BQuick On Dec. 27: Top 10 Stories In Under 10 Minutes
Late evening news broke that the Adani Group has acquired a majority stake in Snowman Logistics. Read about it here.
This is a roundup of the day’s other top stories in brief.
1. RBI’s Financial Stability Report: Rising Bad Loans, Realty Risks And Bank Frauds
The rate of default among 310 real estate-related firms in India rose in the ongoing financial year, signalling increasing stress in the struggling sector.
- Almost all lenders to the real estate sector, including banks, housing finance companies and non-banking finance companies, saw a dip in their quality of assets, when considering the 90-day default cycle, the Reserve Bank of India said in its latest edition of the financial stability report.
- Default rate among public sector banks and NBFCs increased even after 180 days, while private banks and housing finance companies showed an improvement, the report said.
Aggregate exposure to these real estate companies has doubled to Rs 2 lakh crore since 2016. And it was rising till June.
The value of bank frauds reported in the first half ended September rose to a record, largely because of delayed recognition.
- Banks reported 4,412 cases of frauds worth Rs 1.13 lakh crore in the first half of the ongoing fiscal, according to the Reserve Bank of India’s Financial Stability Report.
- That compares with 6,801 cases of frauds worth Rs 71,543 crore reported in the entire 2018-19.
Here are the key takeaways from the report
2. Crystal Ball Gazing For Stocks In 2020
Large-cap stocks helped India’s benchmark equity indices to gain in 2019 even as broader markets fell because of poor corporate earnings and a slowing economy.
- Morgan Stanley expects India to outperform emerging markets in 2020 on the back of better growth and reasonable valuations.
- UBS said some green shoots could be squeezed out in the current gloomy backdrop like fuel demand recovery, tourist arrivals, airline volumes, rail cargo and PMIs.
- Credit Suisse expects narrow market performance to continue for now as economic uncertainty continues to push funds into “safe” stocks.
- Citi said it was a protracted road to a weak recovery in FY21.
Here are the sectors which these top brokerages are bullish on for the coming year.
3. Nifty Recoups Weekly Losses, Bonds Rise
Indian equity benchmarks halted a three-day losing streak and erased most of weekly losses with just today’s rally.
- The S&P BSE Sensex rose 1 percent to close at 41,575.14.
- The NSE Nifty 50 rose 0.98 percent to end at 12,245.80.
- The broader markets represented by the NSE Nifty 500 Index rose 0.93 percent.
- The market breadth was tilted in favour of buyers.
- All the 11 sectoral gauges compiled by NSE ended higher.
Follow the day’s trading action here.
Meanwhile, benchmark sovereign bonds gained in India after the central bank said it will buy long-end debt for a second week, stepping up the pace of its unconventional policy to lower borrowing costs.
- The 10-year yield slid 8 basis points to 6.51 percent at the close, taking the week’s drop to 10 basis points. It touched a three-week low of 6.49 percent intraday.
- The 2033 debt yield dropped three basis points.
Here’s what Crisil’s DK Joshi says can cause a spike in bond yields.
Stocks rose to record highs, with gains in technology companies sending the Nasdaq Composite Index to the longest rally in a decade.
- The S&P 500 added 0.2 percent at 9:30 a.m. in New York.
- The Stoxx Europe 600 Index advanced 0.4 percent.
- West Texas Intermediate crude increased 0.1 percent to $61.76 a barrel.
Get your fix of global markets update.
4. Home Sales Are Back, But Don’t Cheer Just Yet
Developers saw an uptick in demand driven by discounts during the festival period, raising optimism about a revival in the struggling sector considered a benchmark for the Indian economy.
- Festive season was a cheerful phase for real estate developers as housing sales rose 20-25 percent over last year, Jaxay Shah, national chairman at developers lobby Credai, told BloombergQuint.
- A lot of projects were nearing completion and these attracted buyers, aided by a reduction in repo or the central bank’s policy rate, he said.
- That comes as a relief for developers that have yet to recover from the impact of demonetisation, a stricter housing law aimed at curbing malpractices and tighter funding after the IL&FS crisis.
- Still, Anuj Puri of Anarock Property Consultants, said festive sales shouldn't be seen as a sign of recovery. Another strong quarter is needed to confirm a revival.
Find out what remains a major challenge for the sector saddled with a huge pile of unsold inventory.
5. Hold Tight, India Is Set To Disrupt The Sugar Markets Again
India may roil the global sugar market again as prospects for next year’s cane crop have brightened due to brimming reservoirs.
