BQuick On Feb. 10: Top 10 Stories In Under 10 Minutes
This is a roundup of the day’s top stories in brief.
1. Equity Mutual Fund Inflows Hit Five-Month High
Inflows into equity mutual funds jumped to the highest in five months in January as investor sentiment improved after the broader market, which declined for two straight years, turned a corner.
- Net inflows into equity and equity-linked schemes rose 75 percent sequentially to Rs 7,877.4 crore in January.
- That’s the highest since August 2019.
- An analysis of the category-wise data showed that mid caps witnessed the highest inflows since AMFI started offering granular data.
- The small-cap schemes, too, witnessed the biggest inflows since August. Investments into large caps, though remained flat sequentially, stayed above the Rs 1,000-crore mark for the eighth straight month.
Monthly SIP flows sustained, with January setting a record.
2. Amazon Seeks To Quash Competition Commission Order
E-commerce giant Amazon.com Inc. on Monday moved the Karnataka High Court seeking a stay on the investigation ordered by the Competition Commission of India against the company for alleged violations of provisions of competition laws.
- In its plea, Amazon has sought "quashing and setting aside" of the CCI's probe order dated Jan. 13, 2020. It has also requested the court to provide relief based on "facts and circumstances of the case in the interest of justice".
- When contacted, Amazon India in an emailed statement said, "the matter is sub-judice and hence, we cannot offer any comments".
- In its petition, Amazon said the CCI order had been passed "without application of mind" and would cause irreparable loss/injury to the goodwill/reputation of the company if an investigation is allowed.
It added that the order will cause "serious prejudice" against Amazon and its findings are "perverse, arbitrary, untenable in law."
3. Raamdeo Agrawal Isn’t Hunting For Value Anymore
One of India’s best-known value investors is no longer going after value.
- “Value is out of fashion right now, deeply out of fashion. Even Warren Buffett is having a tough time,” Raamdeo Agrawal, chairman of Motilal Oswal Financial Services, said at a PMS AIF World event in Mumbai.
- “Earlier you used to buy cheap. If you end up buying cheap, you were guaranteed to make money. That's not the scene now,” Agrawal said.
- He said this experience has reposed his faith in focusing on quality and growth.
Watch the full interaction with Motilal Oswal’s Raamdeo Agrawal where he explains why quality is key.
4. Metal Stocks Drag Nifty, U.S. Stocks Fluctuate
Indian equities indices closed lower dragged by losses in metal stocks such as Tata Steel Ltd. and Vedanta Ltd.
- The S&P BSE Sensex declined 0.39 percent or 162.23 points to 40,979.60.
- The NSE Nifty 50 declined close to 0.55 percent or 66.85 points to 12,031.50.
- The Nifty is not expected to go below 11,950 in the near term and there may be another attempt to rally towards 12,150, according to Hemen Kapadia, technical research analyst, KR Choksey.
- Mahindra & Mahindra Ltd. shares had their steepest decline in more than a decade after the Indian automaker reported a surprise drop in its December-quarter earnings. The stock tumbled 7.2 percent, the steepest fall since August 2009.
Follow the day’s trading action here.
India is poised to see broad-based earnings upcycle over the next one to three years as three of the four key indicators turned positive, according to UBS.
Watch Gautam Chhaochharia explain why he’s hopeful of a recovery.
U.S. equities fluctuated on Monday, while European and Asian stocks slipped, as investors struggled to gauge the economic hit from the spreading coronavirus while preparing for more corporate earnings.
- The S&P 500 Index was little changed at the start of regular trading, as gains in consumer shares offset losses in the tech and energy sectors.
- The euro declined after the region was buffeted by political headlines. German Chancellor Angela Merkel’s succession plan collapsed, and polls put Sinn Fein in place for a possible role in Ireland’s government, depressing the country’s banking stocks.
- West Texas Intermediate crude fell 0.7 percent to $49.98 a barrel.
Get your daily fix of global markets here.
5. RBI's MSME Norms: Moral Hazard?
The Reserve Bank of India’s latest restructuring guidelines for micro, small and medium enterprises is a step back on asset classification standard imposed by the regulator, said Fitch Ratings India.
- In a statement on Monday, the rating agency said that the latest restructuring announcement signifies a gradual shift away from the regulator's earlier effort to enhance the quality and transparency of asset classification in India’s banking system.
- The RBI on Thursday said that MSME loans to companies registered under the goods and services tax will be eligible for a one-time restructuring process till Dec. 31, 2020.
- This is an extension of the restructuring guidelines which were announced in January 2019 and were supposed to end at the end of the ongoing financial year. The one-time restructuring will be applicable to loans which are stressed but are standard as of Jan. 1, 2020 and will not attract any asset quality downgrades.
