BQuick On June 27: Top 10 Stories In Under 10 Minutes
Here is a roundup of the day’s top stories in brief.
1. SEBI Board Decisions
The market regulator tightened norms for mutual funds after some of the debt investments by asset managers put investor money at risk.
- Mutual funds will have to mark to market their investments in debt and money-market instruments. The regulator dispensed with valuations based on amortisation.
- Mutual funds can only have 20 percent exposure to one sector in a scheme, down from 25 percent earlier.
- SEBI mandated liquid funds to hold 20 percent holdings in liquid assets.
- SEBI has levied a graded exit load on investors of liquid schemes who redeem with seven days of making an investment.
- Chairman Ajay Tyagi said the regulator does not recognise the standstill agreements entered into by mutual funds with companies.
- The board also approved a framework for issuance of DVR shares.
- SEBI has mandated that promoters will now have to disclose the reason for encumbrance of pledged shares whenever it crosses 20 percent of the total share capital.
- SEBI has also amended its royalty payment norms. If the royalty payments cross 5 percent of annual turnover, then the company must get shareholder approval.
Tougher rules for mutual funds may mean lower returns.
2. RBI’s Financial Stability Report
The Reserve Bank of India’s Financial Stability Report highlighted consumption slowdown, noting that the domestic economy hit a soft patch recently as private consumption, the key driver of GDP, turned weak.
Here are the other highlights of the report:
- The subdued new investment pipeline and a widening current account deficit have exerted pressure on the fiscal front.
- Reviving private investment demand remains a key challenge going forward while being vigilant about the spillover from global financial markets.
- Macro-stress tests suggest gross nonperforming assets may decline from 9.3 percent in March 2019 to 9.0 percent in March 2020.
- Macro-stress tests suggest gross NPAs may decline from 9.3 percent in March 2019 to 9.0 percent in March 2020.
- Bulk of the legacy NPAs already recognised in the banking books.
- Provision coverage ratio of all scheduled commercial banks rose sharply to 60.6 percent in March 2019 from 52.4 percent in September 2018.
- Recent developments have led to greater market discipline among NBFCs.
Recent developments in the Non-banking financial companies (NBFC) sector have brought the sector under greater market discipline as the better performing companies continued to raise funds while those with ALM and/or asset quality concerns were subjected to higher borrowing costs.RBI Financial Stability Report
3. Axis Bank Considers Raising $1.3 Billion
Axis Bank Ltd. is considering raising at least $1.3 billion through a share sale to institutional investors, people with knowledge of the matter told Bloomberg News, as the Indian lender seeks to bolster capital ratios and expand lending capacity.
- India’s third-largest private sector lender, led by Chief Executive Officer Amitabh Chaudhry, is talking to potential advisers about the fundraising, according to the people.
- The bank plans to seek board approval for the sale as early as next month, the people said, asking not to be identified as the information is private.
- The deal would help the Mumbai-based lender enhance risk buffers and support loan growth.
A potential deal though could still be delayed or fall apart.
4. Nifty’s Worst F&O Series In Eight Months
Indian equity benchmark NSE Nifty 50 registered its worst F&O series in eight months.
- The 50-share index fell 0.87 percent in June series, the worst since October when it declined 13.3 percent.
- Today, the S&P BSE Sensex ended little changed at 39,586, while Nifty ended 6 points lower at 11,841.
- The broader market index represented by the NSE Nifty 500 Index ended 0.1 percent higher.
- The market breadth was tilted in favour of buyers.
- Six out of 11 sectoral gauges compiled by NSE advanced.
Follow the day’s trading action here.
U.S. stocks halted a four-day slide as investors speculated the Trump administration would avoid escalating its trade war with China this weekend.
- The S&P 500 headed for its best month since January, rebounding from a rout in May to leave it higher by 3 percent for the quarter.
- Tech lead gains for a second day as U.S. officials appeared poised to hold fire on additional tariffs on Chinese goods in an effort to restart talks when the nations’ presidents meet Saturday.
- However, a report saying China will insist on terms muted gains on the benchmark. Boeing Co. slid more than 2 percent after the FAA found new risks related to its grounded 737 Max airplane, weighing on the Dow Jones Industrial Average.
- The 10-year Treasury yield slipped below 2.04 percent, with Goldman Sachs Group Inc. cutting its year-end forecast for the rate to 1.75 percent, matching JPMorgan Chase & Co.’s call from May 31.
- Gold dipped 0.6 percent to $1,406.50 an ounce.
