A motorist drives along a road outside a Tata Steel Ltd. plant in Jamshedpur, Jharkhand, India (Photographer: Anindito Mukherjee/Bloomberg)  

BQuick On June 28: Top 10 Stories In Under 10 Minutes

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

1. India’s Forex Reserves At Record High

India’s foreign exchange reserves are at a record high as inflows into the Indian debt and equity markets remain strong.

  • Data from the Reserve Bank of India shows that foreign exchange reserves hit $426.42 billion as of June 21, up $4.2 billion from a week ago.
  • At current levels, forex reserves have reclaimed the earlier record high of $426.1 billion hit in April 2018.
  • Reserves have risen as both equity and debt inflows have picked up following results of the general elections in May.

In 2019, foreign portfolio investors have pumped in Rs 96,457 crore into the Indian debt and equity markets.

2. Current Account Deficit At Two-Year Low

India’s current-account deficit narrowed last quarter as a slowdown in the economy sapped imports.

  • The shortfall was $4.6 billion in the January-March period, or 0.7 percent of gross domestic product, the Reserve Bank of India said in a statement on Friday.
  • That compares with a median $6.1 billion deficit estimated in a Bloomberg survey.
  • The gap is smaller than the previous quarter’s $17.7 billion, or 2.7 percent of GDP.
  • It compares with a deficit of 1.8 percent of GDP in the year-earlier period.

The deficit narrowed as imports slowed sharply during the quarter on the back of a broader slump in consumption.

India’s fiscal deficit breached the halfway mark of its budgetary estimate two months into the financial year.

  • The gap between the government’s revenue and expenditure rose to Rs 3.66 lakh crore at the end of May.
  • That’s 52 percent of the targeted Rs 7.03 lakh crore in 2019-20.
  • It’s, however, narrower than in May last year when it stood at 55.3 percent of the FY19 target.

The government’s total expenditure for April-May this year rose to Rs 5.12 lakh crore.

3. Small Savings Schemes: Interest Rates Cut

The government has cut the interest rates on small savings schemes, including National Savings Certificate and Public Provident Fund, by 10 basis points for the July to September quarter.

  • Barring interest on savings deposits, which has been retained at 4 percent annually, rate on all other schemes has been slashed by 0.1 percent.
  • NSC and PPF schemes will carry an annual interest rate of 7.9 percent, the finance ministry said in a notification.
  • Kisan Vikas Patra will give a yield of 7.6 percent and mature in 113 months. At present, interest rate on KVP is 7.7 percent and maturity is 112 months.
  • Interest rate for the five-year Senior Citizens Savings Scheme will now fetch a lower rate of interest at 8.6 percent from 8.7 percent earlier.
  • Interest rates for small savings schemes are notified on a quarterly basis.

Also read: Small Savings Collections: Banks’ Loss Is Government’s Gain

4. DHFL’s Lenders Begin Working On A Restructuring Plan

Lenders to Dewan Housing Finance Corporation Ltd. have started work on a restructuring plan for the housing financier, which has defaulted on some of its debt obligations, three people in the know confirmed.

  • The restructuring plan, which is being prepared under the Reserve Bank of India's new stressed asset guidelines, could include conversion of debt into equity, the people quoted above said.
  • Other options being considered include taking over DHFL's loans to slum rehabilitation projects, which the company has found difficult to exit. The plan could also be a mix of these options, the people quoted above said.
  • A final call in the matter will be taken by the lending consortium after they have signed an inter-creditor agreement, the people quoted above said.
  • The housing finance company has appointed consultants to work with lenders on the restructuring plan.

Here’s what DHFL’s financials currently look like.

5. Sensex Slips, U.S. Stocks Fluctuate

Indian equity benchmarks ended their three-week weekly losing streak.

  • The S&P BSE Sensex closed 0.51 percent higher this week to end at 39,394 and the NSE Nifty 50 closed at 11,788, up 0.59 percent.
  • The broader market index represented by the NSE Nifty 500 Index closed 0.81 percent higher this week.
  • Today, the 31-stock index closed 192 points or 0.48 percent lower and the 50-share gauge closed 0.45 percent lower.
  • The 500-share index ended 0.35 percent lower.
  • Eight out of 11 sectoral gauges compiled by NSE ended lower.

Follow the day’s trading action here.

U.S. stocks fluctuated ahead of crucial trade talks with China as fresh data added to evidence that American manufacturing growth is slowing.