There is a risk that such regulatory forbearance will perpetuate moral hazard, as it follows aggressive lending growth and risk-taking in certain sectors in the five years to the financial year ended March 2019 (FY19).Fitch Ratings Statement
The central bank had stayed away from forbearance since 2013.
6. Pharmaceutical Sales Drop, Auto Sales Fall In January
India’s pharmaceutical sales dropped for the second consecutive month in January as drugmakers saw a decline in sales of therapeutic drugs.
- Pharma sales grew 7.6 percent year-on-year to Rs 12,078 crore, according to data released by AIOCD AWACS—a pharmaceutical market research firm.
- The industry had grown 8.8 percent in December and 14.5 percent in November.
- The growth rate in January 2019 was 10.8 percent.
- Sales of popular therapeutic drugs slowed in January, slowing down growth, the research firm said.
More than half of the 5 pharma firms exhibited double-digit growth.
Sales of cars and utility vehicles continued to decline in January as the worst slowdown in the sector in almost two decades showed no signs of recovery.
- Domestic sales of passenger vehicles tumbled 6.2 percent year-on-year to 2,62,714 units in January.
- Cars sales fell 8.1 percent to 1,64,793 units whereas sales of utility vehicles rose 2.57 percent to 84,929 units.
- Sales of CVs plunged 14.04 percent year-on-year to 75,289 units.
Sales of vehicles continued to be stressed due to the rising cost of vehicle ownership.
7. Jaguar Land Rover Sounds Supply Chain Alarm
Jaguar Land Rover warned of potential disruption to its supply chains outside of China, two days after first conceding the coronavirus is likely to affect its fourth quarter performance.
- The luxury carmaker wrote on Friday that it expects the outbreak to impact its fourth-quarter results but that it’s too early to quantify.
- By Sunday it had updated its presentation to add that if the disruption continues, supply chains outside China could also be impacted.
- The quick revision shows how companies are scrambling to respond to both the virus and the growing number of preventative measures put in place in Asia and beyond to halt its spread.
So far the worries over the coronavirus have had little impact on Jaguar’s sterling, euro and U.S dollar-denominated bonds.
8. How GAIL, Grasim, And IOB Fared In Q3
GAIL (India) Ltd.’s quarterly profit rose, beating estimates, and its operating margin expanded.
- Net profit rose 17.5 percent quarter-on-quarter to Rs 1,250 crore.
- Operating profit rose 32.6 percent to Rs 2,072.4 crore.
- Margin expanded to 11.7 percent from 8.7 percent in the preceding quarter.
GAIL’s stock has slumped 29 percent over the last 12 months.
Grasim Industries Ltd.’s quarterly profit fell as prices of viscose staple fibre, its mainstay product, declined in India.
- Net profit dropped 27.4 percent year-on-year to Rs 680.3 crore.
- Profitability was hurt primarily by the drop in viscose staple fibre prices as capacity addition in Asia in the previous year led to a supply glut.
- The global economic slowdown caused by the U.S.-China trade war further weighed on prices.
Here’s why viscose staple fibre profitability was impacted.
Indian Overseas Bank’s loss widened in the quarter ended December as provisions rose.
- Net loss stood at Rs 6,075 crore in the October-December period compared with a loss of Rs 346 crore a year ago, according to its exchange filing.
- That’s because of a more than threefold jump in provisions. The bank’s provisions and contingencies rose to Rs 6,663 crore in the third quarter from Rs 2,075 crore in the year-ago period.
Still, its asset quality improved during the quarter.
9. Budget Move Hobbles Tax Tribunal, Hurts Taxpayers
The proposals in the Finance Bill may cause an added burden, with tax litigation becoming even more expensive for taxpayers, writes Mukesh Butani.
- Section 254(2A) of the Income Tax Act gives the Income Tax Appellate Tribunal the statutory power to grant interim relief of stay to taxpayers.
- This section has constantly been a subject of legislative glare through successive amendments over the years.
- The Finance Bill 2020 has again proposed amendments to Section 254(2A) of the Income Tax Act.
What the Finance Bill proposes is fundamentally repugnant, writes Butani.
10. Reservation Order: Government Says It Wasn’t Party To The Case
The government on Monday informed Lok Sabha that it was not a party in the Supreme Court’s decision which has ordered that states are not bound to provide reservation in appointments.
- Making a statement in the House, Social Justice and Empowerment Minister Thaawarchand Gehlot said the Centre was also not asked to file an affidavit on the issue.
- He said the top court order pertains to a decision of the Uttarakhand government taken in 2012 when the Congress was in power in the state.
- This led to protests by Congress members who walked out of proceedings.
- The minister said the issue is being discussed in the government at the "highest level" and it will take a holistic view on the matter.
The Supreme Court has held that states are not bound to provide reservation in appointments and there is no fundamental right to claim quota in promotions.