BQuick On Aug. 14: Top 10 Stories In Under 10 Minutes
Here is a roundup of the day’s top stories in brief.
1. Why Is Mukesh Ambani Putting His Reliance On A Debt Diet?
It’s no secret that Reliance Industries Ltd. needed to deleverage. The writing was on the wall – sell assets to pare debt.
- That Ambani chose to sell portions of core, or crown-jewel businesses—refining and petrochemicals—is not surprising.
- Curiously though, he has also decided to sell stakes in his new economy businesses, or the new crown jewels.
- Why, Ambani even spoke of selling real estate and financial investments, if needed.
What explains the rush? Doesn’t it signal distress to buyers, asks Menaka Doshi.
2. Trade Deficit Narrows, WPI Declines
India’s trade deficit narrowed in July as imports declined for a second straight month, signaling a deepening economic slowdown.
- The gap between exports and imports was $13.4 billion last month, compared with $15.3 billion in June, data released by the commerce ministry showed Wednesday.
- That was lower than the $15 billion median estimate in a Bloomberg survey of 22 economists.
- Imports declined 10.4 percent from a year ago.
- Shipments of oil, India’s top import, dropped 22.2 percent in July.
That’s in-line with the weak demand highlighted in retail inflation data.
India’s wholesale inflation in July fell to its lowest in two years, led by lower fuel and power costs.
- Inflation as measured by the wholesale price index fell to 1.08 percent in July—the lowest since June 2017—from 2.02 percent in the previous month.
- Weak commodity prices, a mild appreciation of the rupee and a lack of pricing power contributed to the sharp and fairly broad-based fall.
Here are the inflation internals.
3. Yield Curves Invert in U.S., U.K.
The stream of investors seeking refuge in the safest parts of the market has triggered yet another recession warning, with yield curves inverting from the U.S. to the U.K.
- The gap between two- and 10-year yields dropped below zero on both sides of the Atlantic after a wave of soft economic data globally.
- Weaker-than-forecast Chinese retail sales and industrial output set the mood for the markets, with data later in the day showing Germany’s economy contracted, adding to the gloom.
- “The bond market is saying central banks are behind the curve,” said Marc Ostwald, global strategist at ADM Investor Services in London.
Mounting signs of a global economic slowdown hammered stocks and drove demand for sovereign bonds to such an extent that shorter-term yields rose above long rates in the U.S. for the first time since 2007.
- The S&P 500 sank more than 1.5 percent as the inverted gap in rates for two- and 10-year Treasuries flashed a warning that has normally preceded a recession.
- West Texas Intermediate crude fell 3.4 percent to $55.16 a barrel.
- Gold rose 0.8% to $1,513.79 an ounce.
Get your daily fix of global markets here.
4. Sensex Rebounds; EPFR Expects India To Outperform
Indian equity benchmarks rebounded from their worst fall in over a month, driven by Reliance Industries Ltd., ICICI Bank Ltd. and Infosys Ltd.
- The S&P BSE Sensex closed 353 points or 0.96 percent higher at 37,311.
- The NSE Nifty 50 ended 0.95 percent higher at 11,029.40.
- The broader markets represented by the NSE Nifty 500 Index ended 0.91 percent higher.
- The market breadth was tilted in favour of buyers.
- Ten out of 11 sectoral gauges compiled by NSE traded higher.
Follow the day’s trading action here.
Emerging markets, including India, will not see any positive foreign investment for the rest of the year as the “virus” of trade barriers spreads globally. But India will perform relatively better than its Asian peers, according to Cameron Brandt, director of research at EPFR Informa Financial Intelligence.
- Brandt says that India still has a reform story to fall back on.
- Brandt also doesn’t expect the U.S.-China trade war to be resolved this year.
Brandt says India remains a “defensive trade play.”
5. Rupee Is August’s Worst Performing Asian Currency
The Indian rupee has now become Asia’s worst performing currency this month, as it battles pressures from China’s yuan, an unresolved global trade war and fleeing foreign investors.
- The local unit has slumped 3.49 percent against the U.S. dollar so far in August, setting it up for its second-worst monthly loss in four years.
- “There are many factors for the rupee’s movement but the primary one is China’s yuan, there is a one-on-one relation with that,” Harihar Krishnamoorthy, treasurer and head of global markets at FirstRand Bank, told BloombergQuint.
