BQuick On Aug. 26: Top 10 Stories In Under 10 Minutes
Here is a roundup of the day’s top stories in brief.
1. RBI Accepts All Jalan-Committee Recommendations
The Reserve Bank of India will transfer a surplus of a little over Rs 1.76 lakh crore to the government, the central bank said after a board meeting on Monday.
- The surplus transfer includes Rs 1,23,414 crore in surplus for the year 2018-19 and Rs 52,637 crore of excess provisions identified as per the revised Economic Capital Framework (ECF) adopted at the meeting of the Central Board today,” a statement from the central bank said.
- The surplus transfer was finalised in keeping with the recommendations of a committee, headed by former RBI Governor Bimal Jalan.
- The RBI central board accepted all the recommendations of the committee, the central board said in its statement.
The Committee’s recommendations were guided by the fact that the RBI forms the primary bulwark for monetary, financial and external stability. Hence, the resilience of the RBI needs to be commensurate with its public policy objectives and must be maintained above the level of peer central banks as would be expected of a central bank of one of the fastest growing large economies of the world.RBI Central Board Statement
Here’s how RBI determined amounts to be transferred to the government.
2. Trump Backs Off Kashmir Mediation Offer
U.S. President Donald Trump refrained from repeating his offer to mediate between India and Pakistan over Kashmir and said both countries can resolve differences bilaterally.
- “I’m here. I have a good relations with both. If there’s any reason, but I think that they can do it themselves. They’ve been doing it for a long time,” Trump told reporters on the sidelines of Group of Seven leaders’ summit in the French resort town of Biarrtiz when asked if the offer for mediation was on the table.
- The president offered no comment on India’s decision to scrap autonomy in the state of Jammu and Kashmir where Prime Minister Narendra Modi’s government has imposed severe restrictions on movement and communications since Aug. 5.
We spoke last night about Kashmir. The prime minister really feels he has it under control.Donald Trump, U.S. President
- Prime Minister Narendra Modi categorically rejected any scope for third party mediation between India and Pakistan on Kashmir, saying the two countries can discuss and resolve all issues bilaterally and “we don't want to trouble any third country”.
Pakistan has tried to focus international attention on India’s sudden move to scrap Kashmir’s autonomy.
3. Chidambaram To Remain In CBI Custody
A Central Bureau of Investigation Court today extended the investigative agency’s custody of former Finance Minister P Chidambaram for interrogation by five days to Aug. 30.
- CBI had sought five more days custody to complete its interrogations in the INX Media corruption case.
- Chidambaram was produced before Special Judge Ajay Kumar Kuhar on expiry of his four-day CBI custody.
- Arguing for CBI, Solicitor General Tushar Mehta and Additional Solicitor General KN Natarajan said that there were sufficient grounds for the extension of his custodial interrogation as he was interrogated from Aug. 23-26 and was confronted with a co-accused.
- The Supreme Court, on the other hand, extended the protection from arrest given to Chidambaram in the Enforcement Directorate’s case till Tuesday.
Follow the developments around the high-profile case here.
4. Indian Stocks, Bonds Rejoice
Sovereign bonds rose in India after the government resisted pressure to deliver a major fiscal support package to boost the economy, and stocks rallied after early volatile trading as U.S. President Donald Trump said China has asked to re-start trade talks.
- The S&P BSE Sensex rose 2.16 percent to close at 37,494.12 and the NSE Nifty 50 gained 2.11 percent to rise to 11,057.85.
- The broader markets represented by the NSE Nifty 500 Index rose 1.98 percent.
- The yield on the benchmark 10-year bond fell nine basis points, the most since July 29, to close at 6.48 percent, as fears the government may borrow more to fund stimulus eased.
- Finance Minister Nirmala Sitharaman announced a slew of measures on Friday, including the withdrawal of the surcharge on foreign investors.
- An economic revival is on cards in the second half of the current financial year, said Nandita Agarwal Parker, managing partner, Karma Capital Management.
Follow the day's trading action here.
Watch: Indian Markets Are Unlikely To Fall Further, Says Basant Maheshwari
U.S. Equities Climb Amid Twists In Trade War
U.S. stocks climbed along with shares in Europe on Monday after a down session in Asia as investors assessed the latest developments in the Sino-American trade war.
