BQuick On Jan. 20: 10 Stories In Under 10 Minutes

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

1. Davos 2020: Sanjiv Bajaj On Consumer Lending; Oliver Tunby On Asian Trade

The consumer lending business has “clearly reached the bottom”, and there are early signs of “some uptick”, according to Sanjiv Bajaj.

• “We’re seeing a pick-up in consumer durables business, and home electronics and digital products verticals,” the managing director of Bajaj Finserv Ltd. told BloombergQuint on the sidelines of the World Economic Forum in Davos, Switzerland.
• “We’ve seen about 15-17 percent year-on-year growth in the last couple of weeks. In the past years, that growth could be 30-50 percent, but there’s still some growth that we are seeing.”
• “It’s too early to say if the uptick is sustainable. We will wait to see how the rest of January, February and March pan out,” Bajaj said.

Watch the full interview with Bajaj where he explains why there has been a conscious reduction in lending.

The global economy is expected to see more trade pacts such as Regional Comprehensive Economic Partnership as globalisation as we know it has run its course, according to Mckinsey & Company's Oliver Tunby.

• “What we have seen over the last few years is a shift in globalisation and how that is playing out,” Tonby, who is a senior partner and chairman for Asia for McKinsey told BloombergQuint in Davos.
• “In Asia in particular, we are seeing increasing regionalisation,” he said.
• According to Tonby, such treaties are positive because they will smoothen trade by reducing barriers.

2. IMF Cuts India Growth Forecast To Below 5%

The International Monetary Fund on Monday lowered growth estimate for India to 4.8 percent for 2019, citing stress in the non-bank financial sector and weak rural income growth as the major factors for the downward revision.

• It expects growth to be 5.8 percent in 2020 and rise to 6.5 percent in 2021.
• IMF Chief Economist Gita Gopinath said growth in India slowed sharply owing to stress in the non-bank financial sector and weak rural income growth.
• In India, the IMF said domestic demand has slowed more sharply than expected amid stress in the non-bank financial sector and a decline in credit growth.

A growth rebound over the next two years will be supported by the monetary and fiscal stimulus as well as subdued oil prices.

Meanwhile, IMF also predicted the world economy will strengthen in 2020, albeit at a slightly slower pace than previously anticipated amid threats related to trade and tensions in the Middle East.

• Global growth will accelerate to 3.3 percent from 2.9 percent in 2019, marking the first pickup in three years, the fund said.
• Both figures are down compared with forecasts in October, and it marks the IMF’s sixth straight reduction for 2019.

The report, however, contains a sense of modest hope.

3. Telecom Department Asks Oil India To Pay Up Rs 48,000 Crore

The telecom department has slapped a Rs 48,000 crore demand notice on Oil India Ltd. in past statutory dues, an order which the country's second-biggest state oil producer plans to challenge in Telecom Disputes Settlement and Appellate Tribunal.

• Following a Supreme Court ruling that non-telecom revenues should be included for considering payments of government dues, the Department of Telecommunications has asked Oil India to pay Rs 48,000 crore in principal dues together with interest and penalty for using optic fibre network for internal communication.
• Oil India is the second oil and gas firm after GAIL (India) Ltd. to have been slapped a demand notice. The DoT had earlier sought Rs 1.72 lakh crore from gas utility GAIL.

Here’s what Oil India will do next.

4. Supreme Court Allows Government To Takeover Unitech

The Supreme Court today approved a government application for taking over Unitech Ltd. and appoint its nominees on the cash-strapped property developer’s board.

• Attorney General KK Venugopal filed the application today with a top court bench headed by Justice DY Chandrachud.
• He said the government proposes to appoint retired IAS officer YS Malik as the company’s chairman and managing director, adding that it doesn’t intend to infuse funds into any of Unitech’s housing projects.
• The new board will assess projects that can be revived and will also decide on its resolution or whether it should be referred to bankruptcy proceedings, the attorney general said.
• The government also asked the court to grant immunity to the new board from various proceedings pending against the company in Indian courts.

This is the second time the government has moved an application for taking over the company.

5. Nifty Hits Record, Then Falls To Two-Week Low

Indian stocks registered their worst fall in two weeks after clocking all-time highs during opening trades.

• The S&P BSE Sensex fell nearly 1 percent, the most since Jan. 6, to close at 41,528.91.
• The NSE Nifty 50 fell 0.98 percent to end at 12,230.75.
• The broader markets represented by the NSE Nifty 500 Index fell 0.89 percent.
• Earlier today, the 30-stock index had risen as much as 0.78 percent to hit a record high at 42,273.87 and the 50-share gauge had risen as much as 0.63 percent to hit an all-time high at 12,430.50.
• Nine out of 11 sectoral gauges compiled by NSE ended lower.
• Kotak Mahindra Bank Ltd. shares closed 4.7 percent lower after the lender saw loan growth fall to a multi-quarter low. Read more about it’s asset quality and profit.