- Apart from that, U.S.’ additional duties on China, a tumble in bond prices and Argentinian peso and the largest foreign money outflows in nine months have pressured the rupee, he said.
Here’s the outlook for the Indian rupee
6. Top Mutual Funds’ Shopping Cart In July
Investors in Indian equity mutual funds bought more last month, unfazed by the selloff that saw the nation’s $1.9 trillion market log its worst July in 17 years.
- Stock plans received Rs 8,110 crore ($1.2 billion), according to the Association of Mutual Funds in India.
- That’s an increase from Rs 7,660 crore that the funds got in June and the highest in four months.
- India’s top money manager, HDFC Mutual Fund, held about $21 billion in equities, with financials accounting for 32 percent of stock assets followed by industrial companies at 14 percent.
Find out what HDFC Mutual Fund, ICICI Prudential and SBI Funds bought and sold.
7. Destocking Amid Slowdown
Inventory levels at dealerships dropped by nearly half in July due to destocking of cars and commercial vehicles amid production cuts by automakers.
- The auto industry’s net inventory fell to 1,60,848 units in July compared to 3,03,405 units in the previous month.
- This was mainly led by passenger cars and commercial vehicles where retail sales exceeded the aggregate factory sales.
- The inventory trend is based on the difference between wholesales provided by SIAM and retail sales based on vehicle registrations with regional transport offices.
Passenger car inventory showed the sharpest dip in three months in July.
8. Life Insurers Struggle To Get Fresh Business
New business premiums of India’s life insurers grew at the slowest pace in five months in July despite a lower base.
- The individual annual premium equivalent—a sum of first-year premium and single-premium policies—grew at 17 percent year-on-year last month compared with 4 percent in July 2018, according to data compiled by BloombergQuint from Insurance Regulatory and Development Authority of India.
- Growth of private insurers remained flat at 22 percent during the month, while India’s largest insurer—Life Insurance Corporation—grew at 10 percent.
- For the industry, the year-on-year premium growth across segments, including individual and group business, stood at 77 percent last month.
- This was led by a more than twofold growth in LIC’s new business premium.
But the share of private life insurance companies by total premium continued to rise in July at the cost of LIC.
9. Setback For Dr. Reddy’s
Shares of Dr. Reddy’s Laboratories Ltd. fell to their lowest in six months after the drugmaker’s plans to launch a generic version of a female contraceptive in the U.S. hit a roadblock.
- The drugmaker said it has received a Complete Response Letter from the U.S. FDA for its version of gNuvaRing—a vaginal ring to prevent pregnancy.
- While the company said it is preparing a response to the drug regulator’s letter, it did not give much clarity on how much time it would take.
- Developed by Merck & Co., NuvaRing at present doesn’t have any approved generic variants in the U.S. A CLSA report pegs its market size in the country at $790 million.
- Along with Dr. Reddy’s, Teva Pharmaceutical Industries Ltd., Mayne Pharma Group Ltd. and Amneal Pharmaceuticals Inc. have applied to the U.S. FDA to make the generic for the American market.
Here’s what analysts think about Dr. Reddy’s roadblock.
10. J&K Bifurcation Of ‘Immense Benefit': President
President Ram Nath Kovind expressed confidence that scrapping provisions of Article 370 that gave special status to Jammu & Kashmir and bifurcation of the state into two Union Territories will be of “immense benefit” to people of those regions.
- Delivering his address to the nation on the eve of Independence, Kovind also said the recent changes made in Jammu & Kashmir, and Ladakh will enable the people to access and enjoy the same rights, same privileges and same facilities as their fellow citizens in the rest of the country.
....I am confident that the recent changes made in Jammu-Kashmir and Ladakh would be of immense benefit to those regions. They will enable the people to access and enjoy the same rights, same privileges and same facilities as their fellow citizens in the rest of the country.Ram Nath Kovind, President
Watch his full address here.
Restrictions in Jammu have been completely lifted but will continue for some more time in areas of the Kashmir Valley, a senior Jammu & Kashmir police officer said in Srinagar on Wednesday.
- The situation is totally under control, said J&K Police's Additional Director General Munir Khan.
- There were isolated incidents in various parts of Srinagar and other districts in the Valley, but these were contained and dealt with locally.
- When asked about the number of people detained, Khan said he would not talk about individuals.
Khan refused to disclose the number of people who have been detained.