BQuick On July 2: Top 10 Stories In Under 10 Minutes 

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

1. RBI’s Surplus: Only Rs 8,000 Crore?

The panel set up to review the Reserve Bank of India’s economic capital framework estimated the transferable surplus, or the amount the central bank could potentially pass on to the government, is close to Rs 8,000 crore, a person familiar with the matter told BloombergQuint on condition of anonymity.

• This finding was part of the initial report of the committee, which is yet to be finalised due to differences between members.
• After considering three scenarios, the panel settled on a formula which led to a small surplus of around Rs 8,000-8,500 crore, said the first person quoted above.

Five of the six panel members had agreed to this formula.

2. Air India’s $3.2 Billion Bond Sale

Air India Assets Holding Ltd., a special purpose vehicle that holds part of the state-owned carrier’s debt and assets, is planning its first rupee-denominated bond sale to refinance some debt of the airline.

• Air India Assets is aiming to raise about Rs 22,000 crore ($3.2 billion) and has sought fee bids from bankers on Wednesday, people familiar with the matter told Bloomberg News.
• Out of the total, the company plans to raise Rs 14,500 crore through notes that will have a sovereign guarantee while the nation’s government will fully service the remaining.
• The SPV was set up by the government last year, and about Rs 29,500 crore of Air India Ltd.’s debt was transferred to it to ease the ailing carrier’s debt burden and to make it easier for Prime Minister Narendra Modi to sell a stake in it.

Air India could dilute the sovereign backing for the notes.

3. Nifty Extends Gains, U.S. Stocks Fluctuate

Indian equity benchmarks extended gains for the second consecutive trading session, led by the gains in technology shares.

• The S&P BSE Sensex closed 130 points or 0.33 percent higher at 39,816.
• The NSE Nifty 50 ended above 11,900, up 0.35 percent.
• Yes Bank shares fall nearly 8 percent on an Economic Times report of a borrower default.
• The broader market index represented by the NSE Nifty 500 ended 0.33 percent higher.
• The market breadth, however, was tilted in favour of sellers.
• Six out of 11 sectoral gauges compiled by NSE ended lower.

Follow the day’s trading action here.

U.S. stocks fluctuated in thin trading, while Treasuries resumed a rally as attention turned to a slew of data later in the week that will influence the Federal Reserve’s policy path.

• The S&P 500 edged higher in the last full day of trading before an early close tomorrow and Thursday’s holiday.
• Data on private hiring, factory orders and the services sector are due Wednesday, with June’s government jobs report coming the final day of the week.
• The 10-year Treasury yield dipped below 1.99 percent, while gold headed back toward $1,400 and the Japanese yen climbed as demand for haven assets picked up.
• Crude plunged more than 3 percent in New York.

Get your daily fix of global markets here.

4. Nilesh Shah Suggests Two Ways To Boost Non-Tax Revenue

As the government doesn’t have the flexibility on expenses, the key to presenting a game-changing budget could lie on the income side, according to veteran fund manager Nilesh Shah.

• The budget allocates expenses to a fixed set of segments like salary, pension and defence, leaving no room on expenses, Shah, managing director of Kotak Asset Management Company, said in a BQ Edge event, BloombergQuint’s on-ground initiative. Effectively, the only leeway the budget has is non-tax revenue, he said.

Here’s the second way Shah suggested to boost non-tax revenue.

5. Cement Prices Fall For The First Time This Year

Cement prices snapped their five-month gaining streak in seasonally weak June due to a slowdown in demand.

• All-India average cement prices fell by Rs 10 month-on-month to Rs 362 per 50 kg bag after demand decelerated across all five regions due to labour shortage in monsoon season and a slowdown in government projects after the 2019 Lok Sabha elections, according to a BloombergQuint survey of 13 dealers across five regions.
• While all the regions saw cement getting cheaper, the price difference was the widest in east. The quantum of the price cut was similar for the western and southern region.

The sharpest decline came in east India as prices corrected after three straight hikes.

6. RBI Fines Four State-Owned Banks

The Reserve Bank of India has imposed penalties ranging between Rs 25-50 lakhs on four state-run lenders for violating Know Your Customer norms and regulations relating to opening of current accounts.

• Punjab National Bank, Allahabad Bank, and UCO Bank were fined Rs 50 lakh each.
• Corporation Bank was fined Rs 25 lakh.

6. Weak Rainfall Hits Crop Sowing

A delayed onset of the Southwest monsoon has led to early signs of weakness in sowing patterns, which could impact agricultural output during the Kharif season.

• Rainfall during the month of June was running a deficit of 36 percent compared to the Long Period Average, according to data from the India Meteorological Department dated June 27, 2019.
• This deficient rainfall has limited area coverage under kharif crops to 146.6 lakh hectares in June 2019, contraction of 9.5 percent compared to last year, showed data from the Department of Agriculture Cooperation & Farmers Welfare.
• The lackluster monsoon has forced many a farmer to delay the planting schedule, stated a research note by Edelweiss.

A strong revival in monsoon in July along with a good spatial distribution is now needed to ensure output isn't hurt significantly.

7. Growth Slowdown: The Reasons And The Fixes

The slowdown in the Indian economy, now apparent from data such as weaker GDP growth, plummeting auto sales and falling core inflation, has prompted calls for corrective action. Options range from monetary support in the form of lower interest rates, to fiscal support via tax cuts to boost spending, to fixing longer-term structural issues facing the Indian economy.

Determining the best course of action, though, needs two fundamental questions to be answered:

• What led to the growth slowdown in the first place?
• And what are the least disruptive policy options to correct the slowdown without throwing caution to the wind?

BloombergQuint spoke to Credit Suisse’s Neelkanth Mishra and JPMorgan’s Sajjid Chinoy for their views. Here’s what they said.

9. Dr. Doom’s Latest Prophecy

The U.S.-China trade war and a spike in oil prices from geopolitical tensions have the potential to push the world into recession next year, according to renowned doomsayer Nouriel Roubini.

• “It’s a scary time for the global economy,” the head of Roubini Macro Associates, sometimes known as “Dr. Doom,” said in an interview with Bloomberg TV.
• He said he expects a recessionary shock to materialize next year.
• The rub for Roubini is that monetary policy makers’ ability to respond to shocks is impaired, with benchmark interest rates still at historically low -- and in some cases negative -- levels.

Optimism will likely collapse “like in every other recession,” Roubini says.