BQuick On Dec. 20: Top 10 Stories In Under 10 Minutes

This is a roundup of the day’s top stories in brief

1. Top Deck Rejig At Mahindra & Mahindra

Mahindra & Mahindra Ltd. will re-designate Chairman Anand Mahindra as its non-executive chairman from April, as part of top-level changes announced under its succession plan.

• Managing Director Pawan Goenka will take on the role of chief executive officer from April 1 till the end of his current term on Nov. 11, 2020, according to an exchange filing.
• His term has been extended till April 1, 2021.
• Anish Shah, the current group president (strategy), will succeed Goenka as MD and CEO after his term ends in 2021.
• Shah has also been elevated as chief financial officer from April next year.
• The current CFO VS Parthasarathy will head the new e-mobility services division that will be created after merging the company’s after-market division, and Mahindra Logistics and Auto-Mobility Services.
• Parthasarathy will report to Anish Shah.

These changes are part of the comprehensive succession plan put in by M&M.

2. Banks Stare At A Rs 60,000-Crore Hit

Indian lenders may need to set aside another large chunk of money for provisions against stressed assets in the January-March quarter as a regulatory standstill period comes to a close.

• On June 7, the Reserve Bank of India had issued a new circular for stressed asset regulation which asked banks to sign inter-creditor agreements within 30 days and finalise a resolution plan within 180 days.
• If a resolution plan is not arrived at within this time-frame, banks would need to set aside incremental provisions or refer the account for insolvency, the RBI had said.
• Following the circular, inter-creditor agreements had been signed for nearly Rs 3 lakh crore in stressed assets, according to three people in the know.
• Most assets, for which such agreements were signed, are yet to be resolved. In the absence of a resolution, banks are staring at nearly Rs 60,000 crore in additional provisions, these people said.

Why have there been delays in resolution? Find out here.

3. Manufacturing Sector Balance Sheet Look Stronger, But...

There are signs that India’s non-government manufacturing companies are de-leveraging faster, which could portend well for a new investment cycle, even though short-term pressure on sales will continue to weigh on any immediate plans for capital expenditure.

• India’s manufacturing companies have seen an increase in ‘reserves and surplus’, set aside more money for ‘fixed assets’ and cut down on long-term borrowings, shows data from the Reserve Bank of India’s study of 1,539 listed private manufacturing companies.
• The ‘reserves and surplus’ category made up 34.4 percent of the sources of funds for these companies in the first half of 2019-20 compared with 32.4 percent a year ago.
• Long-term borrowings which accounted for 6 percent of the source of funds in the first half of last year has reduced to zero in the comparable period this year.

While multiple indicators are throwing up contradiction signals about a recovery, economists say it won't be coming anytime soon.

4. An End To The Great Onion Crisis?

India’s rampant onion prices may finally be running out of steam, with fresh supplies of the pungent vegetable set to hit the market next month.

• Prices at one of India’s biggest wholesale markets may plunge to about 20-25 rupees per kilogram from mid-January, according to Jaydatta Sitaram Holkar, a director at Agricultural Produce Market Committee, a state-run wholesale market for farm commodities at Lasalgaon in Maharashtra.
• That’s more than 80 percent below Tuesday’s record price.
• A new onion crop should help ease what has been a catastrophic year for the vegetable in the world’s second-most populous nation.
• Soaring prices have been blamed for accelerating food inflation and even triggering onion thefts and fist fights, according to some reports.

How far are we from a cooldown in onion prices?

5. Sensex, Nifty Close Week On A Flat Note

Indian equity benchmarks extended record closing streak for the fourth straight trading session.

• The S&P BSE Sensex rose 0.02 percent to end at 41,681.54.
• The NSE Nifty 50 rose 0.1 percent to close at 12,271.80.
• The broader markets represented the NSE Nifty 500 rose 0.13 percent.
• Eight out of 11 sectoral gauges compiled by NSE ended higher.

Follow the day’s trading action here.

U.S. equities moved higher on Friday alongside European stocks as investors counted down to the holiday break. The dollar edged up and Treasuries declined.

