BQuick On Feb. 6: Top 10 Stories In Under 10 Minutes
This is a roundup of the day’s top stories in brief.
1. RBI’s Stealth Move After Keeping Rates Unchanged
The Reserve Bank of India has decided to introduce long-term repo operations into its liquidity toolkit—a measure that market participants expect will bring down short term rates sharply and also prompt increased investment in corporate bonds.
- These LTROs, together with the RBI’s earlier introduced ‘Operation Twist’, are an attempt by the central bank to manage bond yields and push transmission of already announced interest rate cuts.
- In its statement on developmental and regulatory policies, the RBI said it has decided to conduct LTROs starting the fortnight beginning Feb.15.
- “The RBI shall conduct term repos of one-year and three-year tenors of appropriate sizes for up to a total amount of Rs 1 lakh crore at the policy repo rate,” the RBI said.
- As such these operations will be conducted at the prevailing repo rate of 5.15 percent.
Here’s how this plan will work.
India’s Monetary Policy Committee decided to keep interest rates unchanged, extending a pause in its monetary easing cycle which was described as temporary in December.
- The committee reiterated that its monetary policy stance remains 'accommodative' for as long as it is necessary to revive growth, but decided to maintain a status quo on policy rates amid elevated inflation.
- Concluding its three-day meet, the committee voted to keep the repo rate unchanged at 5.15 percent. The committee has pared rates by 135 basis points in the current cycle.
The pause in a nearly year-long rate cutting cycle in 2019 came after a surge in retail inflation.
2. Done Deal: Emami Sells Cement Unit To Nirma Group
Emami Group has agreed to sell its cement unit to a subsidiary of Nirma Group as its promoters look to pare debt.
- The group entered into a binding agreement with Nuvoco Vistas Corporation Ltd., part of the Nirma Group, for 100 percent stake sale in Emami Cement Ltd. at an enterprise value of Rs 5,500 crore, according to an exchange filing.
- The transaction, subject to regulatory approvals, is expected to be completed in the next three to four months.
- The deal will lead to a consolidation in the eastern markets and the combined entity will compete with Dalmia Cement Ltd., UltraTech Cement Ltd. and Shree Cement Ltd., among others.
Promoters of Emami Group have been looking to cut debt and the deal will significantly reduce concerns around that.
3. Nifty Rises For Fourth Day, U.S. Stocks Fluctuate
Indian equities ended higher for the fourth consecutive trading session after the Monetary Policy Committee decided to keep interest rates unchanged as expected.
- The S&P BSE Sensex rose 0.4 percent or 163.37 points to close at 41,306.03
- The NSE Nifty 50 rose 0.4 percent or 48.8 points to close at 12,137.95.
- The broader markets represented by the NSE Nifty 500 Index rose 0.53 percent.
- The market breadth was tilted in favour of buyers.
- Eight out of 11 sectoral gauges compiled by the NSE ended lower.
Follow the day’s trading action here.
U.S. stocks fluctuated after reaching an all-time high as traders weighed China’s plans for tariff cuts on American imports with lingering concern about the economic hit from the coronavirus.
- The S&P 500 was still up more than 3 percent for the week as it traded little changed, with companies focused on consumer staples faring the best.
- Stocks gained in Europe and Asia after China said it will lower levies on $75 billion of U.S. goods next week, adding a tailwind to growth.
- While some warn of complacency among investors, others flag support from central banks and recent indicators showing the trajectory of growth was solid before the virus struck.
- West Texas Intermediate crude fell 0.4 percent to $50.58 a barrel.
Get your daily fix of global markets here.
4. How To Navigate An ‘Upside-Down’ Market
“You buy expensive, you make money. You buy cheap, you go bust.”
That’s how Shankar Sharma sums up India’s equity markets today. “Most things are upside down most of the time in India, and stock valuations more so,” said the veteran investor in an interview with BloombergQuint. He doesn’t see that changing anytime soon.
- India’s benchmark indices have been scaling new records in the last year as investors piled into heavyweights amid uncertainty and a slowing economy.
- Broader markets, however, bled for most of 2019 before picking up towards the end of the year.
- Yet, Sharma doesn’t see all doom and gloom. Finding new investment ideas, however, will require a lot more effort.
- That done well, he said, investors will be able to find stocks which can return three to four times the benchmarks.
Watch the full conversation with Sharma where he explains why it will require hard work to make money in the current market.
5. Earnings Watch: Eicher Motors, Hero Motocorp, Sun Pharma
Eicher Motors Ltd.’s third-quarter profit fell in line with estimates amid a slowdown in the auto sector.
- Net profit of the Royal Enfield maker fell 6.3 percent year-on-year to Rs 499 crore.
- Realisation improved 10 percent year-on-year.
