BQuick On June 7: Top 10 Stories In Under 10 Minutes
Here is a roundup of the day’s top stories in brief.
1. Stressed Loans Relief For Banks
The Reserve Bank of India released a revised circular on restructuring of stressed accounts, after the last such circular was struck down by the Supreme Court.
- The new rules ease significant provisions related to the timeline that needs to be followed for resolution of stressed assets.
- It also replaces the diktat to refer large stressed accounts for insolvency after 180 days — something that the Supreme Court had objected to — with increased provisions against accounts that are not resolved within a stipulated time period.
- Instead, it offers an incentive to banks to take the route of the Insolvency and Bankruptcy Code by allowing for lower provisions against accounts referred for insolvency.
- The revised rules are applicable to scheduled commercial banks, systemically important non-deposit taking non bank financial services companies and deposit-taking NBFCs, small finance banks and all-India financial institutions. The earlier set of rules applied only to banks and all-India financial institutions.
Banks will have a 30-day “review period” from the date of default of a corporate account with outstanding dues of over Rs 2,000 crore.
2. India Proposes 10-Year Jail For Cryptocurrency Use
India has proposed a jail term of one to 10 years for those who mine, hold or sell cryptocurrencies.
- The move will double down on restrictions already placed by the Reserve Bank of India on digital tokens like bitcoin.
- The government will also propose the introduction of an official ‘Digital Rupee’ in consultation with the central board of the Reserve Bank of India, according to the draft Banning of Cryptocurrency and Regulation of Official Digital Currency Bill, 2019, which was accessed by BloombergQuint.
Here’s how the transition period will work.
3. Nifty Dips; U.S. Stocks Jump
Indian equity benchmarks halted a three-week gaining streak, their longest since the first week of April.
- S&P BSE Sensex ended 0.25 percent lower this week to close at 39,615.
- NSE Nifty 50 ended at 11,870 after declining 0.44 percent during the period.
- The broader market index represented by the NSE Nifty 500 Index closed 0.71 percent lower this week.
- Today, the Sensex closed 86 points or 0.22 percent higher and the Nifty ended 0.23 percent higher.
- The market breadth, however, was tilted in favour of sellers. About 1,057 stocks declined and 705 shares advanced on National Stock Exchange.
- Seven out of 11 sectoral gauges compiled by NSE ended lower, led by the NSE Nifty Pharma Index’s 1.2 percent fall.
- On the flipside, the NSE Nifty Financial Service Index was the top sectoral gainer, up 0.91 percent.
Follow the day’s trading action here.
Treasuries and U.S. stocks rallied after weak jobs data added to speculation the Federal Reserve will cut rates.
- Two-year bond yields were set for their longest weekly slump since 2016 as the report showed U.S. employers added the fewest workers in three months and wage gains cooled.
- Technology and consumer shares led the S&P 500 Index toward its best week since November, with the gauge also climbing on optimism trade tension will ease.
- Traders have aggressively increased bets the Fed will cut rates after a string of weak reports indicated the world’s largest economy is slowing.
- West Texas Intermediate crude rose 1.6 percent to $53.45 a barrel.
Get your daily fix of global markets here.
4. Top Portfolio Managers Ride Modi Wave
India’s top portfolio managers returned gains in May despite increased volatility stemming from elections.
- The 50 largest portfolio management firms—that manage Rs 1.17 lakh crore worth of investor money—returned an average gain of 2.3 percent last month, according to data compiled by BloombergQuint from disclosures made to the market regulator.
- That compares with a 1.75 percent and 1.5 percent rise in the Sensex and Nifty 50 Index, respectively.
Here are the outperformers and the underperformers.
5. Sumeet Nagar Suggests Baseball, Not Cricket, To Investors In India
When picking stocks in India, think baseball, not cricket.
- That’s the advice from Sumeet Nagar of Malabar Investments. What he means is investors should not be afraid of buying when an opportunity is in their zone even if the market conditions are not conducive.
- “In baseball, if something is out of your zone, you leave it. Unlike cricket, you don’t get penalised for it,” Nagar said on BloombergQuint’s special series Alpha Moguls.
- Nagar was sanguine about the prospects of the domestic market.
Watch the full interview here.
