A man looks at his phone as an electronic board displays stock information at the Australian Securities Exchange, operated by ASX Ltd., in Sydney,, Australia (Photographer: Brendon Thorne/Bloomberg)  

BQuick On June 3: Top 10 Stories In Under 10 Minutes

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

1. RBI Takes Action Against EY Firm

The Reserve Bank of India will not approve SR Batliboi & Co LLP, a local chartered accountancy firm affiliated with EY, for carrying out statutory audits of commercial banks for a year starting April 1.

  • The regulator found certain lapses in audit assignments carried out by the firm, the RBI said in a statement on its website.
  • The action stems from the special enforcement framework the regulator announced in June 2018 to take action against firms found to be lacking in their duties as statutory auditors.
  • SR Batliboi is the statutory auditor to private lenders HDFC Bank Ltd., IndusInd Bank Ltd., Kotak Mahindra Bank Ltd., Bandhan Bank Ltd. and The South Indian Bank Ltd.

The statement was not clear if SR Batliboi has been barred from conducting any audit or only from taking up fresh assignments.

2. State-Run Banks Are Finally Overcoming Bad Loans

Nearly four years after a grueling bad loan clean-up hit India’s lenders, banks have started to see a decline in stressed assets, albeit at a moderate pace.

  • The drop in bad loans is being driven by some recoveries via bankruptcy proceeding, a slower build-up of fresh bad loans and increased write-offs.
  • Quarterly earnings data available for 20 of 22 listed government banks shows that these lenders saw a 12 percent year-on-year decline in gross non performing assets to Rs 7.74 lakh crore as on March 31, 2019.
  • The 15 listed private sector banks reported a 2.4 percent increase in gross NPAs to Rs 1.24 lakh crore in FY19, primarily due to an increase in bad loans reported by Yes Bank Ltd. and IndusInd Bank Ltd.

Here’s what led to the drop in bad loans for PSU banks.

3. Manufacturing Gains Momentum In May

India’s manufacturing activity gained momentum in May as business sentiment improved overall, leading to a rise in output and employment.

  • The Nikkei India Manufacturing Purchasing Managers’ Index rose to 52.7 for the month from 51.8 in April. This was the twenty-second consecutive month that the manufacturing PMI remained above the 50-point mark.
  • In PMI parlance, a print above 50 means expansion, while a score below that denotes contraction.
  • Consumer goods led the improvement in May, with rates of expansion in output, total sales, new export orders and employment surpassing those seen in the intermediate as well as capital goods categories.

Employment in the manufacturing sector increased every month since last April.

4. Auto Sales Falls But Optimism Rises

Shares of the automakers rose led by two-wheeler companies on hopes that the worst of the slowdown may be behind the industry.

  • Sales fell over the previous year for most of the makers of cars, utility vehicles, scooters and motorcycles in May, according to numbers filed with exchanges.
  • Volumes of Maruti Suzuki India Ltd., India’s largest carmaker, tumbled the most in nearly seven years.
  • Hero MotoCorp Ltd., the nation’s biggest two-wheeler company, also reported lower numbers. But its volumes were higher than expected, and better than the previous month.
  • There is still some pain left in terms of sales for the auto industry, Ashwin Patil, analyst at LKP Securities, told BloombergQuint.

But there are a few positives in the short-term like...

5. Sensex, Nifty Close Above Key Milestones

Indian equity benchmarks ended at record highs, led by gains in Reliance Industries Ltd. and HDFC twins.

  • The S&P BSE Sensex ended 553 points or 1.39 percent higher to close above 40,250.
  • The NSE Nifty 50 ended near 12,100, up 1.39 percent.
  • The broader market index represented by the NSE Nifty 500 Index closed 1.2 percent higher.

Follow the day’s trading action here.

India’s benchmark bond yield fell below the 7 percent mark for the first time in over eighteen months, as weaker than forecast GDP growth led to expectations of another cut in interest rates.

  • The 10-year bond yield opened at 6.95 percent on Monday compare to Friday’s close of 7.03 percent.
  • Yields have now fallen more than 40 basis points in less than a month.

