BQuick On June 14: Top 10 Stories In Under 10 Minutes
This is a roundup of the day’s top stories in brief.
1. Trade Deficit Widens
India’s trade deficit widened for a third straight month as exports remained sluggish amid a slowing global economy and escalating U.S.-China trade war.
- The gap between exports and imports was $15.36 billion in May, slightly higher than $15.33 billion in April, according to data from the Commerce Ministry on Friday.
- That compares with the $15.74 billion median estimate in a Bloomberg survey of 22 economists.
- Exports rose 3.9 percent from a year-ago to $29.9 billion, compared with a 0.6 percent gain in April.
- Imports rose 4.3 percent to $45.4 billion, against a 4.5 percent increase in the previous month.
Asia’s third-biggest economy is more reliant on its large services sector than goods’ exports.
2. Retaliatory Tariffs On 29 U.S. Items From June 16
India will impose retaliatory tariffs on 29 U.S. items—including almonds, walnuts and pulses—from June 16, after extending the deadline for doing the same several times, government sources told PTI on Friday.
- India has informed the U.S. about its decision to go ahead with the retaliatory tariffs, the sources said.
- The finance ministry will soon issue a notification to this effect, they added.
- The retaliatory tariffs are estimated to earn India $217 million in additional revenue.
Here’s what gets impacted from the retaliatory tariffs.
3. Hexaware Strikes $182-Million Deal
Hexaware Technologies Ltd. agreed to acquire U.S.-based Mobiquity Inc. for $182 million to expand its cloud and automation service offerings.
- The deal—the largest by the Mumbai-based company—will help it gain traction in its banking and pharmaceutical verticals through Mobiquity’s digital products, according to its exchange filing today.
- “Mobiquity will bring direct and substantial value in cloud technology and transformation of customer experiences,” the company’s Chief Executive Officer R Srikrishna told BloombergQuint in an interaction.
- As per the agreement, $131 million would be paid upfront while the remaining would be a deferred consideration—part of which is contingent on earnouts.
Here’s how it will affect the company’s margin.
4. Hope For Bikemakers
Demand for two-wheelers at dealerships offered some hope even as wholesale volumes of automakers continued to decline in May amid a consumption slowdown in India.
- Retail sales of scooters and motorcycles rose 6.1 percent over the previous month in May, according to registration data released by the Federation of Automobile Dealers Association.
- That, along with 5.8 percent jump in three-wheeler sales, pushed the industry’s volumes higher.
- Two-wheeler demand picked up because of marriage season buying and a slight improvement in liquidity, Ashish Kale, president at the dealers’ lobby, told BloombergQuint over the phone.
- Still, that’s just a small respite as demand for cars and utility vehicles remained flat, and truck volumes contracted at dealerships.
Here are the average inventory levels in May for two-wheeler manufacturers.
5. Worst Week In A Month For Sensex, U.S. Stocks Drop
Indian equity benchmarks extended their decline for the second consecutive week, clocking their worst week since May 13.
- The S&P BSE Sensex closed the week 0.5 percent lower at 39,420.
- The NSE Nifty 50 ended at 11,810, down 0.5 percent.
- The broader market index represented by the NSE Nifty 500 Index closed 0.81 percent higher during the period.
- On Friday, the benchmark indices ended the session with losses.
- The 31-share index closed 289 points or 0.73 percent lower and the 50-stock index ended 0.79 percent lower.
- All the 11 sectoral gauges compiled by the NSE fell.
Follow the day's trading action here.
U.S. equities edged lower along with two-year Treasuries after data showing broad gains in retail sales suggested the economy is healthy enough to go without an interest-rate cut.
- Tech shares paced declines in the S&P 500 Index after Broadcom Inc. cut its annual sales forecast, citing trade war concerns.
- The Stoxx Europe 600 Index fell the most in two weeks after a mixed session in Asia.
- Gold climbed above $1,350 an ounce, a level last seen in April 2018, before paring gains.