  • The S&P 500 Index pared early gains, but still pushed its June advance toward 6.5 percent and is higher by 3 percent in the quarter.
  • Materials producers have surged 11 percent in June, buoyed by crude’s best month in five and gold’s biggest rally since the Brexit vote.
  • Optimism over a resolution to the trade war lifted chipmakers to the best monthly gain since 2011.
  • Banks rallied Friday after the Federal Reserve cleared the way for better-than-expected payouts.
  • Ten-year Treasury yields lingered just above 2 percent, falling nearly 40 basis points since the end of the last quarter, as the Fed’s preferred measure of underlying U.S. inflation showed signs of picking up in May.
  • The dollar fell, heading for it’s worst month since January.
  • West Texas crude traded just below $60 a barrel.

Get your daily fix of global markets here.

6. Cox & Kings: Debt Default Impact

Shares of Cox & Kings (India) Ltd. dropped to their all-time low after the tour operator defaulted on its debt.

  • The company defaulted on payment of commercial papers worth Rs 150 crore due to cash-flow mismatch and ratings downgrade, Cox & Kings said in an exchange notification.
  • It paid Rs 50 crore of the Rs 200 crore due, the company said, adding that it will meet the rest of the obligations via a combination of internal accruals and monetisation of assets.
  • Shares of the company closed at Rs 36.80 on the National Stock Exchange today, its lowest level ever. The stock has tumbled nearly 78 percent so far this year.

The default is surprising as the latest financial statements show Cox & Kings has a cash balance of Rs 1,860 crore.

7. Airtel Africa: Dismal Debut

Bharti Airtel Ltd.’s Africa unit plunged in London trading after raising about $750 million in an initial public offering, making it among the worst debuts on European exchanges this year.

  • Airtel Africa Ltd. dropped as much as 16 percent to 67 pence per share, matching the first-day decline for OssDsign AB last month.
  • Airtel Africa said it had priced the offering at 80 pence a share, at the low end of its range, giving the company a market capitalization of about 3.1 billion pounds ($3.93 billion).
  • The weak market showing for the African carrier, the continent’s second-largest by subscribers, comes as parent Bharti Airtel Ltd. struggles back home with a years-long price war and mounting debt.
  • Proceeds from the IPO will help the India-based wireless operator pare debt while it prepares to upgrade its mobile network to fifth-generation technology.

Airtel Africa may be suffering from broader investor unease about telecom carriers in emerging markets.

8. Snack Makers Turn Robin Hood

Indians’ hunger for smaller helpings has tripped traditional business wisdom.

  • Family-sized packs are usually considered cheaper than buying multiple tiny units.
  • That’s because it’s costlier to stock products in many small packets compared with a single large one.
  • Consumer goods makers have turned that on its head.
  • Buying several single servings of biscuits, chocolates or chips is either cheaper or offers more grammage than stocking your kitchen with a bigger bag of equivalent weight.
  • Britannia Industries Ltd., Parle India Pvt Ltd., Mondelez International and PepsiCo Inc.’s Lays are among the companies that have deployed this strategy.

The Robin Hood strategy is easier to sell but comes at a disadvantage.

9. Lower Inventories, But No Sales Pickup

Car and two-wheeler sales are expected to decline in seasonally weak June, according to a BloombergQuint survey of 10 large automobile dealers, suggesting discretionary spending is yet to pick up.

  • Consumer sentiment has remained weak despite hopes of a revival after the general election, according to Vinkesh Gulati, director at Lucknow-based United Automobiles.
  • “We were expecting sales to see a pickup post-election but that has not quite happened,” he said. “One of the reasons for this is consumers don’t prefer to buy a new car or bike right before monsoons.”
  • Sales remained tepid in June even as a brief spurt in demand was seen during the week coinciding with Eid festival.

Analysts also expect the slowdown to continue.

10. Modi Meets Trump At G-20

Prime Minister Narendra Modi today held talks with U.S. President Donald Trump and discussed various bilateral and global issues including Iran, 5G communications networks, trade, and defence, ahead of the G-20 Summit.

  • Trump and Modi have asked officials to hold talks to resolve issues related to trade tariffs, Vijay Gokhale, foreign secretary of India, told reporters in Osaka.
  • The two leaders met Friday after Trump called on Modi to withdraw “unacceptable” increases in tariffs.
  • India, complying with the U.S. sanctions, has ended all imports of oil from Iran.
  • Modi thanked Trump for expressing his "love towards India" in a letter recently delivered by U.S. Secretary of State Mike Pompeo.

Separately, Trump said 'very big' trade deals were on the way with Japan, India. Catch all updates from the summit here.

Bloomberg Quint

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