BQuick On July 22: Top 10 Stories In Under 10 Minutes
This is a roundup of the day’s top stories in brief.
1. Moon Mission: Successful Liftoff
India successfully launched its second mission to the moon on Monday, a week after a technical snag forced an earlier attempt to be postponed.
- The unmanned Chandrayaan-2, which means “moon vehicle” in Sanskrit, was launched at 2:43 p.m. from a tiny barrier island in southeastern India.
- India is attempting to become the first nation to land on the south pole of Earth’s closest neighbor.
- A second attempt just days after the failed one is sooner than some experts predicted, underscoring India’s confidence in the project spearheaded by Indian Space Research Organisation.
India plans to send a mission to study the sun next year, another to Venus three years later, and eventually establish its own space station.
2. Shaktikanta Das On Rates, NBFCs And More
Reserve Bank of India’s Governor Shaktikanta Das said policy makers have effectively delivered more easing than the three interest-rate cuts this year suggest, signaling a more cautious stance on future action.
- In one of his first interviews with media since taking office seven months ago, Das said he sees signs of a recovery in economic growth and further monetary policy steps will depend on incoming data.
- The central bank’s switch to an accommodative stance in June in itself amounts to a 25 basis-point cut, he said, on top of the 75 basis points of cuts since February.
Under Das, RBI has become the most aggressive central bank in Asia this year.
India is also attempting to prevent any repeat of last year’s shadow banking crisis after detecting “signs of fragility” in some of the 50 housing finance and other non-bank lenders it is monitoring, according to Das.
- RBI is working closely with the country’s lenders to prevent the collapse of another large systemically important non-bank finance company, Das said.
- “It is our endeavor that there is no contagion,” Das said.
Our effort is to see that there is no repeat instances of systemically important large NBFC collapsing.Shaktikanta Das, Governor, RBI
Das said they are in touch with large lenders and shadow banks where they see signs of fragility.
Sovereign bonds slid after Das said further rate cuts will depend on incoming economic data, forcing traders to dial back expectations of large easing in monetary policy.
- The benchmark 10-year bond yield jumped seven basis points to 6.43 percent, halting a three-week rally that sent yields to the lowest in more than two years after the government promised fiscal restraint and proposed to shift a part of its borrowing overseas.
- The central bank’s next policy review is due on Aug. 7.
- Interest rate swaps rose, with the 1-year overnight indexed swap rising 6 basis points to 5.47 percent. The rupee fell 0.3 percent against the dollar.
Das’ views were less dovish than what the market wanted to hear.
3. India Faces 'Silent Fiscal Crisis'
India is facing a silent fiscal crisis owing to a shortfall in tax revenues, and the government’s budget suggests it may have grossly underestimated the problem.
- That’s the assessment of Rathin Roy, a member of the Prime Minister’s Economic Advisory Council, who said the budget presented this month won’t help fully reverse the problem in the current financial year that began April 1.
At the heart of the crisis is a shortfall in tax revenues. It is mainly due to a shortfall in GST revenues (but also personal income tax revenues), compared to the numbers presented in the revised estimates.Rathin Roy, Director, National Institute of Public Finance & Policy
Roy separately questioned the government’s 3.4 percent fiscal deficit numbers for the last fiscal year.
4. Sensex Falls, U.S. Stocks Mixed
Indian equity benchmarks fell for the third-straight session, driven by losses in financial stocks.
- The S&P BSE Sensex closed fell 0.80 percent, or 306 points, to 38031.13.
- The NSE Nifty 50 ended at 11,346.20, down 0.64 percent.
- The broader market index represented by the NSE Nifty 500 Index closed 0.61 percent lower.
- Six out of 11 sectoral gauges compiled by NSE closed lower.
Follow the day’s trading action here.
Technology shares led gains among U.S. stocks following a mixed session in Europe and Asia as investors looked ahead to a busy week of corporate earnings.
- Apple rallied after Morgan Stanley boosted its price target. The Dow Jones Industrial Average turned negative.
- Treasuries advanced after traders pared bets the Federal Reserve will slash rates by a half-point this month.
- Oil gained amid tensions in the Persian Gulf. West Texas Intermediate rose 0.7 percent to $56 a barrel.
Get your daily fix of global markets here.
