Dry cement, mortar, and lime trucks from a cement factory drive along an expressway in Mumbai, India. (Photographer: Santosh Verma/Bloomberg News.)

BQuick On June 19: Top 10 Stories In Under 10 Minutes

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

1. Two-Step Deal Between HDFC And Apollo

Housing Development Finance Corporation Ltd. will buy a majority stake in Apollo Munich Health Insurance Company for Rs 1,347 crore—a move that paves the way for merging it with its general insurance business HDFC Ergo.

  • HDFC will acquire 51.2 percent stake, or 18.39 crore shares in Apollo Munich from the Apollo Group for Rs 1,346.84 crore.
  • Apollo Munich will subsequently be merged with HDFC ERGO General Insurance Company Ltd, in which HDFC owns 50.49 percent.
  • The shareholders of Apollo Munich will get HDFC ERGO shares after the merger.
The merged insurance entity on a pro-forma basis has a combined market share of 6.4 percent of non-life insurance industry, with 308 branches across the country. This also makes the combined entity the second largest private insurer in the accident and health segment with a market share of 8.2 percent.
HDFC Press Statement

This comes three years after HDFC’s failed attempt to build a larger presence in life insurance sector.

2. India’s GDP Debate Continues

The Prime Minister’s Economic Advisory Council has issued a detailed rebuttal to a claim by former chief economic adviser Arvind Subramanian that India is over-estimating GDP growth.

  • In a paper titled ‘India’s GDP Mis-estimation: Likelihood, Magnitudes, Mechanisms, and Implications,’ issued last week, Subramanian claimed that annual average GDP growth was about 4.5 percent between 2011 and 2016, instead of the 7 percent estimated by the Central Statistics Agency.
  • On Wednesday, economists from the Prime Minister’s Economic Advisory Council, rebutted the conclusions of Subramanian’s paper.
  • “A critique of official GDP estimates must specifically critique coverage or methodology, the author does neither,” the paper said.
  • The economists involved in authoring the paper include Bibek Debroy, Rathin Roy, Surjit Bhalla, Charan Singh and Arvind Virmani.

Some of the issues on which Subramanian and the PMEAC differ are detailed here.

3. What Will The U.S. Fed Do?

Facing pressure from Wall Street and President Donald Trump, Federal Reserve Chairman Jerome Powell and his colleagues may be running out of patience.

  • The Federal Open Market Committee is likely to hold interest rates steady on Wednesday while opening the door to a cut -- by dropping its commitment to being “patient’’ in its policy statement, according to a Bloomberg survey of economists.
  • “It will be a tap dance on the high wire,’’ said Steven Skancke, chief economic adviser for Keel Point Capital in Vienna, Virginia.
  • Powell will stress that the economy is still fundamentally strong and moving in the right direction, but that the Fed will remain vigilant for changes that might arise, Skancke said.

Fed officials face a quandary because the economic data supports their forecast to hold rates but risks to the global outlook are growing.

4. How Jet Shutdown Is Different From Kingfisher’s

Two large airlines shut down in India in the last six years, undone by losses and mounting debt. But while the industry took about three years to recover from the grounding of Kingfisher Airlines, the impact of Jet Airways (India) Ltd. halting flights has been short-lived. Both airlines were the second-largest players when they collapsed— Kingfisher with a market share of 20 percent and Jet Airways with 16 percent.

  • One thing separates the industry’s recovery after 2013 and now: large carriers with stronger balance sheets who have been able to increase capacity.
  • That limited the increase in fares and hastened the road to normalcy this time.

Jet Airways is unlikely to return to the skies anytime soon as lenders, seeking repayment of Rs 10,000-crore loans, have decided to take the grounded carrier to the insolvency court after failing to find a buyer or an investor.

Read this analysis of how the impact of the two shutdowns was different for the aviation sector and passengers.

5. Banks’ Loss Is Government’s Gain

Slower deposit has often been blamed for the period of tight liquidity in the banking system. But not enough attention, though, has been paid to the role of the government and small savings schemes run by it in weaker deposit growth of banks and, hence, in poor transmission of policy rate changes, writes Ira Dugal.

