BQuick On Feb. 24: Top 10 Stories In Under 10 Minutes
This is a roundup of the day’s top stories in brief.
1. Dow Opens Over 800 Points Lower, Nifty Logs Worst Fall Since Budget
U.S. equities tumbled alongside stocks in Europe and Asia as authorities struggled to keep the coronavirus from spreading more widely outside China. Havens including Treasuries and gold jumped.
In a dramatic day across markets, these were some of the standout moves:
- The three main U.S. stock benchmarks all opened more than 3 percent lower, with the S&P 500 Index registering its biggest drop since August.
- The Dow Jones Industrial Average erased its gains for the year.
- The yield on 10-year Treasuries sank to its lowest since 2016.
- Spot gold approached $1,700, while Brent crude oil tumbled almost 4 percent.
Get your daily fix of global markets here.
Indian equity investors lost around Rs 3 lakh crore of wealth today, according to data available with Bombay Stock Exchange.
- That came after India’s equities benchmark—S&P BSE Sensex and the NSE Nifty 50—clocked its worst fall since the Budget day.
- The 30-share Sensex closed 1.96 percent or 807 points lower at 40,363.23.
- The 50-share Nifty 50 closed 2.08 percent lower to end at 11,829.40.
- The broader markets represented by the NSE Nifty 500 Index ended 2.01 percent lower.
Follow the day’s trading action here.
2. JSW Steel’s Buyout Of Bhushan Power Faces New Test
JSW Steel Ltd.’s $2.7 billion purchase of a bankrupt steel mill is facing a fresh hurdle after a former chairman of Bhushan Power & Steel Ltd. challenged the deal in the country’s top court.
- Sanjay Singal filed a petition on Monday against a ruling by a bankruptcy tribunal that had approved the deal earlier this month, according to the Supreme Court’s website.
- The petition hasn’t yet been allotted a date for a hearing. A JSW spokesman declined to comment.
- The Sajjan Jindal-led mill has been caught in legal tangles since its 197 billion-rupee ($2.7 billion) bid for Bhushan Power was first approved last year, while ArcelorMittal faced more than a year-long battle for its takeover of Essar Steel India Ltd.
The petition now threatens to further delay or derail the takeover, which could also be a setback for lenders.
3. Mukesh Ambani's Next Big Bet
For Asia’s richest man, online gaming could be the next big thing in his home market.
- “There is a huge potential” for gaming to grow in India, Mukesh Ambani, chairman of Reliance Industries Ltd., said while speaking with Microsoft Corp. Chief Executive Officer Satya Nadella in Mumbai.
- “Gaming will be bigger than music, movies and television shows put together,” Nadella said.
- Ambani said gaming doesn’t really exist in India and sees a huge opportunity with increasing broadband connectivity.
- He didn’t disclose whether his wireless upstart, Reliance Jio Infocomm Ltd., will enter the gaming segment, after luring 38 crore users to its 4G technology.
Ambani’s interest in gaming comes at a time when the country is witnessing the growth of online fantasy sports leagues, quizzing and card games such as poker.
4. Donald Trump Announces $3 Billion Defence Deal
U.S. President Donald Trump today began his two-day trip to India with a visit to Mahatma Gandhi’s residence at Sabarmati Ashram and a rally at the Sardar Patel stadium in Narendra Modi’s home state Gujarat. The rally was then followed by a visit to Agra’s Taj Mahal.
- The U.S. will sign military deals worth more than $3 billion with India, Trump told a crowd in the western city of Ahmedabad sharing the stage with Modi.
- The State Department has also approved a potential sale to India of $1.8 billion in arms, including air-defense radars and missiles, rifles and other equipment, the U.S. Defense Security Cooperation Agency announced.
- Trump also reiterated his pledge that the U.S. would make a significant trade deal with India.
Trump gave no timeline for a deal saying that he was in “no rush”.
5. Shaktikanta Das Expects A Four-Level Banking System In India
India may witness a diversification in its banking sector in the coming years as the lenders embrace technology, according to Shaktikanta Das. The nation will see a very different banking sector, which can be split into four levels, the Reserve Bank of India governor said at the Annual Banking Conclave organised by the Mint newspaper on Monday. The segments, according to Das, will include:
- First segment to comprise of large traditional banks with domestic and international presence.
- Second segment to comprise of several mid-sized banks and some niche banks spread across the country.
