BQuick On Jan. 8: Top 10 Stories In Under 10 Minutes
This is a roundup of the day’s top stories in brief.
1. IL&FS Jolt For Banks
The Reserve Bank of India has refused to give any special dispensation to lenders of Infrastructure Leasing & Financial Services Ltd., asking them to classify the loans as non-performing if they are overdue by more than 90 days.
- According to two bankers in the know, the banking regulator did not accept a request submitted by a group of lenders to retain a standard asset classification for loans to IL&FS while stepping up provisions against the loans.
- The request was part of a broader letter written by banks to RBI governor Shaktikanta Das in December.
- IL&FS owes Rs 60,000 crore to banks and other lenders.
- Banks will now have to classify these as non performing assets as soon as they become overdue by 90 days or more.
2. Why HAL Is Facing Turbulence
Hindustan Aeronautics Ltd. is battling a crippling financial crunch. That’s because pending payments from the government, it’s largest client, ballooned even as the dividend payout to the government, also its largest shareholder, doubled since financial year 2012-13.
- Cash balance of HAL fell to its lowest in 16 years as of September 2018, show the exchange filings of the state-owned maker of fighter jets. The receivables—or payments from clients—jumped to their highest since 2012.
- That forced the aerospace equipment maker to take an overdraft facility from banks to meet its current cash needs.
- The cash crunch comes when the opposition parties are embroiled in a dogfight with the government for overlooking HAL as a partner for the deal to buy Rafale jets from France’s Dassault Aviation in favour of Anil Ambani’s Reliance Group.
3. Mumbai Home Prices Have Fallen Again
Home prices in India’s financial capital Mumbai dropped for a second consecutive year in 2018 with buyers, shopping for discounts, content to remain on the sidelines expecting future declines, according to Knight Frank.
- A 6.8 percent fall in Mumbai’s residential property prices last year was the worst among eight Indian cities, according to the property consultant.
- It came after a 5 percent decline in 2017, when values weakened for the first time in a decade.
- A cash crunch among non-bank lenders in the final months of last year delayed loans and hurt buyer sentiment, according to the report, with sales showing a “significant slowdown since then.”
4. Sensex Adds 130 Points, Dow Opens 300 Points Higher
Indian equity benchmarks rose for the third day in a row led by ICICI Bank Ltd., State Bank of India, Axis Bank Ltd. and Sun Pharmaceutical Industries Ltd.
- The S&P BSE Sensex Index rose 0.36 percent or 131 points to 35,981.
- The NSE Nifty 50 Index climbed 0.28 percent or 30 points to 10,802.
- For most part of the day, Sensex and Nifty traded on a subdued note owing to weakness in HDFC twins, Kotak Mahindra Bank Ltd. and Hindustan Unilever Ltd. However, late buying in ICICI Bank and Sun Pharma lifted the benchmarks higher.
- Eleven of 19 sector gauges compiled by BSE ended higher led by the S&P BSE Telecom Index's 1.34 percent gain.
Stocks surged Tuesday after the Trump administration said there was progress coming out of its two-day mid-level trade talks with China.
- The S&P 500 and Nasdaq gauges were up 1 percent while the Dow Jones Industrial Average leaped more than 300 points at the open.
- The dollar rose with Treasury yields.
- West Texas Intermediate crude crude climbed toward $50 a barrel on expectations the market will be tightened by OPEC’s output cuts.
5. Sub-10% Gains Seen In 2019
India’s stock market is likely to give single-digit returns in 2019, according to CLSA. Mahesh Nandurkar, the brokerage house’s India strategist, said last year’s best-performing Asian market is currently facing more downsides than upsides.
- While the valuations are lower than where we started 2018 with, it is still the most expensive major emerging market in the world, Nandurkar told BloombergQuint in an interview.
- India trades at about 17 times its one-year forward earnings which is 12-13 percent higher than the historical average, said Nandurkar, adding that all the other markets such as China, Brazil, South Korea, Taiwan etc are all trading below and that’s where the valuation disconnect lies.
- Another reason why India trades at a premium is because of its strong domestic inflows, Nandurkar said. "Of late, we have seen that trend has been weakening. That is not a good sign."
6. Worst Mutual Fund Outflow Since IL&FS Panic
Investors pulled out the most in three months from mutual funds in December led by an outflow from the money market schemes used by companies to park surplus cash for the short term.
- Across all schemes, the industry witnessed a net outflow of Rs 1.36 lakh crore compared with a net inflow of Rs 1.42 lakh crore in the preceding month, data released by the Association of Mutual Funds in India showed.
- That’s the most since Rs 2.3 lakh crore total outflows in September, when IL&FS crisis spurred the biggest monthly withdrawal from money-market schemes in at least a decade.
- The liquid funds, however, drove the inflows in October and November for the industry.
7. Alok Verma Is Back At The CBI
The Supreme Court reinstated Central Bureau of Investigation Director Alok Kumar Verma, setting aside the Centre's decision to divest him of his powers.
- The apex court, however, restrained Verma from taking any major policy decision till the Chief Vigilance Commission probe into corruption charges against him is over.
- The apex court said any further decision against Verma, who was sent on leave following the Centre's Oct. 23 decision and retires on Jan. 31, would be taken by the high-powered committee which selects and appoints the CBI director.
- Verma sought quashing of three orders of Oct. 23, 2018 -- one by the CVC and two by the Department of Personnel and Training -- as being without jurisdiction and in violation of Articles 14, 19 and 21 of the Constitution.
8. Monsanto Wins GM Cotton Patent Battle
Bayer AG’s Monsanto unit won a legal battle to own patents on genetically-modified cotton seeds in India, the world’s biggest producer of the fiber, in a rare piece of good news for the German company.
- India’s Supreme Court ruled on Tuesday that the company’s patent for Bt cotton seeds is valid, overturning a judgment by the High Court of Delhi saying certain items such as seeds, plants and animals can’t be patented.
- The ruling is a boost for Monsanto, which faced the risk of losing revenues without a claim over exclusive rights in India, as the company faces legal challenges in the U.S. over allegations that its Roundup weed killer can cause cancer as well as a backlash in Europe over genetically modified organisms.
- The verdict may also boost foreign investors’ confidence about the validity of patents awarded to firms in India.
9. Nilekani To Head RBI’s Digital Payments Panel
The Reserve Bank of India constituted a high-level committee under Aadhaar architect Nandan Nilekani to suggest measures to strengthen the safety and security of digital payments in the country.
- The five-member panel on deepening of digital payments has been constituted to encourage digitisation of payments and enhance financial inclusion through digitisation, the RBI said in a statement.
- The panel has been tasked with reviewing the existing status of digitisation of payments in the country, identifying the current gaps in the ecosystem and suggesting ways to bridge them and assessing the current levels of digital payments in financial inclusion.
10. All That Glitters...Is Imported Less And Less
Gold imports by India tumbled by a fifth last year as high domestic prices deterred buyers in the second-biggest consuming nation and local stores remained well-stocked, highlighting a headwind to global demand even as bullion in dollars gains on renewed haven buying.
- Overseas purchases fell to 762 metric tons in 2018, a 20 percent slump from the previous year, according to a person familiar with the data, who asked not to be identified as the numbers aren’t public.
- That would make it the second smallest amount shipped into the country this decade. In December, imports shrank 23 percent to about 60 tons from a year earlier, the person said.