Here’s what has been pulling down yields in India.

The rupee could be set to gain as Prime Minister Narendra Modi’s sweeping election victory boosts foreign inflows. That may present a dilemma for India’s central bank, analysts said.

  • The rupee is emerging Asia’s top performer in the past three months, thanks to the gush of foreign cash.
  • With inflows poised to accelerate after the election result, the RBI may have to rein in the currency or risk making the nation’s exports less competitive as rival currencies weaken.

The central bank may not be very comfortable with a sharp rise in the rupee.

6. Mahindra Sells Treasury Stock For Rs 1,240 Crore

Shares of Mahindra & Mahindra Ltd. fluctuated between gains and losses today after the automaker sold nearly 1.92 crore shares of the company at Rs 650 apiece in a block deal to Canadian pension fund CDPQ, raising over Rs 1,240 crore, according to Bloomberg.

  • “Since the Benefit Trust holds M&M shares for the benefit of its shareholders, it has decided to monetise part of the holding by divesting to a long-term, high-quality investor,” VS Parthasarathy, chief financial officer of the Mahindra Group, was quoted as saying in an exchange filing.
  • The M&M Benefit Trust was created in July 2008 for the exclusive benefit of Mahindra & Mahindra Ltd. and holds nearly 10.36 crore shares called the treasury stock—the outcome of various mergers and amalgamation.
  • Proceeds from the stake sale transferred to M&M to be used for operational requirements.

This is the first investment by CDPQ in the Mahindra Group.

7. SpiceJet Not In A Hurry To Sell Stake

SpiceJet Ltd. has received several proposals to buy into the company, but the Indian budget carrier is only willing to evaluate an offer if it’s strategic, its chairman and majority shareholder said.

  • “SpiceJet has enough cash,” Ajay Singh said in an interview, while attending an industry conference in Seoul.
  • “We have to see if this serves SpiceJet’s long-term interests, and when we come to that determination, we’ll do something,” Singh said.
These are typical in a situation when an airline is doing well and the market is as promising as India.
Ajay Singh, Chairman, SpiceJet

This year, SpiceJet is due to receive cash by selling planes to leasing companies.

Also read: Vistara To Launch International Flights In Second Half Of 2019

8. The GDP Fine Print And India’s Policy Options

T‬he study of the GDP data throws up the following insights:

  • Consumption has weakened but not as sharply as feared.
  • The strong run in investment has either seen a blip or a moderation, depending on how long it lasts.
  • Certain sectors like automobile continue to drag down manufacturing.
  • Weak agriculture growth remains an overhang on growth.

What do these insights say about the possible policy response? Read Ira Dugal’s analysis here.

Also read: In Charts: Who Is Hurting Most From India’s High Unemployment?

9. Trump’s India Trade Threat Demands Cool Heads

President Donald Trump just piled another problem on to the already-full slate of Indian Prime Minister Narendra Modi. By removing zero-duty access for $6.3 billion of Indian goods, the U.S. leader threatens growth at a time when India’s economy can least afford it, writes Andy Mukherjee.

  • Unemployment rate was at a 45-year high in the year to June 2018.
  • Economic growth in the March quarter of 2019 slowed to a five-year low.
  • Demand for Indian goods in the rest of the world needs to perk up to create space for GDP growth and job creation.

Trump’s trade action is, therefore, bad news.

10. Hindi In Schools: Not Compulsory

The draft national education policy committee doesn’t impose any language on any state, said chairman of the nine-member panel that framed the document after the government’s recommendation to teach Hindi in non-Hindi speaking states triggered a controversy.

  • “The question of dropping Hindi or bringing in Hindi or making it a national issue is not necessary at all,” K Kasturirangan told BloombergQuint in an interview.
  • “The choice will be with the state and the students’ parents. The system is completely flexible,” Kasturirangan said.
  • The Ministry of Human Resource Development had received backlash over the draft education policy which mandated teaching Hindi, along with English and regional languages, in non-Hindi speaking states.

Many political leaders, including DMK Chief MK Stalin protested the clause.