assets; inflict losses on equity/bond-holders.
- Use deep discount rights issues to multiply every public rupee infused in banks.
- Shed diffidence/doubt and throw a lifeline to NBFCs, along with the real estate and automobile sectors.
Read the other six ideas here.
10. Worried About Your SIP? Don’t Stop...Yet
If you’re an equity investor, chances are the recent slide in the market has made you a little worried. It’s also possible that you’re none too pleased about the returns over the past year or two. That’s understandable as the benchmark Nifty50 has lost more than 1,200 points in a month.
- But financial planners advise that small investors shouldn’t get fazed by this, and instead treat this as an opportunity to accumulate if their requirement for funds is at least five years away.
- “You have to go back to the objective you had when you started the SIP (systematic investment plan),” said Harshvardhan Roongta, founder of Roongta Securities.
- “I tell my clients that in the stock market, many times 80 percent of returns come in 20 percent of the time,” said Gajendra Kothari, managing director and chief executive officer of Etica Wealth Management.
Here’s an illustration that might put things in perspective for you.