6. Indiabulls Real Estate’s Promoters Sell 12.8% Stake
Indiabulls Real Estate Ltd. has sold a portion of its promoter stake to Embassy Group Ltd., the company’s Executive Director Ajit Mittal told BloombergQuint.
- The company sold 12.8 percent of its promoter stake—or 5.8 crore shares—at Rs 139.25-145 apiece through multiple block deals, fetching between Rs 807-840 crore, according to Bloomberg data.
- The deal is at a premium of nearly 6-10 percent compared with the stock’s closing price of Rs 131.40 on Thursday.
- The company had informed the exchanges yesterday that its promoters intended to transfer up to 14 percent out of the 38.72 percent fully paid-up share capital owned by them to third-party investors as part of their strategy to focus on the financial services business in the long run.
Watch the full interview with Executive Director Ajit Mittal here.
7. Two Open Offers
Larsen and Toubro Ltd. on Friday announced an open offer for 5.13 crore shares or 31 percent stake of mid-tier information technology company Mindtree Ltd. at Rs 980 per share, according to a regulatory filing.
- The infrastructure major will have to shell out Rs 5,029.8 crore for the planned open offer for the Bengaluru-based company.
- The open offer price is higher than Mindtree's closing price of Rs 970.45 at BSE on Friday.
The tendering for open offer will commence on June 17 and close on June 28.
Nippon Life Insurance Co. announced an open offer to acquire nearly 22.49 percent stake in Reliance Nippon Life Asset Management Ltd. for Rs 3,179 crore under a deal with Anil Ambani’s Reliance Capital Ltd., which is exiting the mutual fund business.
- Nippon Life would acquire up to 13.82 crore equity shares, or about 22.49 percent, of RNAM at Rs 230 apiece, according to the RNAM's draft filed with the Securities and Exchange Board of India on Friday.
- The transaction is to be payable in cash for a total consideration of Rs 3,179.41 crore.
Reliance Capital and Nippon Life had 42.88 percent stake each in the company.
8. Early Success Prompts RBI To Put Small Finance Bank Licences On-Tap
Less than three-years after the Reserve Bank of India first approved the launch of 10 small finance banks, the regulator has decided to put such licences on-tap.
- These lenders, intended to further financial inclusion, have met their objective and there is a case for more players to be allowed in the sector, the RBI said on Thursday.
- SFBs are part of an experiment with differentiated bank licences. Back in 2014, the RBI had decided to give out licences to two sets of entities — financial inclusion focused SFBs and remittances-focused payments banks.
- While the business model of the latter is yet to stabilise, SFBs have seen steady growth since they were licensed.
Here’s what the RBI’s statement said.
9. Indians Turn Pessimistic
Consumer confidence in India dropped in May, as people fretted about jobs and slowing growth in Asia’s third-largest economy.
- The current situation index fell to 97.3 from 104.6 in March, according to the Reserve Bank of India’s consumer confidence survey, where 100 is the dividing line between pessimism and optimism.
- The future expectations gauge fell to 128.4 in May from a record 133.4, suggesting waning optimism.
- “Weakening confidence is primarily attributable to the deterioration in sentiments on the economic situation and employment,” the central bank said.
Sentiment returning to pessimistic territory adds to the challenge of policy makers.
10. India Needs A Mega-Bailout
Another shadow bank in India has missed a bond payment. That's a reminder to the new government that a mega-bailout of the country's distressed financial industry is now unavoidable, writes Andy Mukherjee.
- Ever since the collapse of infrastructure financier-operator IL&FS Group in September, an event I termed India’s mini-Lehman moment, the funding woes of the country’s nonbank lenders – those that operate without state-guaranteed deposits or access to central-bank liquidity – have kept worsening.
- The latest casualty is Dewan Housing Finance Corp., which missed payments due June 4 and had its short-term credit rating cut to default at the local affiliate of S&P Global Ratings.
- Mutual funds, which have vigorously lent surplus household and corporate cash to Dewan and many such financiers, are trapped. Their search for yield has gone wrong.
- This crisis has “systemic” written all over it because the market can no longer distinguish financiers that are illiquid from those that are insolvent. Nothing short of a Troubled Asset Relief Program, of the kind enacted by the U.S. during the 2008 credit crisis, will restore confidence.
Here’s one possible blueprint.