BQuick On June 4: Top 10 Stories In Under 10 Minutes
Here is a roundup of the day’s top stories in brief.
1. India Inc.’s Debt Spikes
The debt of Nifty 50 companies, barring financial services providers, jumped the most in five years in the fiscal ended March.
- There are 39 Nifty constituents, excluding banks and non-bank lenders. Of these, four are debt free.
- The total debt of the remaining 35 rose 13.4 percent year-on-year to Rs 16.3 lakh crore, according to Bloomberg data. That’s the highest jump since 2013-14.
Here’s a look at the Nifty companies that contributed most to overall debt.
2. DHFL's Second Sale Of Developer Loans
Non-banking financial company Dewan Housing Finance Corp. Ltd. is set to raise Rs 900 crore through a securitisation transaction of developer loans, according to a ratings note published by Brickwork Ratings Pvt. Ltd.
- This is the second developer loan sell-down by DHFL, which has been among the worst hit by the NBFC liquidity crunch after the collapse of Infrastructure Leasing and Financial Services group in September 2018.
- The latest transaction includes a loan pool of Rs 2,000 crore to Amaryllis Realtors LLP and Gulmarg Realtors LLP, according to the rating note.
- The loans were part of a tri-partite agreement with Oberoi Realty Ltd., which used the funds to develop a residential and commercial property in Worli, Mumbai, according to a person familiar with the matter, who spoke on condition of anonymity.
For the securitisation transaction, the loan is split into three tranches.
3. SFIO Recommends Action Against IL&FS Auditors
Having initiated a crackdown on a suspected group of fraudsters in the IL&FS case, the Serious Fraud Investigation Office has recommended necessary action against the guilty auditors and also a detailed internal investigation by the Reserve Bank of India to identify reasons for the delay in detecting the lapses.
- The SFIO has also recommended a necessary action as per the Companies Act, 2013, by the current management of IL&FS Financial Services, for recovery of the losses suffered by IL&FS due to the fraudulent conduct of the coterie, officials said.
- In its first chargesheet, SFIO identified a nine-member coterie behind the huge financial fraud at IFIN, which it alleged connived with the statutory auditors and some independent directors to defraud the company while running it as a personal fiefdom.
SFIO was also critical of the RBI in its report.
4. Contrarian Bet On Consumer Stocks
Flagging Indian sales of products like toothpaste and hair oil have been a drag on the share prices of the nation’s consumer goods makers, but each dip is a buying opportunity for a fund manager who sees the slowdown in demand as temporary.
- “The stocks offer stability and steady growth,” said Mahesh Patil, co-chief investment officer at Aditya Birla Sunlife Mutual Fund, which has about $13 billion in equities.
- “We don’t expect valuations to correct too much for consumer companies. They may consolidate a bit, but in a correction, we would look at them,” Patil said.
- Companies such as ITC Ltd., Hindustan Unilever Ltd. and Marico Ltd. have lost their shine on the stock market as a cash squeeze caused by the crisis in some finance firms hurt demand even for staples.
Patil said his bets are pinned on Modi-government’s plan to buoy farmers’ spending and giving annual household handouts.
5. Sensex Drops; Dow Rallies On Powell’s Signal
Indian equity benchmarks took a breather from a rally to record highs ahead of Reserve Bank of India’s policy decision on Thursday.
- The S&P BSE Sensex closed 184 points or 0.46 percent lower at 40,083.
- The NSE Nifty 50 ended at 12,021, down 0.55 percent.
- The broader market index represented by the NSE Nifty 500 Index closed 0.47 percent lower.
- The market breadth was tilted in favour of sellers.
- Nine out of 11 sectoral gauges compiled by NSE ended lower.
Follow the day’s trading action here.
U.S. stocks rose after Federal Reserve Chairman Jerome Powell signalled an openness to rate cuts and a Mexican official said he expects to avoid Trump administration tariffs.
- The S&P 500 climbed more than 1 percent, rebounding from a tech-led rout sparked by antitrust concerns.
