BQuick On Jan. 13: Top 10 Stories In Under 10 Minutes  

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

1. Inflation Shoots Above MPC’s Tolerance Threshold

Retail inflation surged above the tolerance band of India’s monetary policy committee, pushed up by a surge in food prices and an increase in telecom tariffs.

• Consumer price inflation rose to 7.35 percent in December, compared to 5.54 percent in November.
• At current levels, inflation is at its highest since July 2014.
• A Bloomberg poll of 37 economists had estimated inflation at 6.7 percent for December.

The surge in inflation continues to be driven by higher prices across the food and beverages category.

2. Deadline For Splitting Chairman And MD Roles Extended

The Securities and Exchange Board of India has deferred by two years to April 2022 its directive for listed companies to split the roles of chairman and managing director.

• The decision was taken in view of demand from corporates and to keep compliance burden low in the wake of the current economic scenario.
• According to SEBI norms, the Top 500 listed entities by market capitalisation were mandated to comply with the requirement of separation of the roles of chairperson and managing director or chief executive officer with effect from April 1, 2020.
• The norms are aimed at improving corporate governance structure of listed companies.

Around 50 percent of the top 500 listed companies are in compliance with the regulatory provision.

3. Citi Doesn’t Expect An Earnings Rebound In Q3

Indian companies are in for a “tough” third quarter as weak earnings from commodity firms will pull down the overall performance, according to Citi Research.

• The commodities sector is under margin pressures because of weak realisations in the steel and cement industries, Citi said in a report.
• It was further weighed down by muted refining and petchem trends in energy.
• The overall earnings growth of India Inc. in the three months ended December is expected to be similar to that in the previous quarter even as corporate tax rate cut benefited companies, it said.
• Citi expects earnings of the companies tracked by it to grow 6 percent year-on-year.

Read more about what the Citi Research team expects from individual sectors.

4. Infosys, IndusInd Bank Rally; U.S. Stocks Climb Before Earnings

Indian stock markets extended gains for the fourth consecutive trading session to end at record highs.

• The S&P BSE Sensex rose 0.62 percent or 259.97 points to close at an all-time high of 41,859.65.
• The NSE Nifty 50 rose 0.59 percent to end at a record high at 12,329.55.
• All the 11 sectoral gauges compiled by NSE Ltd. ended higher.
• Infosys Ltd. was a key driver in taking Sensex to a record after it reported a better-than-estimated profit in the October-December quarter earnings. Shares jumped 4.8 percent.
• IndusInd Bank Ltd. shares rose 3.5 percent ahead of their third quarter results on Tuesday.
• Meanwhile, Allcargo Logistics Ltd. shares jumped as much as 6 percent to their highest since November after Blackstone Group said they had agreed to buy a stake in the warehousing unit for Rs 380 crore.

Follow the day’s trading action here.

U.S. equities advanced at the beginning of a busy week set to be dominated by the start of earnings season and the signing of a partial China trade deal.

• The S&P 500 opened in the green after pulling back a from a record high set on Friday.
• The pound led declines among Group-of-10 currencies after another Bank of England official pointed to a potential vote for a U.K. interest-rate cut this month and data showed the economy unexpectedly shrank.
• The dollar edged higher and Treasuries fell across the curve as the completion of the first trade deal nears.
• Brent crude fell 0.6 percent to $64.61 a barrel, hitting the lowest in four weeks.

Get your daily fix of global markets here.

5. Will It Be The Year Of The Small Caps?

Care Portfolio Managers Pvt. Ltd. returned the best gains among peers in December on the back of a recovery in small- and mid-cap stocks. The firm expects that to continue in 2020.

• “Small caps became untouchables after the NBFC crisis in 2018, and investors didn’t want any stock if its threshold is below a certain level even if the management is clean, there’s no debt on balance sheet and valuations are reasonable,” Amit Doshi, investment director at Care Portfolio Managers, told BloombergQuint over the phone.
• The S&P BSE Small Cap Index fell 23.53 percent in 2018 and 6.85 percent in 2019, while the benchmark Sensex gained 5.91 percent and 14.38 percent, respectively, as investors took refuge in safer and liquid large caps during uncertainty.
• Small caps were ignored for the last two years but now investors are trying to come back, Doshi said.

