BQuick On Aug. 28: Top 10 Stories In Under 10 Minutes
Here is a roundup of the day’s top stories in brief.
1. FDI Norms Relaxed, Sugar Export Subsidy Approved
The government on Wednesday eased local sourcing norms for single-brand retail, providing relief to foreign brands including Apple Inc. and Ikea.
- All procurement made from India, including previous sourcing, by manufacturers will be counted as local sourcing to meet the mandatory 30 percent requirement, Commerce Minister Piyush Goyal said, adding that exports would be part of local sourcing norms against just domestic sales earlier.
- The government said it will also allow single-brand retailers to start online stores that are yet to establish a brick-and-mortal store, but meet the 30 percent local sourcing norm.
This, Goyal said, will lead to larger capacities and more investments.
Other sectors where foreign direct investment has been eased are:
- 100 percent FDI allowed in coal mining and sale through automatic route.
- 100 percent FDI allowed in contract manufacturing through automatic route.
- 26 percent FDI, with government approval, for digital media in news.
The government also announced a Rs 6,268 crore subsidy for export of six million tonnes of sugar during the 2019-20 marketing year starting October in order to liquidate surplus domestic stock and help mills in clearing huge sugarcane arrears to farmers.
- A lump sum export subsidy of Rs 10,448 per tonne will be given to sugar mills in the 2019-20 marketing year (October-September), costing the exchequer Rs 6,268 crore as subsidy, Information and Broadcasting Minister Prakash Javadekar told reporters after the cabinet meeting.
This will benefit farmers in Uttar Pradesh, Maharashtra and Karnataka as well as other states.
2. Nifty Rejig: Nestle In, Indiabulls Housing Out
Nestle India Ltd. will replace mortgage lender Indiabulls Housing Finance Ltd. in the benchmark Nifty 50 Index and Nifty 50 Equal Weight Index from Sept. 27.
- The indices are reconstituted twice every year based on the data for six months ending January and July.
- Edelweiss Research expects an inflow of nearly $112 million in Nestle India owing to the rebalancing of index funds.
- Indiabulls is expected to see an outflow of $41 million from the rejig
- Indiabulls Housing Finance’s stock has had a rough run this year. Nestle, on the other hand, stood out among consumer goods makers.
Here are all the updates from the latest index rejig announced by the NSE today.
3. Nifty Rebound Short-Lived, U.S. Stocks Bounce Back
Indian benchmark indices snapped their three-day rally and ended lower as slowdown concerns were back in the spotlight.
- The S&P BSE Sensex dropped 0.50 percent or 189 points to 37,451.84.
- The NSE Nifty 50 fell 0.53 percent to 11,046.10.
- The broader markets represented by the NSE Nifty 500 Index fell 1.02 percent.
- "The sentiment has changed since Friday but the underlying fundamentals and earnings [concerns] haven't changed to a large extent," said Rusmik Oza, senior vice president and head of fundamental research at Kotak Securities.
- Eight of the 11 sectoral gauges compiled by NSE traded lower.
Follow the day’s trading action here.
U.S. stocks erased early losses while European equities declined as investors awaited new developments in the increasingly unpredictable Sino-American trade war.
- The S&P 500 recovered from Wednesday’s early-session lows, with energy companies pulling the benchmark higher as West Texas crude climbed above $56 a barrel.
- Treasuries climbed and the dollar was steady.
- West Texas Intermediate crude gained 2.5 percent to $56.31 a barrel.
- Gold fell 0.3 percent to $1,537.69 an ounce.
Get your daily fix of global markets here.
4. What Separates 2008 From 2019
The volatility over the last 12-18 months and the selloff in the broader market may prompt comparison with the 2008-09 crisis but, according to India’s largest wealth manager, there’s one key difference: how the rich investors behaved.
- “2018-19 have been very testing times for equity investors. But many of the investors have exhibited a great sense of maturity. We haven’t seen any panic reaction despite portfolios bleeding,” Srikanth Subramanian, senior executive director and head- investment products, at Kotak Wealth Management.
- There has been no cover for equities in general but the story goes much deeper, he said.
- Yet, most investors in the pocket are aware of the risks that equity presents and have “exhibited patience which is a big virtue”, he said. “They believe that this cycle will give way to good times.”
