BQuick On Feb. 7: Top 10 Stories In Under 10 Minutes
This is a roundup of the day’s top stories in brief.
1. One Rate Cut Done, Stage Set For More
India’s Monetary Policy Committee decided to cut its benchmark repo rate by 25 basis points to 6.25 percent in response to lower-than-expected retail inflation.
- The committee also changed the policy stance to ‘neutral’ from ‘calibrated tightening’ and indicated that there may be scope of more rate cuts.
- Reserve Bank of India Governor Shatikanta Das, who chaired his first MPC meet this time, said that the RBI Act mandates that the committee focus on growth after meeting its objective of inflation.
- With headline inflation expected to remain below the mid-point of the MPC’s target of 4 (+/-2) percent, the committee believes that room has opened up for lower rates.
Das said stressed macro economic indicators called for decisive action.
2. India’s Biggest Quarterly Loss
Tata Motors Ltd. reported its third straight quarterly loss as its key luxury car unit—Jaguar Land Rover—continued to struggle, leading to a significant mark-down in its book value.
- Net loss stood at Rs 26,993 crore.
- Margin narrowed 260 basis points to 8.3 percent.
- The surprise loss was due to a non-cash write off worth Rs 27,838 crore for JLR.
- Tata Motors attributed it to slowing sales in China, technology disruptions and rising cost of debt.
Slowing demand for diesel cars and China sales are troubling JLR. But the biggest risk is Brexit.
3. Raymond: Curious Transactions
A BloombergQuint investigation has found four years of curious transactions between public listed textile and branded apparel company Raymond Ltd. and an entity owned by its promoter Gautam Singhania.
- The transactions indicate that Raymond has been selling goods to a privately held promoter entity, JK Investors (Bombay) Ltd., only to buy them back at a higher price for no clear reason.
- Despite multiple requests, Raymond did not respond to queries or offer an explanation for these transactions.
- In the last four financial years (2014-15 to 2017-18), JK Investors bought goods worth Rs 993 crore from Raymond and made sales to Raymond worth Rs 1,613 crore during the same period.
Here’s why these transactions are puzzling.
4. Another Setback For The Ruias
The Ruia family, mounting one legal battle after another to thwart Essar Steel Ltd.’s insolvency resolution, faces a fresh setback.
- Lenders to the Essar Group’s power companies have filed recovery cases to invoke personal guarantees provided by the promoters, two people aware of the development told BloombergQuint.
- Private lender ICICI Bank Ltd., and state-run IDBI Bank Ltd. moved various benches of the debt recovery tribunal, the people said without willing to be identified as they are not authorised to speak to the media.
Among the companies facing recovery cases are Essar Power Mahan, Essar Power Gujarat and Essar Steel.
5. Sensex Swings, S&P 500 Slips
India’s benchmark equity index was whipsawed on Thursday after the central bank unexpectedly cut its key policy rate and dropped its hawkish stance, briefly firing up stocks.
- The S&P BSE Sensex swung between a 0.5 percent gain and a drop of 0.2 percent soon after the decision, before closing little changed at 36.971.
- The NSE Nifty 50 Index ended a little changed at 11,069.
- Seven out of 11 sectoral gauges compiled by NSE advanced, led by the NSE Nifty Media Index's 2.5 percent gain.
- On the flipside, the NSE Nifty PSU Bank Index was the top sectoral loser, down 0.37 percent.
Follow the day’s trading action here.
U.S. stocks fell while Treasuries rallied after concern mounted that a slowdown in the global economy is spreading at the same time investors remain on edge over threats ranging from a government shutdown to rising trade tensions and Brexit turmoil.
- The S&P 500 dropped the most in a week, and the Stoxx 600 snapped a seven-day rally as the European Commission downgraded its economic estimates.
- The dollar edged higher to extend its rally.
- The pound reversed losses after the Bank of England left rates unchanged and cut its growth forecast for the U.K. economy.
- Crude slumped below $54 a barrel in New York and the 10-year Treasury rate slipped to 2.66 percent.
Get your daily global markets fix here.
6. Jhunjhunwala’s Modi Bet
Billionaire investor Rakesh Jhunjhunwala said Prime Minister Narendra Modi will come back to power in 2019.
- “The Bharatiya Janata Party’s tally will surprise on the upside,” he said at the TiECON Summit in Mumbai.
- The country, Jhunjhunwala said, must do good social welfare without “leakage” and Modi’s policies are the “correct” ones and will help bring prosperity.
Here’s what he said on India’s growth, market volatility and tips for new investors.
7. India’s Soap Wars
The maker of India’s largest-selling soap is losing its grip over the No. 1 crown in a slowing market.
- Hindustan Unilever Ltd.’s Lifebuoy, the nation’s most selling soap brand, has been consistently losing share since at least 2016, according to Kantar Worldpanel data reviewed by BloombergQuint.
- Wipro Consumer Care and Lighting Ltd.’s Santoor, marketed as a natural product, gained at its expense.
- It’s already taken over second-placed Lux, also made by HUL.
Consumers worried about chemicals are shifting towards the natural segment.
8. No Respite For Auto Sales
Inventory piled up for automakers in January as new launches and discounts failed to boost sales, according to dealers.
- Passenger vehicle inventory jumped nearly 34 percent over December, according to the Federation of Automobile Dealers Associations.
- Inventory for two-wheelers and three-wheelers also rose 4.25 percent and 11.86 percent, respectively.
- Slowdown for automakers continued into the new year after a poor festival season as higher fuel prices and increased upfront insurance costs hurt demand.
Consumer sentiment is improving slowly and converting into sales.
9. Telecom Firms Are Shedding Flab
India’s top two telecom operators deactivated connections of more than eight crore low-paying subscribers as they focus on better-paying customers and lowering costs.
- Vodafone Idea Ltd. introduced a minimum average revenue per user, and deactivated 3.5 crore users who bought recharge plans of less than Rs 35 a month in the December-ended quarter, according to its filing.
- Sunil Mittal-led Bharti Airtel Ltd. too had dumped 4.8 crore such users.
- Focus on improving average revenue per user comes as older operators battle a tariff war triggered by Reliance Jio Infocomm Ltd.’s rock-bottom pricing.
Jio, though, is still focussing on more customers through discounts.
10. Dear Akhilesh, Introduce Rahul/Priyanka To Deputy PM Mayawati
Akhilesh Yadav’s challenge now is to request for a chai pe charcha with the lady he fondly calls bua, and make a 10-point presentation, writes Raghav Bahl.
- Mayawati knows that it will be almost impossible to form a stable government in 2019 without her MPs, whether in an NDA-led, UPA-led, or Federal Front-led coalition.
- Depending on her winning numbers, she could bargain for becoming the Deputy Prime Minister.
- Akhilesh needs to convince Mayawati that an entirely new political alchemy is possible in Uttar Pradesh with the Congress.
What will be Mayawati’s response? It’s a billion-vote question.