BQuick On Jan. 14: Top 10 Stories In Under 10 Minutes
This is a roundup of the day’s stories in brief.
1. RBI Gets A New Deputy Governor... Finally
The government has appointed Michael Patra as deputy governor of the Reserve Bank of India for three years, according to a press release by the Appointments Committee of the Cabinet.
- Patra will replace Viral Acharya, who left office on July 23.
- He will be the fourth RBI deputy governor and will likely take over the monetary policy portfolio handled by Acharya.
- Patra, who joined the central bank in 1985, is currently executive director of the Monetary Policy Department.
- He has been central to the RBI’s views on the macro-economy, the new inflation-targeting framework and the liquidity framework.
Patra is already a member of the Monetary Policy Committee. Which means there will now be a new entrant in the rate-setting panel.
2. Stagflation Concerns Emerge
India’s wholesale inflation jumped to a seven-month high in December as prices of food articles surged.
- Wholesale inflation, as measured by the wholesale price index, stood at 2.59 percent in December compared with 0.58 percent in November.
- A Bloomberg poll of 23 economists had pegged WPI at 2.42 percent.
Here are the wholesale inflation internals.
When weak growth gets combined with a rise in inflation, economists start to worry about temporary stagflation-like conditions and its consequences.
- Stagflation is a combination of stagnant economic growth, high inflation and high unemployment.
- Given what it brings with it, stagflation is not characteristic of a well-functioning economy.
- Normally, slow economic growth prevents consumer demand from rising, causing inflation to remain low.
- At a time of stagflation, demand is weak but inflation is high.
But are the conditions in India, like former Prime Minister Manmohan Singh worries, that of stagflation?
3. Top Three Mutual Funds’ December Shopping Cart
Inflows into Indian equity funds rebounded after three months of decline in December as the nation’s benchmark stock index hit a series of record highs.
- Stock plans took in Rs 4,500 crore ($626 million) last month, according to the Association of Mutual Funds in India.
- That compares with Rs 1,310 crore received in November, which was the smallest inflow in more than three years.
- India's largest money manager HDFC Mutual Fund held $22 billion in equities with financials making up 33 percent of the assets.
- ICICI Prudential Mutual Fund held $21 billion in assets while SBI Funds Management held about $27 billion—financials accounting the bulk of assets for both.
Here’s what the top three asset managers bought and sold in December.
4. Indian Stocks Rise But Bonds Get An Inflation Shock
Indian stocks edged higher during the last hour trade and ended at record highs after a topsy-turvy session.
- The S&P BSE Sensex rose 0.22 percent or 92.94 points to close at a new high at 41,952.63.
- The NSE Nifty 50 rose 0.27 percent to end at an all-time high at 12,362.30.
- The broader markets represented by the NSE Nifty 500 Index rose 0.33 percent.
- Seven out of 11 sectoral gauges compiled by NSE ended higher.
Follow the day’s trading action here.
Sovereign bonds slid the most in more than a month in India after retail inflation surged sharply in December to hit a five-year high, casting doubts over any near-term monetary easing.
- The yield on the benchmark 10-year bond rose as much as 10 basis points to 6.7 percent, the most since Dec. 5.
- With high consumer prices limiting the ability of the RBI to cut rates further to revive economic growth, the government may be forced to spend more.
But that’s not the only blow to bond traders.
U.S. Stocks Fluctuate Amid Earnings Kickoff
Stocks flucuated as investors eyed the start of U.S. earnings season and officials prepared to sign the China trade deal in Washington.
- The S&P 500 opened lower after closing Monday at a record high, with JPMorgan Chase & Co., Citigroup Inc. exceeding forecasts and Wells Fargo & Co. falling short.
- Dollar gains versus peers; yuan holds most of Monday’s surge.
- Treasuries climbed after a gauge of underlying inflation rose less than forecast.
Get your daily fix of global markets here.
5. Wipro, IndusInd Bank, Bandhan Bank Fail To Impress In Q3
Wipro Ltd.’s quarterly profit declined despite arresting a three-quarter fall in the IT services business margin.
- Net profit fell 3.8 percent sequentially to Rs 2,456 crore.
- Revenue rose 2.3 percent to Rs 15,470.5 crore.
- Operating margin declined 20 basis points to 17.1 percent.
- IT services’ margin expanded 30 basis points to 18.4 percent.
A weaker rupee and cross-currency hedges helped the company widen the margin.