Get your daily fix of global markets here.
5. Suzlon Lenders Seek To Avoid Second Debt Restructuring
Suzlon Energy Ltd., which had restructured debt under the Corporate Debt Restructuring programme in 2013, is once again in financial trouble. This time, though, lenders are not keen to restructure the company’s debt and see equity infusion from an outside investor as the only feasible option.
- The company owes banks about Rs 10,000 crore.
- According to two bankers in the know, who spoke on condition of anonymity, Suzlon is currently overdue on payments with some banks and has been classified as a ‘special mention account’ as per the Reserve Bank of India’s guidelines.
- The rules say that if any account is overdue by 1-90 days, its classified as a special mention account in three different buckets, depending on the extent of delay.
Bankers say that a second restructuring of the company’s debt is not feasible.
6. Triple Trouble For Oil Retailers
India’s top three state-owned oil retailers stare at triple trouble in the upcoming earnings season.
- Indian Oil Corporation Ltd., Bharat Petroleum Corporation Ltd. and Hindustan Petroleum Corporation Ltd. are likely to report dismal numbers in the first quarter ended June because of possible inventory losses, a weaker marketing margin and flat consumption, according to BloombergQuint’s calculations.
- The first worry stems from the softening global oil demand amid the U.S.-China trade war slowing the global economy. International Energy Agency has so far pared global oil consumption growth estimates twice since May.
- While Brent crude—the Asian benchmark for oil—rose 8 percent quarter-on-quarter in the April-June period, it witnessed a sudden drop earlier this month on fears of a global slowdown. Oil tumbled more than 20 percent from its high of $75.6 to $59.5 a barrel in 12 days.
The sudden price drop could affect company financials.
7. Mass Rollout Of Smart Meters
India is considering a plan to install smart meters in every home and business as part of its ongoing effort to turn around the country’s ailing power sector, officials with knowledge of the situation told Bloomberg News.
- The plan under consideration would require 300 million smart meters over three years, said the people, who asked not to be identified as the information isn’t public.
- The power ministry has begun discussions with manufacturers on supplying the meters, which improve efficiency by monitoring and transmitting power use data.
- As part of the plan, the central government is mulling providing subsidies to partially cover the costs, one of the officials said.
- Preliminary estimates by the government put the cost for the meters at about 2,000 rupees ($29) apiece, or $8.7 billion in total, according to one of the officials.
Widespread use of smart meters could be a gamechanger.
8. New Roster For Allocating Cases In Supreme Court
The Supreme Court issued a new roster for allocation of cases, effective July 1 when it reopens after annual summer vacation.
- According to the roster uploaded on the website of the top court, public interest litigation matters will now be heard by benches headed by either Chief Justice of India Ranjan Gogoi or Justice SA Bobde, Justice NV Ramanna, Justice Arun Mishra or Justice RF Nariman.
- It reverses the earlier roster that allocated all PILs to the bench headed by the Chief Justice of India or by the second senior most judge.
Here are the other changes in the Supreme Court’s roster.
9. In Search Of Water
Sitting quietly in the shade under a tree in her tranquil village in central India, Phooldevi, in her mid-70s, says most of the village has migrated to different cities and towns in search of work. Lack of water has rendered the farmlands useless. “We have run out of drinking water, let alone using water for agriculture,” she says, adjusting her red saree, ensuring her head is covered.
- Spread across an area of 7,53,700 square kilometers, with a population of over 18 million, Bundelkhand is one of the most backward regions of India.
- The average rainfall in Bundelkhand is supposed to be about 850 mm a year, but over the past five-seven years or so, it has dwindled to half of that, causing recurring crop failure.
- This year too, the situation is similar, not just in Bundelkhand but across the country.
- Even though the drought has attracted more attention in peak summers months, when water scarcity is stark and evident, statistics suggest it has been prevailing in India since October 2018.
Here’s how India’s worst water crisis is impacting Bundelkhand.
10. MG Hector Arrives In India
MG Motor India Pvt. Ltd. on Thursday launched the MG Hector SUV at an introductory price range of Rs 12.18-16.88 lakh. Deliveries of the car will start by first week of July.
- The car will take on the likes of Mahindra XUV 500, Tata Harrier, Jeep Compass and Hyundai Creta, among others, in the Rs 12-25 lakh SUV segment.
- The MG Hector is the company's first model in India and will be followed by an electric SUV, the MG EZS, later this year. In 2020, MG Motor will launch two models in India.
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