- All three main U.S. equity indexes rose after President Donald Trump said prospects for a deal with China were better now than at any time since talks began last year, even though a top state-media editor in Beijing questioned his version of events.
- Ten-year Treasury yields held close to a three-year low.
- The Bloomberg Dollar Spot Index rose 0.3 percent to 1,209.33.
- West Texas Intermediate crude rose 1.9 percent to $55.19 a barrel, the first advance in a week.
Get your daily fix of global markets here.
5. Birla, Tata, Ambani, Bajaj: Who Gave The Best Returns?
The Bajaj Group has created the maximum wealth for investors in a volatile year when a domestic slowdown and a global trade war unsettled the markets.
- Among the 11 large groups, five managed to return gains as of Aug. 22, while the remaining six have caused losses.
- Mukesh Ambani’s Reliance Industries Ltd. group and HDFC Group were among the top gainers, while Essel Group was among the top losers.
- India’s benchmark Nifty 50 has eroded all gains as foreign investors turned sellers after Finance Minister Nirmala Sitharaman brought them under super-rich tax—the government rolled back the decision on Friday. Domestic slowdown and a trade war between the U.S. and China also weighed on the markets.
Here’s the list of the best and worst performing conglomerates this year.
6. How Nestle Bucked The Slowdown
When its peers saw volume growth ease as Indians consume less in a slowing economy, Nestle India Ltd. stood out.
- The maker of Maggi noodles and Nescafe instant coffee has grown faster than most other consumer goods makers in the first half of the current year and even in 2018.
- That, according to analysts, has been aided by a nuanced distribution approach giving market share leadership, aggressive advertising spends to support new launches and expansion in portfolio.
- Investors and analysts have reposed faith. More than 96 percent of the analysts tracked by Bloomberg have a buy on the stock.
- Shares of the company have jumped 15 percent so far this year.
Here’s how Nestle managed to buck the trend.
7. Fighting Fire With Fire
To counter data-driven onslaught from Asia’s richest man, India’s direct-to-home services providers are turning to—data.
- DTH operators are betting on broadband services and streaming content onto mobiles to retain subscribers, who are increasingly watching everything from movies to shows online.
- But fending off Mukesh Ambani’s oil-to-retail conglomerate won’t be easy as he threatens to disrupt the pay television industry.
While DTH players are fighting hard, tying up with other streaming services, it may not be enough in the face of Ambani’s challenge.
8. New Mindree CEO Lists Priorities
Mindtree Ltd.’s new chief said instilling confidence in clients and retaining key employees are among the top priorities of the software services provider.
- Most of Mindtree’s mid-senior level employees continue to remain with the company despite leadership change, Debashis Chatterjee, who took over as chief executive officer earlier this month, said in his first interaction with analysts through a conference call.
- Chatterjee was named CEO and managing director of Mindtree after his predecessor Rostow Ravanan quit following Larsen & Toubro Ltd.’s hostile takeover of the mid-sized information technology company.
- Chatterjee also said his interaction with the company’s top 20 clients has been encouraging with a positive commitment from them.
Chatterjee didn’t rule out collaborations with L&T Infotech since their portfolios complement each other.
9. Should RBI Ask Banks To Link Lending Rates To An External Benchmark?
To avoid confusion, the Reserve Bank of India would be best advised put some ground rules in place if it wants banks to move to external benchmarking, writes Ira Dugal.
- In the absence of clear RBI directions, banks will move to external benchmarks in an ad-hoc manner.
- Private banks are unlikely to offer such products at all, without a regulatory nudge.
- The result will be a split market where rates will differ significantly for new and existing borrowers.
10. What’s Irritating This Government Vendor
Business is picking up for SoftTech Engineers Ltd., which offers software services to architecture, engineering and construction firms, on the back of the government’s focus on automation and ease of doing business. The government in fact is an important client but there’s a problem of delay in payments.
- “We’re benefiting from a lot of government schemes like digital governance and mobile governance,” Gupta said.
- “This is where we have a great level of opportunity,” he told BloombergQuint.
- But the company has to go through an “entire cycle” before getting payments, which poses working capital difficulties, he said.
Watch the interview here on Real Economy Check—a special series on India’s small-and-medium enterprises.