BQuick On Aug. 5: Top 10 Stories In Under 10 Minutes
Here is a roundup of the day’s top stories in brief.
1. Modi's Jammu & Kashmir Solution: 2 Union Territories
Prime Minister Narendra Modi’s government revoked the special constitutional status of Kashmir in a move that’s drawn protests in parliament and risks worsening its already fraught security relationship with rival Pakistan in the disputed region.
- The Rajya Sabha voted to approve The Jammu & Kashmir Reorganisation Bill, 2019. It was passed by 125 votes in favour to 61 against.
- Speaking in the Rajya Sabha on Monday afternoon, Home Minister Amit Shah defended the Narendra Modi-led government’s move to amend Article 370, that gives the state of Jammu & Kashmir special autonomous status, and bifurcate the state into two union territories—J&K with a state legislature and Ladakh without a state legislature.
- J&K will be given full statehood at an “appropriate time” when normalcy returns, Shah said in the Rajya Sabha.
- While several parties such as Indian National Congress, Communist Party of India (Marxist) and Janata Dal (United) opposed the proposed legislative changes during the house debate, others like Bharatiya Janata Party-ally Shiv Sena, Bahujan Samaj Party, Aam Aadmi Party, All India Anna Dravida Munnetra Kazhagam Party among others expressed support for the government’s actions.
- Former Attorney General Soli Sorabjee said that there is nothing revolutionary in the bill. It is a political decision, even though an unwise one, he said.
- Former finance minister and BJP leader Yashwant Sinha said that the government followed “dubious process”, and that it’s actions were likely to cause further unrest in the region. Sinha added that Modi’s move is likely to internationalise the issue as Pakistan is not likely to take this “lying down” and will probably take this to the UN Security Council and other international platforms.
Catch live updates from the biggest development of the day here.
2. Nifty Slumps, Rupee Drops Most In 6 Years
Indian equity benchmark NSE Nifty 50 erased 2019 gains as the escalating tensions concerning Jammu & Kashmir and the trade dispute between China and the U.S. spooked investors.
- The 50-stock index has fallen over 10 percent from its record high.
- It closed 1.23 percent lower today at 10,862.50.
- S&P BSE Sensex closed 418 points or 1.13 percent lower at 36,699.34.
- The broader market represented by the NSE Nifty 500 fell 1.25 percent.
- Ten out of 11 sectoral gauges compiled by NSE ended lower.
Follow the day’s trading action here.
The Indian rupee weakened to an over five-month low on Monday, as the Chinese yuan traded below 7 against the U.S. dollar for the first time since 2008 and tensions over Kashmir added to nervousness in the market.
- The rupee opened at 70.28 to the dollar and weakened through the trading session. It closed 1.6 percent weaker at 70.73 to the dollar.
- A pick-up in trade tensions between U.S. and China could mean weakness for emerging market currencies, said K. Harihar, treasurer at First Rand Bank. The rupee could trade between 70-71/$, he said.
The Indian rupee was the worst performer in Asia.
3. S&P 500 Slides, Bonds Surge On Trade War Escalation
Stocks slumped after China struck back in its trade dispute with the U.S. and let the yuan tumble to the weakest level in more than a decade.
- The S&P 500 Index dropped for a sixth day, extending its plunge from a record to about 5 percent, led by technology and consumer companies.
- Equity losses accelerated after data showed that a gauge of service industries declined in July to an almost three-year low.
- Benchmark 10-year Treasury yields fell to their lowest since 2016 and gold rallied.
- West Texas Intermediate crude declined 2.2 percent to $54.46 a barrel.
Get your daily fix of global markets here.
4. Undue Importance To Disruption?
Disruptors such as Reliance Jio Infocomm Ltd. or Paytm must be able to use their large subscriber bases to generate cash flows and profit for investors to find value in them, according to valuation guru Aswath Damodaran.
- Investors and valuers will have to think through the business model of subscription-based companies to understand how they make money, Damodaran, professor of finance at the Stern School of Business at New York University, told BloombergQuint in an interaction.