- The dollar strengthened after May’s retail sales data was seen as undermining the case for a dovish turn by the Federal Reserve.
- Oil fluctuated after Thursday’s surge on the heels of suspected tanker attacks.
Get your daily fix of global markets here.
6. Alpha Moguls: Unique Way Of Valuing Companies
Prashant Khemka looks at cash flows in a company to arrive at a valuation, but not like everyone else.
- He relies on what he calls an asset-light cash flow to value businesses, sectors and countries, said Khemka, founder of White Oak Capital Management LLP that manages Rs 8,300 crore in assets.
- Khemka splits a company into two: the part which houses the assets and the working capital; and operating company that uses those assets.
- The operating company would pay the asset-heavy company the cost of capital, he said on BloombergQuint’s special series Alpha Moguls.
Watch the full show to find out Khemka's bets.
7. Specialty Chemicals: Looking Beyond Star Performers
Shares of the large specialty chemical makers have rallied this year aided by earnings growth and growing domestic demand.
- SRF Ltd. led the gains so far this year, followed by Deepak Nitrite Ltd., Vinati Organics Ltd. and Aarti Industries Ltd., rising 20-46 percent.
- That compares with a 6 percent rise in the boarder NSE 500 Index.
- But beyond the list of these top-performing stocks in the sector, there are other companies that have delivered a consistent revenue growth and return-on-equity in the last five years.
Here’s the list of best-performing smaller specialty chemicals makers.
8. Troubles At DHFL, Reliance Capital: Whose Risk Is It Anyway?
The Indian financial system had another scare last week. Non-bank lender Dewan Housing Finance Corporation Ltd. missed payments, but made good on dues within a seven-day grace period. Simultaneously, developments at Anil Ambani firms have also been disquieting for investors. The renewed bout of uncertainty prompted calls for systemic intervention from RBI. But the central bank has not yet felt the need to act.
It may be best for the Reserve Bank of India to keep it that way, for the NBFC crisis is now concentrated in a few firms which are facing the market’s wrath, writes Ira Dugal.
- DHFL continues to be the weakest spot, but its liabilities are less than 0.5 percent of the system-level debt.
- Like DHFL, Reliance Capital Ltd.’s NBFC businesses would not be material for the system.
- At this stage, many will say that it is the indirect contagion risk that will hurt more than the direct impact.
A comparison to the Lehman Brothers collapse is fashionable, but here are a few counter arguments.
9. WeWork Mulls $1.9-Billion India Deal
WeWork Cos. is considering a deal to take majority control of its India affiliate, people familiar with the matter told Bloomberg News, a deal that would allow the shared-office startup to consolidate financial results from the fast-growing unit as it prepares for an initial public offering this year.
- The New York-based company is in talks to buy around 70 percent of WeWork India at a valuation of about $2.75 billion, said one of the people, who asked not to be named because the discussions are private.
- The deal, $1.9 billion at those terms, would be part cash and part stock, and could close as early as August, the person said.
- The transaction isn’t finalised so terms may change or the talks could break down.
Here’s why adding India to its asset portfolio may benefit WeWork.
10. Modi Calls For End To State-Sponsored Terror
Countries “sponsoring, aiding and funding” terrorism must be held accountable, said Prime Minister Narendra Modi at the Shanghai Cooperation Organisation Summit on Friday, in what is seen as a veiled reference to Pakistan whose premier Imran Khan was in the audience.
- Addressing the Shanghai Cooperation Organisation Summit in Bishkek, Kyrgyzstan, Modi also called for a global conference to combat the scourge of terrorism and highlighted the spirit and ideals of the SCO to strengthen cooperation in the fight against terrorism.
- India advocates a terrorism-free society, said the prime minister.
During my visit to Sri Lanka last Sunday, I visited the St. Anthony’s church, where I witnessed the ugly face of terrorism which claims the lives of innocents anywhere.Narendra Modi, Prime Minister
Modi also called on SCO member states to cooperate and act against terrorism.