BQuick On Feb. 5: Top 10 Stories In Under 10 Minutes

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

1. RCom Insolvency Faces Legal Twists

Regulatory hurdles in the sale of spectrum, a persistent operational creditor in Ericsson, a deal with white knight Reliance Jio, but only on paper, and a board that wishes to overstay its welcome—Reliance Communications Ltd.’s insolvency process promises to be a roller-coaster ride for stakeholders as well as the courts.

• The decision of RCom’s board to opt for voluntary insolvency under the Insolvency and Bankruptcy Code, 2016, raises several questions.
• Reliance Communications, Reliance Telecom Ltd. and Reliance Infratel Ltd. owe nearly Rs 1,500 crore to operational creditor Ericsson.
• After Ericsson failed to recover its dues, it filed bankruptcy proceedings against the three entities at the National Company Law Tribunal in May last year.

Here are the five legal twists this insolvency process will have to overcome.

3. Mutual Funds’ Exposure To Risky Assets

As lenders allowed Subhash Chandra’s Essel Group a standstill on default, it’s the third company in the last four months that has triggered concerns about mutual funds’ investments in commercial paper after IL&FS group and Dewan Housing Finance Ltd.

• Mutual funds have an exposure of more than Rs 17,000 crore to three entities, according to data by fund houses and credit rating agencies.
• Though it’s only 1 percent of the total assets under management of the fund houses, these investment decisions have impacted investor sentiment in the last few months.

Here are the mutual funds with the largest exposures to risky debt.

4. Government Demands RBI's Surplus

The central government asked the Reserve Bank of India to transfer its entire surplus generated over the last two years as it seeks to meet its revised budget goals for the ongoing and the next financial years.

• The demand comes even before a committee headed by former RBI Governor Bimal Jalan to review the rules which govern surplus transfers submits its report.
• The panel was formed after differences between the government and the central bank over RBI’s reserves and independence spilled out in the open.
• The government requested the RBI to provide an interim surplus during the ongoing financial year 2018-19 from the amount withheld in the two previous fiscals, Minister of State for Finance P Radhakrishnan said in the Rajya Sabha.

RBI’s total dividend to the government could hit Rs 68,000 crore in FY19.

5. Markets Extend Winning Streak

Indian equity benchmarks ended higher for the fourth consecutive trading session, its longest winning streak in over two weeks.

• The S&P BSE Sensex Index closed 0.1 percent higher at 36,616.
• The NSE Nifty 50 Index ended at 10,934, up 0.2 percent.
• The broader market index—NSE Nifty 500 Index, however, ended 0.1 percent lower. The market breadth was also tilted in favour of sellers.
• Six out of 11 sectoral gauges compiled by NSE fell, led by the NSE Nifty Realty Index's 2.25 percent decline.

Follow the day’s trading action here.

U.S. stocks pushed higher for a fifth day, with sentiment getting a boost from corporate results and strong earnings from oil giant BP that lifted European equities.

• The S&P 500 matched its longest rally of the year, as stocks continued to rebound from the pre-Christmas rout.
• U.S. earnings were mixed, with Alphabet slipping after announcing a big rise in spending, while Estee Lauder surged on its results.
• The euro fell 0.1 percent to $1.143, the weakest in more than a week.
• West Texas Intermediate crude declined 1.1 percent to $53.97 a barrel.

Get your daily fix of global markets here.

6. Earnings: GAIL, HPCL, Tech Mahindra

GAIL (India) Ltd.’s profit for the December-ended quarter beat estimates due to higher revenue from its natural gas marketing and liquefied petroleum gas business.

• Net profit slipped 14 percent quarter-on-quarter to Rs 1,681 crore.
• Revenue rose 2.7 percent to Rs 19,789 crore.

The petrochemical business failed to impress.

Hindustan Petroleum Corporation Ltd.’s profit slipped for the fourth straight quarter, but beat estimates.

• The company reported a net profit of Rs 247.6 crore for the three months through December.
• Revenue rose 6.8 percent to Rs 72,111.8 crore.
• Gross refining margin fell below the $4 mark for the first time in nine quarters.

Here’s what triggered the decline in GRMs.

Tech Mahindra Ltd.’s quarterly profit rose led by its communications and enterprise businesses.

• Net profit increased 14.3 percent sequentially to Rs 1,207 crore
• Revenue rose 3.6 percent to Rs 8,943 crore.
• Operating profit rose 8.6 percent to Rs 1,439 crore.
• Ebit margin expanded 70 basis points to 16.1 percent.

It added one new client in the $50 million-plus bracket.

Also Read: PNB Reports First Profit In Four Quarters; Says Fully Provided For Nirav Modi Fraud

7. Prepaid Power?

India’s power retailers may need to start paying in advance for their electricity purchase in a bid to ease financial stress at generators.

• Concerned over delayed payments to generators, the federal power ministry has formed a panel to examine if distribution companies should pay generators in advance for electricity purchases, according to a power ministry document reviewed by Bloomberg.
• A power ministry spokesman confirmed the development.

Power producers are among the biggest holders of soured loans in the country.

9. Did India Pick The Right Inflation Target?

As we head into the monetary policy review on Thursday, the discussion is divided over whether the MPC should focus on high core inflation or low headline inflation, both of which are sending different messages, writes Ira Dugal.

• Will a prolonged period of low food inflation dampen inflation expectations and future inflation?
• Economists are divided. Not just on the read of the inflation data but also on the strictness with which the MPC will interpret its inflation target linked to headline CPI.
• A similar debate had played out in the 2013-2016 period but in a different way.

For now though, the RBI’s decision to target headline inflation will put the MPC in a spot.