- A lot of startups aren’t thinking about how to get value from users, unlike Facebook Inc. and Amazon.com Inc. that are successfully monetising their user base, he said.
- Companies like Reliance Jio or an Ola can only create value for investors if they have a long-term plan to monetise their users like Amazon or Facebook, he said.
Otherwise, making money on disruption is really difficult.
5. India Inc. Looks Beyond Borders For Loans
Indian corporates are borrowing more via overseas loans and bonds as domestic banks remain cautious and funding rates in the debt markets remain elevated.
- Companies have taken approvals to raise over $29 billion between January and June 2019, shows data put out by the Reserve Bank of India.
- This is just short of the $31 billion in approvals for external borrowings in 2018.
- The RBI shares data on approvals for external borrowings taken by companies. The final amount raised may differ marginally.
- Of the $29 billion in approvals in 2019, $12 billion came in March.
The increasing preference for ECBs can be attributed to a number of factors.
6. Gold Imports Lowest Since 2016
Gold imports by India in July tumbled to the lowest monthly inflow in more than three years as demand paused following record high prices in the domestic market.
- Overseas purchases fell 69 percent to 20.4 tonne in July from 65.6 tonne a year earlier.
- That would be the smallest monthly quantity shipped since at least March 2016, when imports fell to 17.7 tonne as jewelers went on a nationwide strike to protest against an excise duty on jewelry.
Here’s what arrested imports in India.
7. FMCG Earnings Reinforce Slowing Consumption
Revenue and volume growth of India’s largest consumer goods companies slowed in the quarter ended June as demand remained subdued and rural consumption eased further.
- The top line of the staples to shampoo makers with a market capitalisation of at least Rs 30,000 crore grew at a slower pace on a yearly basis in the quarter ended June compared with the previous three months.
- Dabur India Ltd. is the only exception as its net sales growth was higher.
- The numbers only reinforce the slump in demand at a time cars sales to logistics sector indicators point to a slowing economy.
Volume growth eased for most fast-moving consumer goods companies.
8. July Monsoon Deficit Covered
The Indian Meteorological Department has said that the monsoon deficiency in India has been covered from the "very good" rainfall in central parts of India and the northern peninsula, including Maharashtra.
- The deficit is 7.3 percent compared to the 18 percent almost two weeks ago, AK Srivastava, head of climate research division at the weather agency said.
- IMD expects August and September to have 100 percent rainfall, he said.
- In Mumbai, heavy rains are likely to continue for another 24 hours and subside thereafter.
Watch the full interview here.
9. Sitharaman To Discuss Slowdown With Industry
Finance Minister Nirmala Sitharaman will hold a series of meetings with representatives from various industries, including the automobile sector, before announcing measures to revive the slowing economy.
- The government will look into the issues faced by various sectors of the economy, and come up with appropriate policy responses, Sitharaman said after meeting with heads of public sector banks and some private lenders.
- That comes after retail auto sales fell for the eighth straight month during the seasonally weak monsoon period.
- Sitharaman met bankers today to discuss credit growth to support needs of the economy.
Finance minister will also meet foreign portfolio investors to hear their concerns.
10. A New Walmart Vs Amazon Battleground
Walmart Inc.’s Flipkart plans to start a free Indian video streaming service in coming months, escalating a fight with Amazon.com Inc. by borrowing its arch-foe’s tactics.
- India’s biggest online retailer plans to roll out video streaming for members of its Flipkart Plus loyalty program by September ahead of the peak Diwali shopping season, people familiar with its plans told Bloomberg News.
- The service is currently in beta mode, the people said, asking not to be identified discussing internal strategy.
- Flipkart Online Services Pvt. is getting into a red-hot market but playing catch-up by taking a page from Amazon’s playbook. The U.S. retailer’s Prime Video service had for years proven instrumental in retaining shoppers and attracting new ones.
A streaming offering could help level the playing field with Amazon.