Here’s Subramanian’s play on gold, equity and real estate.
5. Not All Institutional Investors On Board With IndiGo Board Expansion
Even as InterGlobe Aviation Ltd. won shareholder support to expand its board after two feuding co-founders called truce, the special resolution faced the biggest opposition from institutional investors.
- Nearly eight percent of the shareholders among those who voted rejected the move to alter Articles of Association, according to exchange filings.
- These were largely institutions. Of the 84 percent of such large public shareholders who voted, 41 percent rejected the move.
- Institutions own nearly 21 percent stake in InterGlobe Aviation.
It’s unclear why institutional shareholders would oppose the proposal to expand board size from six to ten.
6. Yes Bank Downgraded
Moody's Investors Service Inc. has downgraded Yes Bank Ltd.’s long-term foreign-currency issuer rating to non-investment grade and kept the outlook as negative.
- The rating has been lowered to Ba3 from Ba1.
- Moody's also downgraded Yes Bank's long-term foreign and local currency bank deposit ratings to Ba3 from Ba1, foreign currency senior unsecured MTN program rating to (P)Ba3 from (P)Ba1, and Baseline Credit Assessment and adjusted BCA to B1 from Ba2.
- The Moody’s downgrade is on account of lower-than-expected amount of capital raised by the lender as well as the risk related to substantial decline in its share price.
The outlook on the bank's ratings is also negative. Here's what it reflects.
7. HDFC Bank’s Millennial Focus
India’s largest private sector lender HDFC Bank Ltd. is working its way into the wallets of young, working and aspirational millennials, who, by the bank’s assessment, are willing and eager to spend on products and experiences.
- Millennials make up nearly 25-30 percent of HDFC Bank’s credit card base, according to Parag Rao, country head for card payment products at the lender.
- Moreover, they account for 40 percent of the incremental credit cards issued by the bank, Rao said.
- No surprise then that the lender is planning events and products targeted specially at this category.
HDFC Bank’s own data suggests that millennials spend over 23 percent of their incremental income on discretionary spending and personal grooming.
8. Will Cement Prices Recover?
A slowdown in demand in the seasonally weak monsoon period pulled down cement prices for the third straight month, according a BloombergQuint survey.
- All-India average cement prices fell by Rs 12 month-on-month to Rs 340 for a 50-kilogram bag in August, according to the survey of 15 dealers across five regions.
- The price cut was the sharpest in south India.
- Dealers in the region have been informed about a potential price hike from September.
Poor demand due to stalled government projects also weighed on prices.
9. NHAI’s Road Run To Hit Speed Bump
The solution to the road construction crisis in the first term of the Narendra Modi government has now turned into a problem.
- The Hybrid Annuity Model, devised to shift the financing burden off over-leveraged private balance sheets, has now led to a ballooning of debt at the government-owned National Highway Authority of India—enough for the Prime Minister’s Office to say that “road infrastructure has become financially unviable”.
- He also said that NHAI is “totally log jammed with unplanned and excessive expansion of roads", in a letter to the Ministry of Road, Transport and Highways.
- A UBS research note said the NHAI project awards declined 70 percent over the previous year in financial year 2018-19 after a strong FY16-18.
The letter, written by Nripendra Misra, principal secretary to the PMO, makes a few suggestions to fix this.
10. Constitution Bench To Hear Plea Against Article 370 Amendment
The Supreme Court today referred the pleas challenging the validity of removal of special status to Jammu and Kashmir to a five-judge constitution bench, weeks after the top court said it won’t interfere in the curfew and restrictions imposed in the valley and the government must be allowed to take steps to restore normalcy.
- The apex court bench—that was headed by Chief Justice Ranjan Gogoi and comprised Justice SA Bobde and Justice Abdul Nazeer—also issued a notice to the central government. Earlier, the government had said no notice should be issued in the matter given its international impact.
- The five-judge bench—the composition of which will be known in due course—will hear all petitions challenging the abrogation of Article 370 in October.
- Earlier this month, Union Home Minister Amit Shah introduced a resolution to amend Article 370 of the Indian Constitution that gave Jammu and Kashmir administrative autonomy.
Here’s what the apex court said regarding restrictions on journalists working in Jammu & Kashmir.