BQuick On Dec. 6: Top 10 Stories In Under 10 Minutes

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

1. Cabinet Clears PFC's Takeover Of REC

The cabinet approved the sale of government’s entire 52.63 percent in power sector financier REC Ltd. to state-run peer Power Finance Corporation Ltd. as it looks to mop up funds through such a deal for the second straight year to meet its divestment target.

• The Cabinet Committee of Economic Affairs has given its in-principle approval for the strategic sale of 52.63 percent REC to PFC along with transfer of management control, Finance Minister Arun Jaitley said in a media briefing.
• “This was announced in the 2017-18 budget that if in one space there are multiple PSUs then their consolidation, acquisition or merger will happen. In this case the cabinet has approved the acquisition model.”
• Jaitley didn’t give other details. The modalities will be worked out by a committee comprising him, secretaries of the departments involved and Infrastructure Minister Nitin Gadkari, Jaitley said.

The government’s stake in REC is worth more than Rs 11,000 crore.

2. Sensex Slumps, Dow Down 400 Points

Indian equity benchmarks clocked their biggest single-day drop since Oct. 11 ahead of the outcome of state elections amid a global market selloff.

• The S&P BSE Sensex Index fell 1.6 percent or 572 points to 35,312.
• The NSE Nifty 50 Index dropped 1.7 percent or 182 points to 10,601.
• Investors are taking profits after a good rally ahead of outcome of state elections, AK Prabhakar, head of research at IDBI Capital told BloombergQuint.
• All 19 sector gauges compiled by BSE ended lower led by the S&P BSE Energy Index's 2.35 percent fall.

Follow the day’s trading action here.

Stocks slumped at the start of U.S. trading, following European and Asian shares lower, as concern resurfaced that trade tensions between the world’s two largest economies are far from resolved.

• The Dow Jones Industrial Average sank more than 400 points, while S&P 500 resumed its slide after one of the biggest routs of the year.
• Trade tensions reignited after the arrest of the chief financial officer of tech giant Huawei Technologies Co. -- dousing hope China and the U.S. would make immediate progress on a deal.
• The euro climbed 0.1 percent to $1.136, the strongest in a week.
• The yield on 10-year Treasuries fell two basis points to 2.89 percent, hitting the lowest in three months with its sixth straight decline.

Get your daily fix of global markets.

3. Saudi Doesn’t Want To Shock Oil Market

Saudi Arabia proposed a moderate oil-production cut from OPEC and its allies that would nudge the market back into balance, seeking to walk a fine line between preventing a surplus and appeasing U.S. President Donald Trump.

• “We in the kingdom are going to be advocating something adequate to balance the market,” Energy Minister Khalid Al-Falih told reporters at the opening session of the group’s meeting in Vienna on Thursday.
• A cut of about 1 million barrels a day from the whole group should be adequate and “certainly we don’t want to shock the market”, Falih said.
• Events in the Austrian capital weren’t the only story on Thursday. As ministers sat down at the headquarters of the Organization of Petroleum Exporting Countries, Russian Oil Minister Alexander Novak flew to St. Petersburg to meet President Vladimir Putin to decide on their country’s contribution.
• If the group’s most important ally in the broader OPEC+ coalition decides to make a sizable cut, the cartel will follow up.

Saudi Arabia is equally prepared for a deal or no deal.

4. More Than 60% Of Indian Firms See Earnings Cut

Earnings forecasts for three-fifths of Indian companies were lowered as they missed estimates because of higher commodity costs.

• Till Dec. 4, earnings per share forecasts were reduced for 168 of the 269 companies tracked by at least 10 analysts, according to Bloomberg data. That came as the number of Nifty 50 companies failing to meet forecasts rose to its highest in at least five quarters.
• Companies across sectors saw EPS cuts, except for information technology. The export-driven sector was aided by the weakening rupee.
• EPS estimates were reduced by more than 50 percent for 18 stocks, with telecom cement and hospital companies witnessing the deepest cuts.

