BQuick On July 15: Top 10 Stories In Under 10 Minutes
BQuick | Top news, must-read stories and columns – all served up in less than 10 minutes.
Here’s a roundup of all the top stories of the day in brief.
1. Government To Raise Rs 11,000 Crore Through CPSE ETF
The Narendra Modi government plans to raise between Rs 10,000 crore and Rs 11,000 crore from the sixth tranche of the Central Public Sector Enterprises' Exchange Traded Fund that will open on July 18, according to a senior government official.
- The CPSE ETF Further Fund Offer-5 will have a base offer of Rs 8,000 crore, and a greenshoe option—or the option to retain oversubscription—will be exercised based on the response received, the official told BloombergQuint on condition of anonymity.
- As the current market conditions are better, the government would be able to raise an additional Rs 2,000-3,000 crore through this option, the official said.
The CPSE ETF has shares of 11 state-run companies.
2. Trade Gap Narrows
India’s trade deficit narrowed in June as a slowing economy and lower oil prices curbed imports.
- The gap between exports and imports was $15.28 billion last month, compared with $15.36 billion in May, according to data on Monday from the Commerce Ministry.
- That was higher than the $15 billion median estimate in a Bloomberg survey of 23 economists.
- Exports fell 9.71 percent from a year ago to $25 billion, compared with a 3.9 percent gain in May.
- Imports declined 9.1 percent to $40.3 billion, against a 4.3 percent increase in the previous month.
The decline in exports is consistent with global trends, the ministry said.
3. GAIL’s Gas Pipeline Business To Be Spun Off?
Prime Minister Narendra Modi’s administration is considering a plan to spin off the gas transmission business of GAIL India Ltd., the nation’s largest gas utility, into a separate unit, people with knowledge of the matter told Bloomberg News.
- The oil ministry is seeking approval from the cabinet for splitting the transmission business from the gas marketing operations, the people said, asking not to be identified as the matter is not public.
- GAIL has appointed an international consultant to determine tax implications after the restructuring, they said.
- Oil ministry spokesman declined to comment, while a GAIL spokeswoman didn’t respond to email seeking comment.
- GAIL owns two-third of India’s operating gas transmission network, and the pipelines operation accounts for close to 40 percent of its earnings.
Here’s how the plan to carve the pipelines business into a fully-owned unit may help the government at a later stage.
4. Fraud Probe Won’t Derail JSW’s Bid For Bhushan
JSW Steel Ltd., India’s most valuable steel producer, said it is likely to go ahead with a Rs 19,700 crore ($2.9 billion) offer to buy out a stressed steel mill even as a string of accounting frauds were uncovered at the target company.
- While JSW is “so far” not backing out of its offer to buy Bhushan Power & Steel Ltd., the company is anxious about the alleged frauds and its impact on the sale process, it’s lawyer Arun Kathpalia said Monday during a hearing at the National Company Law Tribunal.
- Earlier this month Allahabad Bank and Punjab National Bank reported financial frauds amounting to about Rs 1,800 crore and Rs 3,800 crore respectively at Bhushan.
- A two-judge bench headed by Justice MM Kumar said during the hearing that the alleged fraud reports would not affect the insolvency resolution process and JSW’s plan for Bhushan Power.
Shares of JSW jumped as much as 1.8 percent after erasing losses.
5. Sensex Gains, U.S. Stocks Mixed
India’s benchmark equity index advanced, led by Infosys Ltd., after analysts cheered the company’s raised forecast for annual sales as investments in new technologies helped it win major contracts.
- The S&P BSE Sensex climbed 0.4 percent to 38,896.71, after completing its worst week since mid-May, as investors remained concerned over debt default and bank frauds amid the earnings season.
- The NSE Nifty 50 Index rose 0.3 percent or 36 points to 11,588.35.
- Infosys was the top gainer on the Sensex and climbed to a record after it raised its revenue guidance for the current financial year.
- The market breadth, however, was tilted in favour of sellers. About 1,193 stocks declined and 585 shares advanced on the National Stock Exchange.
Follow the day’s trading action here.
U.S. stocks were mixed at the start of a busy week for corporate earnings, economic data and Federal Reserve speakers.
- The S&P 500 Index fluctuated near 3,000 as Citigroup Inc. slid after posting worse-than-estimated trading revenue, while Broadcom Inc. rallied on a news report that talks for the company to acquire Symantec Corp. fell apart.
- Steelmakers jumped after Donald Trump’s trade aide Peter Navarro said the president will sign an executive order boosting the use of the material in federal government contracts.