5. Kotak Mahindra Bank Profit Misses Estimate
Kotak Mahindra Bank Ltd.’s profit rose in the quarter ended June but missed estimates.
- Net profit rose 33 percent year-on-year to Rs 1,360 crore in the April-June period. That compares with the Rs 1,434-crore consensus estimate of analysts tracked by Bloomberg.
- Net interest income, or core income, rose 23 percent over last year to Rs 3,173 crore—in line with the Rs 3,168-crore estimate.
- The lender’s asset quality remained stable during the quarter.
- Still, provisions rose 85 percent on a quarterly basis to Rs 317 crore.
Corporate lending has been sluggish and overall demand has been muted.
6. Why Realty Funding May Be Affected
The National Housing Bank has advised housing financiers to desist from funding schemes in which developers offer to service interest on housing loans on behalf of borrowers, citing the prevalence of fraud in them.
- The NHB, in a circular on subvention schemes offered by builders, said the disbursal of housing loans should be strictly linked to the stages of construction and no upfront disbursal should be made in incomplete projects or those under construction.
- “Several complaints have been in relation to the aforementioned housing loan products,” it said in the circular. “Further, instances of frauds having been allegedly committed by certain builders using subvention schemes have also been brought to the notice.”
- NHB said prevalent products of housing finance companies, if any, should be reviewed on the above lines. The directive, it said, shall be effective even when the financier is yet to commence disbursements under the sanctioned cases.
Some popular subvention schemes in vogue include the “5:95” and “10:90” schemes.
7. IndiGo Board Expansion
InterGlobe Aviation Ltd. is considering expanding its board strength to up to 10 members, including four independent directors.
- The proposal to amend the Articles of Association of the company will have to be approved by shareholders at the upcoming annual general meeting, the company said in an exchange filing.
- On Saturday, the company said it would seek shareholders’ nod at the AGM to add a woman independent director — as directed by the market regulator in April 2019.
Expanding the board was a point of contention between the two promoters.
8. ‘Big 4’ To Face CCI Probe?
India’s competition regulator may probe dominance of the ‘Big 4’ audit firms and check whether they are impeding fair competition, one person aware of the development told BloombergQuint.
- The ‘Big 4’ auditors—Deloitte, EY, KPMG and PwC, who service a third of India’s listed companies’ audit business by value—together act as “entry barriers” for domestic firms, the person quoted above said requesting anonymity as the information isn’t public yet.
- The Competition Commission of India may “suo moto” probe these four accountancy firms, he said.
- The issue stems from the crisis of credibility facing the ‘Big 4’ and their affiliates, which according to Prime Database audited close to 60 percent of the Nifty 500 companies in 2017-18.
India is not the only country looking to probe these audit firms.
9. Essar Steel Sale Put On Hold Again
The Supreme Court on Monday ruled that status quo should be maintained in the Essar Steel Ltd. insolvency case.
- The interim order by a bench headed by Justice Rohinton Fali Nariman came on a plea filed by the committee of creditors of Essar Steel against the judgment of the National Company Law Appellate Tribunal.
- In its judgment on July 4, NCLAT upheld ArcelorMittal SA’s bid for Essar Steel while making changes over the distribution of claims between various creditors.
- Overruling the committee of creditors’ decision on distribution of claims, NCLAT held the CoC has no role in distribution of claims from ArcelorMittal’s resolution plan and that its role is limited to deciding viability and feasibility of the bid.
- The appellate tribunal had also held that the committee comprises financial creditors and letting them decide on distribution of claims will be a conflict of interest.
Supreme Court will hear the Essar Steel insolvency case in detail on Aug. 7.
10. Don’t Amend The RTI Act
The Lok Sabha passed the Right To Information (Amendment) Bill, 2019, which seeks to amend the RTI Act in order to empower the central government to unilaterally decide the tenure, salary, allowances and other terms of service of Information Commissioners at the Centre and states.
This move appears to be to gain control over the information commissions and make them beholden to the government, writes former Central Information Commissioner Shailesh Gandhi.
- The Prime Minister has promised to give India a better democracy, and to listen to citizens.
- Demonstrate this by withdrawing this move to amend the RTI Act.
If the government does not display the wisdom to do this, citizens must come together to oppose this ill-advised move.