Here are the stocks with the biggest EPS hikes.

5. Customers’ Gain = Banks’ Pain?

The Reserve Bank of India has directed banks to change the manner in which they fix lending rates for retail borrowers and small and medium enterprises.

• Until now, banks were using their own cost of funds to determine the lending rate charged to different categories of borrowers.
• But starting April 1, 2019, banks will need to use an external benchmark -- such as the yield on a government bond -- to determine the lending rate to be charged.
• The move is beneficial for customers. One, as a borrower you are more aware of what is impacting your lending rates and EMIs. Two, since you know that a change in credit score will impact your EMI, you will be more careful to maintain it.
• But there are some possible downsides here. The most obvious one being that your lending rates will become more volatile.

So what does it mean for banks?

6. The Regulatory Dilemma With NBFCs

The recent turmoil provides a good opportunity to make  ‘big-ticket’ changes to non banking finance company regulations, writes Harsh Vardhan.

• Regulations in the past focused entirely on the contagion that will pass from NBFCs to banks.
• Recent events proved that the banking system can pose risks for NBFCs.
• Regulations on the asset side of NBFCs and banks have been aligned. It’s now time to look at the liability side.

Here’s the way forward.

7. Sun Pharma Spooked By A Secret

It’s said that silence is golden. But it’s really not that golden when it costs you and your shareholders Rs 11,000 crore in two days. Not only did investors lose money, Sun Pharmaceutical Industries Ltd.’s market capitalisation fell below Rs 1 lakh crore for the first time since August 2013.

• Dilip Shanghvi held a conference call on Dec. 3 in which he said he hadn’t received intimation from SEBI about reopening of an insider trading case, nor get any communication about the whistleblower’s 150-page complaint.
• A fair point; you can’t respond to something you aren’t aware of or haven’t seen. That brings us to what he was aware of: The undisclosed beneficiary of the Rs 2,240-crore loan.
• Shanghvi said the loan was advanced in the normal course of business at arm’s length, and at market rates. And that it was given to someone involved in the pharma business.

Still, Shanghvi stopped short of naming the person or the company.

8. Anand Mahindra’s ‘Unfinished Story’

The revival of Pininfarina SpA, the iconic coach-builder famous for designing Ferrari sports cars, is ahead of schedule, though the turnaround is an “unfinished story,” said Anand Mahindra, chairman of the group that bought the Italian company three years ago.

• Pininfarina, founded in 1930 by Battista “Pinin” Farina, is boosting profit and winning orders for clients inside and outside the car industry, including design contracts for a Sukhoi airliner and Princess yachts.
• It’s on track to present its PF Zero electric car at the Geneva auto show next year.

Here are other highlights from the interview.

9. Surat To Be World’s Fastest Growing City

When it comes to the top 10 cities for economic growth, India is set to dominate over the next two decades, according to Oxford Economics.

• Surat, a diamond processing and trading center in the western state of Gujarat, will see the fastest expansion through 2035, averaging more than 9 percent, Richard Holt, Oxford’s head of global cities research, wrote in a report.
• All of the 10 fastest over that period will be in India.
• While economic output in many of those Indian cities will remain rather small in comparison to the world’s biggest metropolises, aggregated gross domestic product of all Asian cities will exceed that of all North American and European urban centers combined in 2027.

Click here to see the world’s largest 10 cities.

10. Why December 11 Is The Congress’ To Lose

For the Congress and Rahul Gandhi, being second-best or ‘nearly there’ won’t fly anymore, writes Tamanna Inamdar.

• Many see this as the best possible chance for the Congress to regain power in Madhya Pradesh.
• In Chhattisgarh, the difference in the vote share between the BJP and the Congress has remained narrow.
• In Rajasthan’s ‘revolving door’, a government hasn’t been re-elected in the last 20 years.

The factors disrupting the possibility of a Congress win across all the states are mostly of its own creation.