- Treasuries climbed while the dollar was little changed.
- Bitcoin sank briefly below $10,000.
- West Texas Intermediate crude increased 0.7 percent to $60.66 a barrel.
Get your daily global markets fix here.
6. Super-Rich Surcharge Impact
In the first 15 days of July, foreign investors have pulled out more money from Indian equity markets, than any full month so far this year.
- Foreign portfolio investors withdrew a net Rs 4,954 crore from equities in the first 15 days of July, the highest so far in 2019, the data available on the website of National Securities Depository Ltd. showed.
- If this trend continues, the monthly FPI inflows may turn negative for the first time in five months.
- The Budget 2019 proposed to increase the surcharge on individuals with a taxable income of Rs 2-5 crore to 25 percent and for those earning more than Rs 5 crore to 37 percent.
The effective tax rate on the top two brackets is now 39 percent and 42.7 percent respectively.
7. End-Of-Season Sales Arrive Early
For shopping malls and retailers, subdued demand in June and early July had an unlikely contributor: the cricket world cup.
- Virat Kohli and Co. were upstaged in the semifinals by New Zealand, but not before they kept Indians indoors watching Rohit Sharma’s batting and Jasprit Bumrah’s yorkers. Five of India’s nine round-robin league ties were on the weekends.
- That, according to a report by Edelweiss, was a sentiment dampener for retailers as it reduced weekend crowds—and business.
- Like-to-like stores sales at Lifestyle, Max and Splash retail stores were “flat” during the world cup, said Vasanth Kumar, the chief executive officer of Infiniti Malls.
- As it is, Indians have been buying less of cars to shampoos since the demand began faltering after summer last year on lower discretionary spending.
And discounts are deeper than last year.
8. Don’t Allow Public Sector Banks To Wither Away, Says YV Reddy
It has now been 50 years since Indira Gandhi, then prime minister of India, took a decision to nationalise 14 private banks. Since then, while there may have been no privatisation of government-owned banks, there has been privatisation of banking. Should the economy then just allow public sector banks to wilt away?
- Former Reserve Bank of India Governor YV Reddy does not believe so.
- Even today, the average citizen of India is most comfortable banking with PSU banks, he says. As such, Reddy still sees a role for public sector banks and believes they should have a strategic presence.
- Reddy also argues that the often-cited inefficiencies of public sector banks should not be seen in isolation. These may reflect inefficiencies of the public sector as a whole, he says.
- “So, part of the banking problem is political and part of the problem of public sector banks is a reflection of inefficiency of public sector systems in the country as a whole,” Reddy says, citing shortcomings of public health and education systems.
- In final analysis — a phrase you’ll often hear Reddy use — India still needs its public sector banks but in a thought out and purposeful way, he says.
Here’s how Reddy suggests the nation needs to asses the true share of PSU banks.
9. Sovereign Bondage… For A Few Dollars More
The announcement in Budget 2019-20 of the government's intention to issue sovereign bonds to raise “a part of its gross borrowing programme in external markets in external currencies” could well end up as an exercise in pious policy paving the way to perdition, writes Shankkar Aiyar.
There is no quarrelling with the intent. The challenge before the economy is to expand the pool of resources to fund the aspiration of higher growth to eventually attain the goal of ‘$5 trillion by 2024’.
It is arguable that raising dollar resources via sovereign bonds could help overcome the constraint of inadequate domestic savings – correct the consumption curve, ignite investment, cushion the currency and lift liquidity.
The seductive power of the thesis of dollar stimulus-triggered growth, however, is challenged by the construct of necessary and sufficient conditions, which defines outcomes.
The availability of additional resources by itself is no guarantee of a virtuous outcome.
10. India, Russia Seek To Skirt U.S. Sanctions Threat
India and Russia have agreed on a new payment method through their national currencies for multi-billion-dollar defense deals, in a bid to avoid risks created by the U.S. threat of sanctions and banking restrictions.
- The arrangement would enable India to pay the first installment soon for two warships that Russia is building for its navy, two people familiar with the matter told Bloomberg News in New Delhi, without elaborating.
- Defense contracts will be settled in rubles and rupees under a payment agreement reached by the central banks of Russia and India, said a person in Moscow with knowledge of the preparations.
- While the new mechanism potentially opens the way for releasing billions of dollars in contract payments to Russia, it may still be dependent on India winning agreement from U.S. President Donald Trump not to impose sanctions in retaliation.
Still, India is attempting to obtain a U.S. presidential waiver for its arms purchases.