• The S&P 500 Index climbed 0.5 percent to 3,220.75 as of 9:31 a.m. New York time, the highest on record.
• The Dow Jones Industrial Average advanced 0.5 percent to 28,543.41, the highest on record with the biggest gain in a week.
• West Texas Intermediate crude declined 0.8 percent to $61.22 a barrel, the biggest drop in almost two weeks.

Get your fix of global markets update.

6. Will The ‘Quality Bubble’ Pop?

A narrow band of large caps has been driving India’s benchmark indices to new records despite the economy grappling with a prolonged slump. According to Credit Suisse’s Neelkanth Mishra, that’s expected to continue as the slowdown may worsen.

• “It has been a narrow rally so far. Only a few stocks are driving the upside,” Mishra, managing director and co-head of Equity Strategy (Asia Pacific) at Credit Suisse, said in an interview to BloombergQuint.
• “We think this [record rally] will continue till there is economic uncertainty. What they are calling as the quality bubble is really not going to deflate,” he said.
• The top 15 stocks by market capitalisation constituted nearly 40 percent of India’s equity market value, according to a report by Credit Suisse.
• The situation could reverse when an industry-wide restocking cycle kicks off, resulting in a rally in lower-quality stocks that are cheap right now, he said.

Here’s who, according to Mishra, is to blame for the economic slowdown.

7. What SEBI’s New Margin Trading Norms Mean

The market regulator’s changed rules covering margin collection in the cash segment are aimed at curbing risks and formalising leveraged trading. But the new norms are also expected to hurt small brokers the most.

• The regulations look to prevent the potential misuse of client securities to borrow money by brokers, something that’s at the heart of the crisis at Karvy Stock Broking Ltd.
• The broker, using power of attorney given by clients, pledged their shares to raise money for its own purposes.
• The Securities and Exchange Board of India made two key changes to curb such practices.

Here’s a full explainer of how the new norms will change things for traders.

8. It’s Crunch Time For Indian States

India’s sharp slowdown is endangering the fiscal deficit targets of its states, threatening to unravel progress made over the past few years and driving borrowing costs higher for some of them.

• The states have budgeted a consolidated fiscal deficit target of 2.6 percent of gross domestic product in the financial year ending March, a recent study by the Reserve Bank of India shows.
• While the deficit ratio has remained within the mandated threshold of 3 percent of GDP in the previous two years, doubts are growing about their ability to meet the latest goal.

Any slippage could see India’s overall public finances come under pressure and raise the risk of a downgrade by rating companies.

9. NCLAT’s Tata-Mistry Ruling: More Questions Than Answers

It is rather ironic that the NCLAT’s ruling in the Tata Sons case has the effect of perpetuating the stalemate rather than getting rid of it, writes Umakanth Varottil.

• If one were to wear the hat of a governance enthusiast, there is cause for jubilation, as the ruling marks the vindication of shareholder rights and enhanced scrutiny over promoter
• If, however, one were to view it through the lens of a corporate law aficionado, the NCLAT’s judgment leaves much room for discontent.
• The NCLAT assumes that Tata Sons is a quasi-partnership through a simple statement, without any rigour in analysis.

Read more on why the ruling is of significance.

10. Apple’s Secret Team Is Working On Satellites To Beam Data To Devices

Apple Inc. has a secret team working on satellites and related wireless technology, striving to find new ways to beam data such as internet connectivity directly to its devices, according to people familiar with the work.

• The Cupertino, California-based iPhone maker has about a dozen engineers from the aerospace, satellite and antenna design industries working on the project with the goal of deploying their results within five years, said the people, who asked not to be identified discussing internal company efforts.
• Work on the project is still early and could be abandoned, the people said, and a clear direction and use for satellites hasn’t been finalised.
• Still, Apple Chief Executive Officer Tim Cook has shown interest in the project, indicating it’s a company priority.

It’s not clear if Apple intends to pursue the costly development of a satellite constellation itself or simply harness on-the-ground equipment.