IndusInd Bank Ltd.’s net profit missed estimates in the quarter ended December as the private lender continued to provision for bad loans and other risks.
- Net profit fell 6 percent quarter-on-quarter to Rs 1,300 crore.
- Provisions grew 41 percent to Rs 1,043.45 crore.
Asset quality improved during the quarter.
Bandhan Bank Ltd.’s third-quarter profit missed estimates as it made additional provisions against its microfinance portfolio in protest-hit Assam.
- Net profit stood at Rs 731 crore.
- The figures are not comparable sequentially or with same period a year ago as the Kolkata-based lender’s merger with Gruh Finance Ltd. came into effect from October.
- The lender made an additional provision of Rs 200 crore after evaluating risk in certain areas of Assam.
Here are the key highlights from its earnings.
6. Foreign Investors Rush Back Into IT Stocks
Foreign portfolio investors turned buyers of software and services shares for the first time in nine months as the rupee weakened.
- Overseas investors infused $687 million into IT stocks in December, the highest inflow into the sector in 21 months, according to data released by the National Securities Depository Ltd.
- That contributed 67 percent of net equity flows in December, the largest for a single category.
- The NSE Nifty IT Index advanced 4.36 percent during the period, the most in eight months, led by the rally in Mindtree Ltd., NIIT Technologies Ltd. and Tata Consultancy Services Ltd.
Overall, foreign investors remained net buyers for the fourth straight month. Find out more about FPI flows into India.
Also read: Top Mid-Cap Stock Picks Of Analysts For 2020
7. What Kumar Mangalam Birla Thinks Will Define The Decade
For Indian billionaire Kumar Mangalam Birla, the world isn’t flat anymore.
- Tensions between nationalism and globalisation will probably be the most defining trend of the new decade, he said in a personal statement on LinkedIn, after climate change gripped the global narrative in 2019.
- Being entrenched within regional economies protects companies from global trade entanglements, he said.
- “While the march of globalisation is perhaps inevitable, what is certain is that the world is no longer flat,” Birla wrote.
As globalisation makes way for ‘slowbalisation,’ the emerging pattern of trend is more regional.Kumar Mangalam Birla, Chairman, Aditya Birla Group
Read the full text of Birla’s post in which he explains why companies can no longer ignore the climate crisis.
8. An Old Rivalry Goes Electric!
Bajaj Auto Ltd. will sell the Chetak electric scooter at a price tag of Rs 1 lakh as it takes on Hero MotoCorp Ltd.-backed Ather Energy.
- Bajaj Auto, which unveiled the battery-powered version of the iconic brand on Oct. 16, will sell the Urbane variant with drum brakes at Rs 1 lakh and the Premium variant with disk brakes at Rs 1.15 lakh, according to a company statement.
- Online bookings for the Chetak are now open at Rs 2,000, with deliveries expected to start from February-end.
- The Bajaj Chetak joins nearly a dozen of electric scooter brands looking to capture the demand for battery-powered scooters.
At Rs 1 lakh price and range of 95+ km, the Chetak will directly compete with the Ather 450.
9. Kerala Becomes First State To Challenge CAA In Supreme Court
The Kerala government has moved the Supreme Court to challenge the Citizenship Amendment Act, 2019, and sought to declare it as violative of the principles of equality, freedom and secularism enshrined in the Constitution of India.
- The Communist Party of India (Marxist)-led Kerala government is the first state to challenge the act.
- The Kerala Assembly was also the first in the country to pass a resolution against the act.
- In its suit filed in the apex court, the Kerala government has sought to declare that the Citizenship (Amendment) Act, 2019 is violative of Article 14, Article 21 and Article 25.
- It said the CAA is also violative of the basic principle of secularism enshrined in the Constitution.
The apex court is set to hear 59 anti-CAA petitions on Jan. 22.
10. Trump’s First Trip To India?
U.S. President Donald Trump is planning his maiden India visit in February, an official told Bloomberg News, in a trip that may coincide with an impeachment trial that is likely to get underway in Washington next week.
- The two countries are in touch to work out mutually convenient dates for the visit, according to a senior Indian government official, who asked not to be identified citing rules.
- Trump and Modi are expected to sign an agreement on civil aviation apart from the long-pending bilateral trade deal, The Hindu newspaper reported citing sources it didn’t identify.
Trump last year turned down an invitation to attend India’s Republic Day celebrations.