Here’s how India’s top portfolio managers performed in December.

6. CCI To Probe Flipkart, Amazon

The Competition Commission of India has ordered a probe against Flipkart and Amazon to assess whether the online retailers abused their dominant position through deep discounting, preferential listing of sellers or exclusive tie-ups.

• The probe comes after the Delhi Vyapar Mahasangh—a body representing small and medium enterprises—filed a complaint with the competition regulator alleging that Flipkart and Amazon violated the competition law.
• The trade body had also sought CCI's direction to stop online retailers from indulging in anti-competitive practices.
• The Flipkart group said in a statement that it is fully compliant with all applicable laws and foreign direct investment regulations.

Here are the key allegations against the two online retailers.

7. GST Refunds Under The Scanner

The government will probe claims seeking goods and services tax refunds of more than Rs 28,000 crore as it looks to check fraud, according to an official.

• About 27,000 taxpayers filed these claims in the ongoing financial year on account of an inverted duty structure, the official said on the condition of anonymity.
• The structure refers to a situation where inputs for making a product are taxed at a higher rate than the product itself.
• The decision to probe claims was taken after the Department of Revenue, under the Ministry of Finance, identified 931 cases of fraudulent GST claims using data analytics.
• The department has now asked the data analytics wing to scrutinise all past and pending inverted duty structure claims, the official said.

The government is relying on data analytics tools to keep a check on illegal GST refund claims and fly-by-night firms.

8. TRAI Vs Broadcasters

The telecom and broadcast regulator defended its latest tariff order governing broadcasters and subscription platforms, saying that it will usher in transparency.

• “The framework’s primary focus is empowerment of consumers,” Ram Sewak Sharma, chairman of Telecom Regulatory Authority of India, told reporters in Delhi today.
• He said the regulator observed the first framework for over a year and made changes once it detected misuse of “available flexibility by a group of service providers”.
• Meanwhile, Indian broadcasters such as Sony and Disney have moved the Bombay High Court challenging the TRAI’s order.

The regulator has, however, said that it’s open for discussion with the stakeholders.

9. Yes Bank: More Allegations; Only One Solution

Uttam Prakash Agarwal, who was an independent director on the board of Yes Bank Ltd. until Jan. 10, has detailed his concerns regarding the management of the lender’s capital raising plan in a letter to the Securities and Exchanges Board of India. Agarwal had resigned on Friday citing corporate governance concerns.

• In his letter to the capital market regulator, Agarwal alleges that the bank’s Chief Executive Officer Ravneet Gill did not share adequate information about possible investors with the board and misled shareholders.
• According to Agarwal’s letter, Gill did not adequately disclose information regarding the $2 billion in capital which the bank was expecting to raise from a clutch of investors.

Here are the allegations made by Agarwal in his letter.

Before it results in a tragedy for all of India’s banking, regulators need to step in and end the farce called Yes Bank Ltd. The latest shenanigans make it very clear that the authorities need to stop being spectators — and act, writes Andy Mukherjee.

• At a time when India’s financial system is choking on hundreds of billions of dollars of bad loans, the news coming out of Yes still manages to shake confidence.
• There’s no safe way to shut it down without inviting system-wide panic. Depositors are already on the edge, trapped in a cooperative bank that failed. What else can be done?

After Agarwal’s letter, none can pretend to be in the dark any longer about the state of affairs at Yes Bank.

10. Flat Tyre Or Engine Failure? How Serious Is India’s Economic Slowdown?

A vehicle inspection of each component in India’s slowing economy, by Hugo Erken.

• Population growth will not drive the Indian economy as it used to.
• India’s FDI ratio is unlikely to continue to grow at the same pace as in the recent years.
• It will be difficult for the economy to exceed 6 percent growth in the next couple of years.

With money for new repairs depleted, these are the options left.