- Carmakers and chip manufacturers led the advance after Mexico’s foreign minister said he sees 80 percent odds to negotiate a solution on levies.
- Powell’s comments added to speculation the central bank will cut rates later this year if trade tensions hamper growth.
- Rate-sensitive utility and real-estate shares were the only two of 11 S&P 500 groups to retreat.
- The 10-year Treasury yield rose for the first time in a week and the dollar drifted
- West Texas Intermediate crude dipped 0.2 percent to $53.16 a barrel.
Get your daily fix of global markets here.
6. Message From Money Markets To The RBI
India’s monetary policy committee is widely expected to pare its benchmark repo rate by another 25 basis point this week, which would make this the third rate cut in 2019. The first two rate cuts, however, have been only partially transmitted to the broader economy. Bond yield remained stubbornly high although they have now eased. Bank lending rates, too, haven't fallen much.
- It’s against this backdrop that money market veterans are calling for a review of the RBI’s liquidity policy, along with any further interest rate cuts.
- “Of course we need lower rates. But what we need to see first is the market rates come down. We need to see bank deposit rates, lending rates and bond yields drop,” said R Sivakumar, head of fixed income at Axis Mutual Fund.
- “If you have a sustained liquidity surplus, it does help transmit lower rates much quicker into the ecosystem,” said Ananth Narayan, associate professor of finance at the SP Jain Institute of Management and Research.
The liquidity framework has to be an adjunct to the monetary policy framework, added Narayan.
Also read: How To Run A Growth Marathon
7. Why The U.S. Should Not Go To War With Iran, Yet
The first foreign policy crisis of Narendra Modi’s second term as prime minister may be a war between two of India’s friends, writes Raj Bhala.
- As Indians cast and counted their ballots, American and Iranian leaders beat their drums.
- Prime Minister Modi is in the rare position of holding the trust of America as well as Iran.
- Appreciating the illegality and immorality of conflict, his choice is to offer his good offices for India’s two friends to re-engage with one another.
Here’s why such a war would be illegal and immoral.
8. Hurdles To Modi’s Renewable Ambitions
India is looking to resolve operational issues to meet its ambitious renewable energy capacity target of 175 gigawatt by 2022 as Asia’s third-largest economy shifts from coal-fired energy.
- “That will be the agenda for the next government,” Anand Kumar, secretary of Ministry of New and Renewable Energy, told BloombergQuint, referring to the newly-sworn in cabinet of the Bharatiya Janata Party-led National Democratic Alliance.
- The target includes 100 GW from solar, 60 GW from wind, 10 GW from bio-power and 5 GW from small hydel power.
- Nearly 8.53 GW of renewable energy capacity was added during FY19, according to data on Ministry of New and Renewable Energy’s website.
Yet, the sector is beset by problems. Here’s a look at the hurdles to the government’s target.
9. Nilekani’s Digital Payment Hopes
India’s digital payments could grow tenfold within the next three years if the Reserve Bank of India-appointed committee’s recommendations are implemented, according to Nandan Nilekani.
- “Today it’s about 22 transactions per capita. It can go to 220,” Nilekani, who heads the RBI-appointed committee on digital payments, said during an interview with Bloomberg.
- “We identified number of things on how to make acceptance network more ubiquitous, how to make dispute evolution more online. We have come with lot of recommendation and if we put all these together, we can make a big difference," he said.
Read the full transcript of the interview here.
10. Biggest Democracy, Costliest Elections
India’s just-concluded 2019 Lok Sabha elections that saw Prime Minister Narendra Modi return to power with a bigger majority is the world’s costliest.
- Around Rs 55,000 crore, or $8 billion, was spend during Lok Sabha elections, according to a report by the Centre for Media Studies.
- And Modi’s Bharatiya Janata Party and allies spent roughly half of that.
- The spending binge meant that it beat all records. It’s more than the U.S. presidential election of 2016 that saw $6.5 billion spending.