BQuick On Aug. 27: Top 10 Stories In Under 10 Minutes
Here is a roundup of the day’s top stories in brief.
1. Jio’s Revenue Market Share Grows At Its Slowest Pace
Reliance Jio Infocomm Ltd.’s market share by revenue grew at its slowest pace since it started charging users even as the telecom services provider launched by Asia’s richest man added subscribers to become India’s largest operator.
- Reliance Jio’s revenue market share rose 70 basis points over the preceding three months to 31.7 percent in the April-June period, according to data compiled by BloombergQuint.
- The revenue market share is calculated based on the adjusted gross revenue, which factors in interconnection usage charges and other deductions, provided by the Telecom Regulatory Authority of India, and national long-distance revenue.
Here’s why Reliance Jio's revenue share growth declined.
2. Gangwal Skips IndiGo AGM
Rakesh Gangwal, co-founder of InterGlobe Aviation Ltd., skipped the company’s annual general meeting even as the management tried to reassure shareholders that its two feuding promoters are working to resolve corporate governance issues.
- The promoters have been speaking to each other and there will be a solution over time, M Damodaran, chairman of the board, said at the IndiGo AGM.
- Bhatia, speaking at the AGM, said IndiGo will soon be a company not dependent on its two promoters.
- Chief Executive Officer Ronojoy Dutta said that the airline had not found a single related-party transaction that wasn’t at an arm’s length or not in the interest of the company.
Minority shareholders attending the IndiGo AGM were not convinced but remained hopeful. And Gangwal’s absence irked almost everyone.
3. Mechanics Of The Transfer Of RBI’s Contingency Reserves
The central board of the Reserve Bank of India on Monday decided to transfer Rs 1.76 lakh crore to the Government of India. This amount includes a one-time transfer of Rs 52,637 crore from RBI’s contingency reserves, following the recommendations of the Bimal Jalan committee.
- With the decision made, the question now being asked is how this transfer would be executed. The transfer has already taken place as of the end of Monday, according to a person familiar with the matter.
- The amount has been transferred as an accounting entry from RBI’s general account to the government account, the person quoted above said.
- It has been shown as a debit in RBI’s general account and a credit in the government’s account with the central bank, the person said.
- There has been no sale of assets—either domestic government bonds or foreign assets—to generate the funds, according to this person.
BloombergQuint spoke to Former RBI Deputy Governor R Gandhi who explained the mechanics of the transfer.
4. Nirmala Sitharaman Vs Rahul Gandhi
Finance Minister Nirmala Sitharaman strongly reacted to the Congress' allegation of "stealing RBI's reserves", saying she does not care about such charges and the opposition leader should have spoken to the finance ministers from his party before hurling such charges.
The Congress should have consulted its finance minister and seniors before making these allegations regarding the RBI. Yet, they have become consummate in making such allegations of stealing and I do not want to pay much heed to this.Nirmala Sitharaman, Finance Minister
- Sitharaman also said questioning the credibility of the RBI, which had constituted the Bimal Jalan committee on determining the excess capital, is a "worrying" sign.
- The committee had eminent people on it and making any allegations like this is "outlandish", Sitharaman said.
The finance minister said that the government has not decided how it will use the windfall from the RBI.
5. Nifty Extends Rally
Indian equity indices extended gains for the second day in a row paced by gains in Tata Motors Ltd. and Britannia Industries Ltd.
- The S&P BSE Sensex rose 0.39 percent or 147 points to close at 37,641.27.
- The NSE Nifty 50 rose 0.43 percent to 11,105.35.
- Government’s measures to boost growth announced last week, and RBI’s decision to transfer Rs 1.76 lakh crore to the government supported the markets.
- The market breadth was tilted in favour of buyers.
- Eight of the eleven sectoral indices compiled by National Stock Exchange advanced.
Follow the day’s trading action here.
- Sovereign bonds fell as traders sold into this week’s rally spurred by the record central bank payout to the government.
- While the Rs 1.76 lakh ($24 billion) transfer lifted all assets in the first half, doubts about how the surplus would be used emerged as the day wore on.
Investors may have booked profit after a relief rally.
U.S. Stocks Advance, Dollar Declines
Stocks advanced as investors chose to focus on the positive in the topsy-turvy trade negotiations between the U.S. and China.
