BQuick On Aug. 21: Top 10 Stories In Under 10 Minutes

Follow our live blog as CBI and ED enter P Chidambaram’s residence. The former Finance Minister has been taken into custody.

The full text of P Chidambaram’s statement to the media earlier this evening can be read here.

Here is a roundup of the day’s other top stories in brief.

1. Slew Of Changes By SEBI

The Securities and Exchange Board of India announced a clutch of measures at its periodic board meeting today which included easing requirements for foreign portfolio investors, tweaking buyback norms, amending insider information informant regulations and tighter disclosure requirements for rating agencies.

• Easing the regulatory framework for foreign portfolio investors, SEBI simplified KYC requirements for them and permitted them to carry out off-market transfer of securities.
• The regulator also relaxed norms for buyback of shares by listed companies, especially those having subsidiaries in housing finance and NBFC sectors.
• SEBI also announced new norms to make it mandatory for companies to provide details about possible defaults and delayed loan repayments to credit rating agencies amid concerns that banks have resisted sharing such information citing confidentiality.

Here are the key highlights of SEBI’s announcements today.

2. Why A 35 Basis Point Rate Cut?

India’s six-member Monetary Policy Committee voted to reduce policy rates for the fourth time this year as the panel believed that weakness in growth warranted further monetary easing. “It can no longer be a business as usual approach,” said Reserve Bank of India Governor Shaktikanta Das, who led the charge for a larger-than-expected 35 basis point cut in the repo rate.

• The surprise in the August policy was not so much the reduction in rates but the quantum of the cut.
• Das explained this move by saying that given the evolving growth-inflation scenario, it can no longer be “business as usual”
• The calibration of the size of the rate cut is expected to reinforce and quicken, the impact of the past rate cuts, change in the stance from neutral to accommodative and the injection of large surplus liquidity in the system, Das added.

The RBI Governor wasn’t alone in supporting an unusually-sized rate cut.

4. Nifty Extends Losses, U.S. Stocks Rebound

Indian equity benchmarks extended their decline for the second session in a row led by losses in Tata Motors and Yes Bank.

• The S&P BSE Sensex fell as much as 0.72 percent to 37,060.37.
• The NSE Nifty 50 declined as much as 0.89 percent to close at 10,918.70.
• The broader markets represented by the NSE Nifty 500 Index fell 1.04 percent.
• The indices could "certainly" correct another 2-3 percent in the short-term, said Vikas Sethi, managing director, Sethi Finmart. “However, it is a right time to buy good quality stocks with 9-12 months time frame,” Sethi said.
• All 11 sectoral gauges compiled by NSE traded lower.

Follow the day’s trading action here.

U.S. stocks climbed as better-than-estimated earnings at retailers bolstered confidence in the world’s largest economy. Treasuries fell.

• The S&P 500 rose 0.8 percent to 2,923.93 as of 10:18 a.m. New York time.
• The Stoxx Europe 600 Index increased 1.2 percent.
• The MSCI Asia Pacific Index fell 0.3 percent.
• West Texas Intermediate crude increased 1.1 percent to $56.75 a barrel.

Get your fix of global markets update.

5. Royal Enfield’s Engine Is Choking Up

To beat India’s worst auto slowdown in a decade, the nation’s largest leisure motorcycle maker launched the cheapest version of its second best-selling model. But Eicher Motors Ltd., the maker of Royal Enfield motorcycles, could be battling a bigger problem—brand fatigue.

• On Aug. 9, the Chennai-based company introduced its most-affordable offering in the new Bullet 350 by reducing some features—the company didn’t disclose details.
• The latest variant is about Rs 9,000 cheaper than the existing version that contributes 21 percent to its volumes.
• The move implies this is more a price cut and less a reduction in features, according to Joseph George, auto analyst at IIFL Institutional Equities.

Here’s BloombergQuint’s analysis of the silver bullet’s business so far.

6. ‘Kaam Hai Kya?’

Everyday 7:00 am onwards, hundreds of loaders, painters and construction workers and cleaners gather at Labour Chowk in Noida’s Sector 49, about 25 km east of Delhi, in search of work. But from school dropouts to 70-year-olds, unskilled workers are finding it increasingly difficult to get employment, conversations with job seekers revealed.

• The number of people looking for work doubled over a year earlier to 1,500, leading to infrequent work and falling incomes.
• And the situation is not different at any of the several such job hubs BloombergQuint visited in the National Capital Region centred on Delhi.
• The situation is grim at labour chowks—unofficial employment exchanges—at a time when the Indian economy is slowing and demand for everything, from shampoos and biscuits to cars, is falling.

Here’s the story of the workers living on daily wage, struggling to survive.

7. Is HCL Technologies Poised For A Rerating?

HCL Technologies Ltd. is the cheapest Indian information technology stock though it has guided for the best growth among large-sized peers and some of the concerns stemming from its acquisition of software assets of International Business Machines Corp. have waned.

• The software services provider trades at 14 times its estimated 12-month forward earnings. Along with Tech Mahindra Ltd., that’s the lowest PE multiple among software services providers with a market capitalisation of at least Rs 5,000 crore.
• The company, whose revenue grew 17 percent in the quarter ended June, has guided for 14-16 percent growth in constant currency for the ongoing financial year.
• That compares with the double-digit growth estimates by peers Infosys Ltd. and Tata Consultancy Services Ltd. Bengaluru-headquartered Wipro Ltd. and Tech Mahindra are expected to grow between 3 percent and 7 percent, according to analysts.

Here’s why the company’s valuations fell.

8. No Respite For P. Chidambaram

The Enforcement Directorate has widened its money laundering probe against former finance minister P Chidambaram as it suspects his role in granting alleged illegal FIPB clearances to at least four more business deals, apart from INX Media and Aircel-Maxis, and receiving multi-crore kickbacks through multiple shell firms.

• The federal agency has also come across evidence where alleged illegal deposits of over Rs 300 crore were made in a single shell firm after purported kickbacks were received by Chidambaram and his son Karti.
• The ED has found, the sources said, that Chidambaram and Karti are "beneficial owners" of several shell firms that have been incorporated both in India and abroad.
• Meanwhile the Supreme Court once again refused to hear Chidambaram's plea against the Delhi High Court order that refused him anticipatory bail. The top court has now listed the matter for Friday.
• In a statement today, Chidambaram said that he is not accused of any wrongdoing and that no chargesheet has been filed against him. He said that these were lies being spread against him.

Follow the developments around this case here.

9. ‘One-Trick-Pony’ Growth Won’t Turnaround Soon

India’s one-trick-pony growth by relying on private consumption won’t revive anytime soon, according to Macroshanti’s Rajeev Malik.

• The seeds of a slowdown in India were apparent even at the beginning of the year when global growth was healthy, said Malik.
• Now that there is a global slump, there will be a pronounced impact on India’s gross domestic product, the investment firm’s founder and director told BloombergQuint in an interview.
• India’s growth has been a “one-trick-pony” relying on consumption which had been held up largely by debt financing, Malik said.

Watch the full interview here where Malik equates India to a truck with a "messed-up" gearbox.

10. Indian State Reforms: Cow Tax To Water Subsidy

The first half of 2019 saw a real slowdown in the pace of states’ business reforms across India, finds Richard Rossow.

• Many steps taken by states were policy reforms focussed on shoring up key political constituencies.
• With the election done, we will hopefully see states re-commit to enacting smart business policies.
• Uttar Pradesh takes the prize for the most bizarre business regulation.

Here’s a report card of what states did on land, labour, power-water, and business regulations.