BQuick On Feb. 5: Top 10 Stories In Under 10 Minutes
This is a roundup of the day’s top stories in brief.
1. Government Paves Way For RBI To Have More Control On Cooperative Banks
The Union Cabinet on Wednesday approved amendments to the Banking Regulation Act to give the Reserve Bank of India greater control over cooperative banks.
According to Information and Broadcasting Minister Prakash Javadekar, who briefed the media after a cabinet meeting:
- Cooperative banks will be brought under the regulation of the RBI.
- The RBI will have the power to supersede and take control of the cooperative banks if the bank’s financial health deteriorates.
- Cooperative banks will need RBI permission to appoint a CEO.
- Cooperative bank audits will have to be done as per RBI guidelines.
The RBI will soon come out with a blueprint.
2. Anil Ambani’s NBFCs Look For Ways To Restructure
The two non-banking finance companies under the Anil Ambani-owned Reliance Group are proposing to split their loan book into two and seeking additional funds from lenders, in the hope of restarting operations, according to three people familiar with the discussions.
- Reliance Home Finance Ltd. and Reliance Commercial Finance Ltd. have submitted a fresh resolution plan to its consortium of banks, led by Bank of Baroda.
- The first part of the proposal is to separate the loans given by the two NBFCs to group companies.
- Once the group loans are segregated out, the NBFCs propose to restart operations and are seeking an additional Rs 3,000 crore in funds.
Lenders, however, are reluctant to provide fresh financing to the NBFCs.
3. Rosneft Said To Be Keen To Bid For BPCL
Russia's largest oil producer Rosneft is keen to bid for acquisition of Bharat Petroleum Corp Ltd., sources told PTI after the Russian firm's Chief Executive Officer Igor Sechin met Oil Minister Dharmendra Pradhan on Wednesday.
- Rosneft, which is the majority owner of India's second-biggest private oil refinery, is keen to expand in the world's third-largest and the fastest-growing energy market.
- Sechin first met Pradhan over breakfast, and then in delegation-level talks expressed interest in bidding for acquisition of government stake in Bharat Petroleum Corp Ltd, an official privy to the discussions said.
The government is selling all of its 53 percent stake in BPCL in the country's biggest privatisation plan.
4. Nifty Caps Best Three-Day Rally Of 2020, U.S. Stocks Surge
Indian equities registered their best three-day rally in over four months ahead of Monetary Policy Committee’s rate decision on Thursday.
- The S&P BSE Sensex rose 0.87 percent or 353.28 points to end at 41,142.
- The NSE Nifty 50 rose 0.91 percent to 12,089.15.
- The broader markets represented by the NSE Nifty 500 Index rose 1 percent.
- The market breadth was tilted in favour of buyers.
- Ten out of 11 sectoral gauges compiled by the NSE ended higher.
Follow the day’s trading action here.
U.S. stocks surged as the rally in risk assets entered a third day on rising bets the cornoavirus won’t derail the global economy. Crude oil joined the advance after tumbling into a bear market.
- The S&P 500’s three-day surge topped 3 percent, taking the equity benchmark within a whisker of all-time highs.
- Sentiment got a boost overnight, lifting Asian and European stocks, after a string of reports on possible vaccines or treatments for the deadly pathogen.
- Treasuries retreated, sending 10-year yields above 1.63 percent even as more quarantines were announced in an effort to control the virus.
Get your daily dose of global markets here.
5. D-Mart Eyes Raising Rs 4,000 Crore
Avenue Supermarts Ltd. will look to raise Rs 3,998 crore through its qualified institutional placement that opens today.
- The parent of D-Mart chain of supermarkets will issue up to 2 crore shares at a floor price of Rs 1,999.04 apiece, according to its stock exchange filing.
- The company can also choose to offer up to 5 percent discount to the floor price, it added.
- According to BloombergQuint’s calculation, if Avenue Supermarts manages to raise the full amount, it will result in equity dilution of 3.09 percent.
Promoter Radhakishan Damani has been selling his stake in Avenue Supermarts to comply with SEBI’s regulations.
6. Services Sector Grows At Highest Pace In Seven Years
Activity in India’s dominant services sector rose to its highest in seven years, a survey showed on Wednesday, backing a view that a nascent recovery was underway in Asia’s third-largest economy and that would keep the central bank sidelined.
- The January services purchasing managers’ index released by IHS Markit rose to 55.5 in January, from 53.3 in December and its highest reading in seven years.
- The composite index rose to 56.3 -- its highest since January 2013 -- helped by an improved showing in both the manufacturing and services sectors.
- A reading above 50 signals expansion, while less than that shows a contraction.
- The uptick in growth was accompanied by rising inflationary pressures, with input costs rising by the steepest since February 2013 and output price inflation picking up to a near two-year high, IHS Markit said in a release.
Those price pressures mirror a spike in headline inflation, which rose above 7 percent in December.
7. What To Expect From The MPC
India’s Monetary Policy Committee will announce its final review for 2019-20 on Thursday, days after the Union Budget tried to strike a difficult balance between treading a prudent fiscal path and supporting growth.
- While fiscal policy will be a key discussion point for the committee, it will be the recent spike in inflation that will likely seal the case for a status quo on rates.
- The MPC, after cutting its benchmark repo rate by 135 basis points in 2019, left rates unchanged at 5.15 percent when it met last in December.
- The pause will continue for now, according to all 36 economists polled by Bloomberg.
- Most expect the MPC to also hold on to its accommodative stance, although a few believe that a move to a neutral stance cannot be ruled out if the central bank sees inflation pressures spilling over to segments beyond food.
Here are the challenges that the MPC will have to manoeuvre through while taking a decision tomorrow.
8. Analysing Budget 2020 Tax Targets
Tax revenue is the largest, most critical source of revenue for any government and yet in India these past few years it has also been most difficult to forecast given the many policy changes.
- The government has revised down its tax revenue target for the current fiscal. Yet, even that will be challenging to achieve.
- It hopes to collect the remaining 40 percent over three months (January-March) and while the last quarter does traditionally see an increase in tax collections, it is unlikely to be this high.
- The budget estimates for the oncoming fiscal year 2020-21 are even more challenging to achieve, for three reasons: uncertain base, aggressive nominal GDP growth estimate and tax revenue growth estimate.
Are India's tax estimates a bit too stretched?
9. Is India's Gen Z Wary Of Credit?
India is home to the world’s biggest under-24 population — yet, the proportion of young borrowers in the country is low. For now.
- Of the 609 million Indians below the age of 24 years as of 2019, 147 million are eligible to apply for credit, according to a recent study by TransUnion CIBIL.
- But only 9 million people, or 6 percent, are “credit active” or have availed some form of credit.
- That’s the smallest percentage among Canada, Columbia, Hong Kong, South Africa and the U.S.
But this may change as India’s credit culture evolves.
10. Modi Gives Nod To Ram Mandir Trust
India’s Prime Minister Narendra Modi has announced the establishment of a trust to build a temple for the Hindu God Ram in the northern town of Ayodhya, where a 16th century mosque was razed in 1992.
- An independent 15-member trust was constituted by the Centre to oversee the construction of a "grand and magnificent" Ram temple in Ayodhya, Modi announced four days before the expiry of the deadline set by the Supreme Court.
- The announcement of a "broad scheme" for developing a Ram temple and formation of a Trust named 'Shri Ram Janambhoomi Teertha Kshetra' was made by the prime minister, shortly after a meeting of the Union Cabinet presided by him gave its approval.
Union minister Prakash Javadekar said it would be incorrect to link the Cabinet decision to the Delhi Assembly polls this Saturday.