- Bountiful monsoon rains this year have led to above average water levels in reservoirs, which will in turn boost the amount of sugar cane that’s planted, according to industry and Indian government officials.
- Sugar output in the country is expected to bounce back in 2020-21 from an estimated three-year low this year, they said.
- Bumper crops from India, which vies with Brazil as the world’s top producer, have been blamed for causing a global sugar glut, leading to two years of more than 20 percent declines in world sugar prices.
- While the market has recovered in 2019, partly on crop setbacks in India, sentiment may worsen again if the country returns to record output.
Major producing countries have complained to the WTO to curb India's shipments. But the only thing stopping cane plantings in India “is the hand of God”.
6. Technical Glitch Turns An Itch For Taxpayers
An upward revision in capital gains by the revenue department in the income tax returns this year is confounding taxpayers.
- The central processing cell of the tax department recently issued notices to hundreds of taxpayers, making or proposing to make adjustments in the disclosed capital gains.
- Some notices also state that the returns are defective.
- The sudden spate of notices is attributable to a glitch in the tax departments’ ITR processing software, experts told BloombergQuint.
- “Some of the taxpayers who received notices have now been informed by the central processing cell that the problem relates to a technical error and the department is working to rectify it,” Ameet Patel, chairman of the taxation committee in Bombay Chartered Accountants Society, said.
What prompted the LTCG notices? And what is the government doing to fix it? Read more here.
7. The Year In Five Charts
2019 was an important year for data, with the release of long-pending statistics on unemployment, crimes in India and farmer suicides.
- Data long withheld, when released, showed joblessness at a 45-year high of 6.1 percent; that 11,379 people engaged in farming had committed suicide in 2016; and that cases of crime against women had increased by 9 percent from 2015 to 2017.
- Meanwhile, climate data showed a record number of extreme weather events such as severe heat waves, floods and cyclones.
- At the same time, there were widespread protests for land rights of tribal populations living in India’s forests.
Here’s a look at 2019 in five infographics.
8. A Decade Of “Fire And Ice”
It started with animal spirits left for dead by the financial crisis. It’s set to finish with stocks near records, volatility vanquished and the credit supercycle on steroids.
- In the 2010s traders braved everything from the sovereign meltdown in Europe and populist rage to “Volmageddon” and the shale revolution.
- Political earthquakes, shaky corporate earnings and credit shocks all came for the bull market.
- Then the central banks saved the day.
This is the tale of global markets over a decade of “fire and ice”.
9. How Instagram Changed The Way We Shop
On Oct. 6, 2010 — the first year of the decade now drawing to a close — the following headline appeared above a modest 445-word article on a tech-industry website: “Instagram Launches With the Hope of Igniting Communication Through Images.”
- It’s an almost comically quaint description of exactly what the company has done over the past nine years.
- On its way to amassing more than a billion users, Instagram has become many things: a joyful storehouse of family photos, a sledgehammer for celebrity tabloid culture, a shadowy abyss of teen bullying.
- Oh, and it has also become the most powerful force in shaping commerce this side of Amazon.com Inc.
Sarah Halzack tells the story of how the social media giant has given birth to new forms of consumer marketing.
10. The Car (Or Truck) To Look Forward To In 2020
Depending on your angle, the Cybertruck is a design disaster made from cheap metal sheets pounded together into a four-wheel ice pick stuck right in your eye, or it’s a slick marketing scheme that earns Tesla Inc. millions of dollars by way of each $100 deposit required to reserve one. The truck won’t see the light of day, this point of view goes—it’s just the latest promise from a company with a history of sporadic delivery on promises.
- Whatever you make of it, the Cybertruck is exciting! That’s not so common in today’s auto market.
- In 2019 we saw so many bulbous SUVs, appliance-shaped sedans, and out-of-reach supercars that they started to blur together.
- The Cybertruck comes by way of its jarring looks honestly. It feels like a descendant of the wedge cars from the 1960s and 1970s—the flatbed version of the Lotus Esprit, BMW M1, Lancia Stratos, Ferrari PF Modulo, DeLorean, and Lamborghini Countach.
- Those design icons transcended the car world and became pop culture. They dominated fashion editorials and were immortalised in Hollywood blockbusters.
- When it finally hits the road, the Cybertruck should do the same.
On a broader scale, the success or failure of Tesla’s first electric pickup will indicate the future of the truck industry as a whole.