- Ebitda fell 12.9 percent to Rs 592 crore.
Find out what the company said about the BS-VI transition.
Hero MotoCorp Ltd.’s quarterly profit surpassed analysts’ expectations as lower raw material costs helped it earn more on every vehicle it sold despite weak sales.
- Net profit rose 14.5 percent over last year to Rs 880.4 crore.
- Revenue fell 11 percent to Rs 6,996 crore.
- Operating margin expanded 80 basis points to 14.84 percent.
Here’s how higher realisation and lower tax helped Hero Motocorp.
Sun Pharmaceutical Industries Ltd.’s quarterly profit missed analysts’ estimates as other income fell and costs rose.
- Net profit fell 27 percent year-on-year to Rs 914 crore.
- Revenue rose 5 percent to Rs 8,155 crore.
- Operating profit declined 14 percent to Rs 1,842 crore.
A decline in its U.S. business hurt the Q3 performance.
6. Who Stands To Gain Most From Budget 2020’s Corporate Bond Tweak
The government’s decision to increase the limit for foreign portfolio investment in corporate bonds may benefit public sector companies and AAA-rated firms, as overseas investors continue to play it safe in the Indian credit markets.
- The immediate impact of the announcement, however, would be limited as existing limits are yet to be fully utilised.
- As part of the Union Budget presentation, Finance Minister Nirmala Sitharaman said that the limit on foreign investment in corporate bonds would be increased to 15 percent of the outstanding amount compared to 9 percent earlier.
- The increased limit for corporate bonds came alongside a move to fully open up certain specific government securities to foreign investors.
Here’s why the largest foreign investors in India have shown a preference to PSU bonds.
7. Francisco D’Souza To Step Down From Cognizant’s Board
Cognizant Technology Solutions Corp. co-founder Francisco D’Souza has quit the board of the software services exporter less than a year after he stepped aside from the chief executive officer role.
- D’Souza will leave the board from March 31, according to a media statement.
- D’Souza co-founded Cognizant in 1994 and served as the company’s CEO from January 2007 through March 2019. He also served as president from 2007 to 2012 and has been serving as vice-chairman of the board since last April.
Vinita Bali will join the board as an independent director.
8. India’s Largest Carmaker Is Not Ready For The Electric Boom
India's largest carmaker is in no hurry to replace its existing fleet of internal combustion engines with electric variants even as its peers are embracing the technology more than ever.
- “Out of 70 million cars expected to come from today till 2030, the industry is projecting 7-8 percent to be electric vehicles. That means 63-64 million will still be internal combustion engine-based cars,” Shashank Srivastava, executive director at Maruti Suzuki India Ltd., told BloombergQuint on the sidelines of Auto Expo 2020.
- “There is a long intermediate period in which we must improve fuel efficiencies to reduce consumption and that’s what we are focusing on,” he said.
- That comes even as Indian and global automakers are showcasing at least two dozen battery-powered vehicles at the nation’s biennial expo.
Affordability continues to be one of the biggest impediments for electric vehicles.
9. China’s Sacrifice To Save The World
Scenes of chaos and despair are emerging daily from China’s Hubei province, the landlocked region of 60 million people where the new coronavirus dubbed 2019-nCoV was first identified in December, and where it has since cut a wide, deadly swathe.
- While cases have spread around the globe, the virus’ impact has been most keenly felt in Hubei, which has seen a staggering 97 percent of all deaths from the illness, and 67 percent of all patients.
- The toll, which grows larger every day, reflects a local health system overwhelmed by the fast-moving, alien pathogen, making even the most basic care impossible.
- It’s also an ongoing illustration of the human cost extracted by the world’s largest-known quarantine, with China effectively locking down the region from Jan. 23 to contain the virus’ spread to the rest of the country, and the world.
- But Hubei -- known for its car factories and bustling capital Wuhan -- is paying the price, with the mortality rate for coronavirus patients there 3.1 percent, versus 0.16 percent for the rest of China.
Read the story of the epidemic-stricken district which people have likened the quarantine to fighting in a war.
10. Modi Defends CAA And Government’s Economic Policies
Amid anti-Citizenship Amendment Act protests in the country, Prime Minister Narendra Modi on Thursday accused the Congress and the Left of inciting people at protest sites while making it clear that the Act will neither impact any Indian citizen nor harm minority interests.
- "I want to clearly state that with the CAA coming, there will be no impact on any citizen of India, practising any faith. CAA does not affect any Indian, it doesn't harm minority interests," he said in his more than 90-minute long reply to a debate on Motion of Thanks to the President's address.
- Besides, Modi said that the government has done enough to keep inflation and the fiscal deficit under control.
He added that his government remained resolved towards its commitment for development despite opposition.