- The S&P 500 gained for a second day after President Donald Trump appeared to soften his tone toward China on the final day of the Group of Seven summit.
- Ten-year Treasury yields fell to around 1.50 percent, while the dollar dropped against major currencies.
- The euro was little changed following data showing Germany was on the brink of a recession, and the pound gained as opposition politicians stepped up efforts to prevent a no-deal Brexit.
- West Texas Intermediate crude climbed 1 percent to $54.20 a barrel.
Get your daily fix of global markets here.
6. Analysts Temper Expectations From Indian Stocks
Analysts cut target price for two in every three stocks since June as slowing demand, weak corporate earnings and geopolitical tensions dampened the sentiment.
- Target prices were lowered for 66.9 percent of the 251 stocks tracked by at least 10 analysts since June end, according to data available on Bloomberg.
- Consumer discretionary and industrial sectors saw the biggest downgrades, reflecting a slowdown in consumption as auto sales have fallen and consumer goods volume growth has softened.
- Among stocks, analysts lowered the price target the most for Yes Bank Ltd. and Vodafone Idea Ltd.
Here are the sectors and stocks with worst downgrades.
7. Yes Bank’s Stake Sale Hits Information Roadblock
Talks between private sector lender Yes Bank Ltd. and at least four global private equity funds for a possible stake sale went cold after the funds did not get enough comfort from publicly available information on the bank’s asset quality and profitability outlook, said three people in the know, speaking on conditions of anonymity.
- Instead, the investors sought more granular information, which the bank is not allowed to share based on the existing insider trading rules.
- Yes Bank has been looking to raise close to $1 billion for some time now. The fundraising plans were delayed by the abrupt exit of founder Chief Executive Rana Kapoor. Ravneet Gill, who took over as chief executive officer in March, kicked off a renewed attempt at fundraising.
- Gill had said that the bank could raise money via private equity investors or a qualified institutional placement. It recently raised about $275 million through a QIP issue but is likely to need more capital soon.
The investors are seeking clarity on two key issues.
8. To Be A Good Investor, Respect Market Cycles
In ancient Egypt, a Pharaoh had two unique dreams. In the first one, he dreamed of seven fat and beautiful cows. Then he saw seven thin and bony cows. And, the thin ones ate the fat ones. In the second dream, he saw seven heads of full and ripe grains growing on one stalk. Then seven thin, dried-out heads of grains. And, the thin heads of grain swallowed the seven good ones.
As the dream kept repeating, it intrigued him to find out what they meant. He called for wise man Joseph to interpret those dreams to him. Joseph explained to him – both the dreams meant the same. In Egypt, seven years of prosperity would be followed by seven years of famine.
Kalpen Parekh explains how this allegory from the Bible can also apply to the world of investing.
9. Buffett's Philosophy Still Speaks Volumes
During previous bouts of economic downturn, Warren Buffett, America’s patron saint of investing offered his sage — and inevitably unpopular — perspective. This time, Buffett has been uncharacteristically missing from the chatter, but that doesn’t mean his views are any less clear, or any less worth paying attention to, writes Nir Kaissar.
- Let's start with Buffet's favourite stock market barometer, the market cap-to-GDP ratio. It notched a fresh high of 154 percent in 2017 and is almost certainly higher today, suggesting he doesn't like lofty levels of stock market.
- Buffet has rarely had a higher allocation to cash than he does now.
- There are some bets, like banks, which suggest that Buffett's faith in value investing is unshaken.
Berkshire’s portfolio remains unabashedly Buffett: big profits at a reasonable cost.
10. The Long Wait For A Day’s Labour
Babasaheb Jadhav, 36, had been waiting for four hours in hope of finding work along with hundreds of others at the labour naka in Kopar Khairane, Navi Mumbai, a hub where construction contractors from Mumbai and its surrounding areas hire labourers. It’s already noon and he isn’t sure if waiting till the end of the day would help.
- His plight stems from the troubles of the real estate sector.
- Developers are struggling to raise funds because lenders have turned selective after a liquidity crunch.
- That, coupled with economic slowdown, stalled a nascent recovery from the disruption caused by demonetisation and a stricter housing law.
- Some construction companies have started cutting corners by employing fewer workers.
Read about how India's economic slowdown has made life tougher for scores of Mumbai's construction workers like Babsaheb.