Follow the day’s trading action here.

Shares of Cochin Shipyard Ltd., NHPC Ltd., NMDC Ltd. and Power Grid Corporation Ltd. surged on their inclusion in the index of public sector firms aimed at helping the government cut its holding.

• The stocks of Indian Oil Corporation Ltd. and Power Finance Corporation Ltd. declined after exclusion from the Nifty Central Public Sector Enterprises Index.
• Power Grid, NMDC, Cochin Shipyard and NHPC—which together have 29.1 percent weight in the index—surged 3-12 percent on being included.
• Indian Oil Corporation and Power Finance Corporation—together having 26.9 percent weight—fell 4.08 percent and 7.91 percent, respectively, on exclusion.

Find out what the new revision criteria entails for state-run firms.

6. A Not So Festive Season For Airlines

India’s air passenger growth during the seasonally strong Diwali festival quarter rose at the slowest pace in six years as Indians cut back on travel in a slowing economy.

• Airlines’ passenger traffic grew at 5.8 percent year-on-year to 3.82 crore in the quarter ended December, according to data shared by Directorate General of Civil Aviation.
• More Indians usually take to the skies in the festive season.
• A slower air passenger growth during the period this year would be a concern when airlines are also grappling with higher maintenance costs.
• In December, the number of passengers flying Indian airlines grew at 2.6 percent year-on-year to nearly 1.3 crore—the slowest in last three months, according to DGCA data.

Only two airlines were able to improve their passenger load factor, a measure of capacity utilisation.

7. Reliance Naval Insolvency: What It Means For The Company And Its Lenders

Reliance Naval & Engineering Ltd. has been admitted for insolvency proceedings by the Ahmedabad bench of the National Company Law Tribunal, after legal proceedings that stretched out for over 18 months.

• According to disclosures made to the stock exchange, Reliance Naval has Rs 9,492 crore in loans outstanding.
• The company is now the second from the Anil Ambani Group to face insolvency after Reliance Communications Ltd.
• For lenders, an admission into insolvency will mean a relatively lower provisioning hit.
• Lenders will also need to take stock of the company’s additional funding needs during the period of insolvency.

But what does it mean for Reliance Naval which is the only private sector firm to receive contracts to build warships from the Indian Navy?

8. Why Personal Loan Growth In India Is Soaring

A weak economy has weighed on growth in credit to most segments. But not on personal loans and amounts outstanding on credit cards.

• While overall consumer credit growth declined for the sixth straight quarter, “consumption loans” continued to grow, according to the latest credit trends report from credit bureau TransUnion CIBIL.
• For instance, credit card outstanding grew at 40.7 percent in the third quarter of calendar year 2019 compared with 31.7 percent a year ago. Personal loans grew at 28 percent compared with 33.5 percent in the same period last year. The volume of origination in the personal loan category soared 134 percent year-on-year.
• Overall, the share of consumption products to total balances originated increased to 31.2 percent in third quarter of 2019 from 25.1 percent in the year-ago period, CIBIL said.

What is driving this increase in consumption credit?

9. How Inventory Pile-Up Made Auto Slowdown Worse

An inventory pileup seems to be among the biggest contributors to India’s worst-ever auto slump.

• Retail sales at dealerships, measured by vehicle registrations, contracted 4.6 percent in 2019, according to data updated on the transport ministry’s website as of Jan. 17.
• The data released by automakers’ lobby show factory-gate sales plunged 13.6 percent during the period.
• That indicates overstocking at dealerships took several months to clear out.
• In the face of slowing demand, unsold vehicles with dealers aggravated the slowdown.
• Category-wise analysis of the numbers shows that passenger cars and two-wheelers suffered from an inventory overhang.
• The commercial vehicles sector relies more on pre-orders and hence a better managed sales chain.

Five charts tell you what may have caused the great auto slowdown in India.

10. Ideas For Growth: Tax Cut Or Spending Increase?

India’s weak economy, which has seen growth sliding to multi-year lows, has prompted calls for greater government intervention. After a period of substantial monetary policy easing, investors and analysts are now calling for fiscal support.

• BloombergQuint’s conversations with senior economists threw up considerable support for fiscal easing, even if it meant a temporary widening of India’s fiscal deficit.
• Should the government accept that argument, what is the best route to take in order to support the economy?
• Should the government cut taxes? And what taxes? Or should it spend? And where?

Here’s what senior economists recommend.