- Third segment to include small private banks, small finance banks, regional rural banks and cooperative banks that cater to smaller borrowers.
- Fourth segment to comprise digital entities as well as financial technology companies that serve as agents or associates of larger banks to spread services to the bottom of the pyramid.
The focus, Das said, has to be on ushering in significant improvements in efficiency and rationalisation of scarce capital.
6. RBI’s LTRO Gets Strong Demand From Banks
India’s second long-term repo operation was bid five times the amount on offer as lenders locked in cheap one-year money from the central bank.
- The Reserve Bank of India received 52 bids worth Rs 1.23 lakh crore ($17.1 billion), it said in a statement.
- The authority accepted Rs 25,020 crore.
- The demand was however lower than the first auction which saw demand exceeding the funds on offer by nearly eight times, as lenders rushed to borrow three-year money at lower rates from the central bank.
Here’s why the central bank is likely to do more such long-term repo operations.
7. How PSU Stocks Disprove The Efficient Market Hypothesis
Why are PSU stocks serial underperformers? It’s not just about weak financial fundamentals, argue Saurabh Mukherjea and Salil Desai.
- As minority shareholders, investors play on an uneven field with the government on the other side.
- Often, the government is not just the dominant shareholder but also a customer of these PSUs.
- This duality of the government’s role puts at risk the efficient use of capital
Should PSUs, where such conflicts are likely to arise, be listed at all?
8. Is Groupe ADP Giving GMR A Better Deal?
GMR Infrastructure Ltd.’s plan to sell stake in its airport business to France’s Groupe Aeroports de Paris fetches a higher valuation compared to an agreement signed last year.
- The Indian airport operator will sell a 49 percent stake to Groupe ADP for Rs 10,780 crore to reduce debt.
- That comes nearly a year after a consortium led by a Tata Group company, Singapore’s sovereign wealth fund GIC and SSG Capital Management had agreed to invest around Rs 8,000 crore for a 44.4 percent stake in GMR Airports in March 2019—valuing the airport division at Rs 22,480 crore, including earn-outs.
- The new deal values GMR Airports at Rs 26,475 crore, including earn-outs. Groupe ADP pegged earn-outs up to Rs 4,475 crore, linked to achievement of certain operating performance metrics as well as on receipt of certain regulatory nods over the next five years.
Here’s a look at some key differences between the two deals.
9. Arson, Stone Pelting In North East Delhi
Violence erupted in New Delhi just hours before U.S. President Donald Trump was due to arrive in the Indian capital, as rival groups protested the country’s contentious religion-based citizenship law.
- Police fired tear gas to disperse the protesters and imposed curfew-like restrictions in Delhi’s northeast, with demonstrators both for and against the law throwing stones and setting vehicles and shops on fire, television footage showed.
- A policeman was killed and another injured in the clashes, according to reports from the Press Trust of India.
- Orders under section 144 Code of Criminal Procedure, which bans the assembly of four or more people, have been imposed.
- On Saturday night, a group of women blocked a carriageway outside the Jaffrabad Metro station against the CAA. Clashes broke out on Sunday evening between pro and anti-CAA groups near Jaffrabad over blocking of the road.
- The situation escalated after BJP leader Kapil Mishra called a gathering on Sunday demanding that police remove the anti-CAA protestors within three days.
Since then, northeast Delhi has been on the boil.
10. Nirav Modi’s Prized Art Goes Under The Hammer
The man accused of orchestrating India’s biggest bank fraud once counted among his most prized possessions an MF Husain painting that depicts the tussle between right and wrong in the human soul.
- The Battle of Ganga & Jamuna is the centrepiece of an auction Friday in Mumbai, where India’s fraud investigation office is seeking to recover as much as Rs 50 crore ($7 million) by selling paintings, watches, handbags and cars seized from Nirav Modi, the celebrated jeweler now fighting extradition from a London jail.
- If the diptych sells for its top asking price -- $2.6 million -- it will be an auction record for Husain.
- “Since these artworks were in Nirav Modi’s house, they’re already pre-selected as the best ones,” said Dinesh Vazirani, founder of the Saffronart auction house, which is handling the sale.
- “And because the government of India is doing the auction, there is a gravitas to it. You know the title is going to be clear,” Vazirani said.
India’s fraud investigation office has for the first time commissioned auctioneers to invite bids for assets seized from economic fugitives.