  • Data on small savings suggests that collections have been running at a pace well above last year’s—63 percent higher, to be precise.
  • Apart from any tax incentives, a key reason for higher collections across small savings schemes is the difference in interest rates offered by government run schemes and those offered by banks.
  • The higher rates, together with tax benefits offered on some schemes, can create a substitution effect between bank deposits and small savings scheme, RBI has noted.

The question to ask is why the government is setting small savings rates higher than they should?

6. Brokers Say Give Investors A Tax Break

Stock brokers want the government to incentivise equity market investments to channelise household savings for recapitalising state-owned banks.

  • The government should make all individuals and Hindu Undivided Family eligible to invest Rs 50,000 in initial public offering, follow-on public offer or mutual funds, and allow 50 percent tax rebate on the amount invested, the Association of National Exchanges Members of India and BSE Brokers’ Forum urged the finance ministry.
  • An additional avenue to raise money would help the government to recapitalise public sector banks, divest state-owned entities and fund projects of national importance, both the broker lobbies said in a representation to the ministry.

Brokers want a cut in dividend distribution tax and securities transaction tax.

7. Markets Remain Flat Ahead Of Fed Meet

Sensex extended gains helped by buying in the last hour trade while Nifty ended unchanged.

  • The 31-stock index closed 66 points or 0.17 percent higher at 39,112.74.
  • The NSE Nifty 50 Index was at 11,691.45 at close.
  • The broader market index represented by the NSE Nifty 500 Index closed 0.26 percent lower.
  • Six the 11 sectoral gauges compiled by NSE advanced.

Follow the day’s trading action here.

Motilal Oswal’s Gautam Duggad says financial stocks are poised for a rally this year. But there are other sectors which will remain sluggish. To find out his top sectoral bets, watch this video below.

Also read: IRB Infra Falls 10% Over Fears Of Losing Mumbai-Pune Expressway Contract

Meanwhile, U.S. equities were little changed while Treasuries slipped as investors prepared for the latest Federal Reserve meeting to conclude, with anticipation growing that policy makers will signal a readiness to lower rates.

  • The S&P 500 Index was little changed as of 8.30 p.m. India time.
  • The Nasdaq Composite Index fell 0.1 percent.
  • The Dow Jones Industrial Average showed meagre gains.

Get your fix of global market action here.

8. Here’s India’s New Lok Sabha Speaker

National Democratic Alliance nominee Om Birla was today elected unopposed as speaker of Lok Sabha with several parties moving a motion in his support.

  • There was no other candidate in the fray and the motion moved by Prime Minister Narendra Modi to choose the Kota-Bundi member of parliament as speaker was adopted by a voice vote.
  • A total of 13 motions were moved in support of Birla.
  • Since the motion moved by Modi, also leader of the House, was adopted, the other motions became infructuous.

Did you know Birla is one of India’s most active parliamentarian?

9. RBI Panel Suggests Doubling MUDRA Loan Limit

A committee on micro, small and medium enterprises, set up by the Reserve Bank of India, has recommended a hike in the unsecured loan limits under the MUDRA scheme from Rs 10 lakh to Rs 20 lakh, two people familiar with the recommendations told BloombergQuint on condition of anonymity.

  • The eight-member committee, headed by former Securities and Exchange Board of India Chairman U K Sinha, submitted its report on Tuesday, the central bank said in a press release. The RBI is yet to release the report.
  • At present, under the MUDRA scheme, lenders provide unsecured loans to MSMEs, farm enterprises and self-help groups.
  • The scheme offers three loan products ⁠— Shishu loans upto Rs 50,000, Kishore loans between Rs 50,000 and Rs 5 lakh and Tarun loans covering loans between Rs 5 lakh and Rs 10 lakh.

The recommendation for larger unsecured loans comes along with some safeguards.

10. Those Worth More Than $100,000,000,000

Bernard Arnault, Europe’s richest person, just joined Jeff Bezos and Bill Gates in the world’s most exclusive wealth club with a fortune of at least $100 billion.

  • Arnault, chairman of LVMH, entered the ranks of centibillionaires Tuesday as the luxury-goods maker climbed 2.9 percent to a record 368.80 euros a share.
  • His net worth has increased almost $32 billion this year, the most on the 500-member Bloomberg Billionaires Index.
  • Arnault’s fortune of $100.4 billion now equals more than 3 percent of France’s economy.
BQuick On June 19: Top 10 Stories In Under 10 Minutes

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