BQuick On March 11: Top 10 Stories In Under 10 Minutes
This is a roundup of the day’s top stories in brief.
1. How Some Traders ‘Manage’ Nifty Bank
A lopsided banking index makes it possible for some investors to manage the weekly Nifty Bank options for quick returns on the day of expiry. All in the final 90 minutes of trade.
- At the core of this strategy is HDFC Bank Ltd., which has a weight of more than a third on the Nifty Bank Index.
- A 1 percent (about Rs 20) move in the stock changes the banking gauge by 0.35 percent (nearly 100 points).
- There are some sections of the market that indulge in this practice to make quick returns, Jitendra Panda, managing director and chief executive officer at Peerless Securities, told BloombergQuint.
Here’s how the strategy works.
2. IndiGo’s Plan To Spread Its Wings
InterGlobe Aviation Ltd., the operator of IndiGo, is eyeing a larger share of international air routes with huge cash reserves and a large aircraft order book as one of the world’s fastest-growing aviation markets shows signs of saturation.
- Foreign carriers handle nearly 61 percent of the air traffic flying from and to India, while the rest is controlled by Indian operators.
- IndiGo, the country’s largest carrier with a 42 percent market share on domestic routes, accounts for only 6 percent market share in the international segment.
- Santosh Hiredesai, an aviation analyst with SBICAP Securities, said, “Unlike other Indian airlines, IndiGo is planning to expand into South East Asian nations and Turkey which are still not explored by Indian airlines.”
Here’s how IndiGo plans to keep a low-cost structure for its international flights.
3. Goyal's Rs 750-Crore SOS
Jet Airways (India) Ltd. Chairman Naresh Goyal has sought an urgent funding of Rs 750 crore from its equity partner Etihad Airways PJSC, citing “very precarious” position of the airline following the lingering cash flow issues which got amplified after the forced grounding of over 50 of its planes.
- In a letter to the Gulf-based carrier’s group chief executive Tony Douglas, Goyal also said the airline had secured the go-ahead from the aviation ministry to pledge its shares in JetPrivilege for securing the interim funding.
- The airline holds 49.9 percent stake in the loyalty programme, while the majority is with Etihad.
- It can be noted that Etihad board is meeting in Abu Dhabi on Monday to discuss the resolution plan for Jet in which it owns 24 percent stake since April 2014.
Goyal warned that without interim funding the airline could be grounded.
4. Nifty Rallies, Dow Bounces Back
Indian equity benchmarks resumed their rally after a one-day blip, to end near a six-month high.
- The S&P BSE Sensex ended 1.04 percent or 382 points higher at 37,054.
- The NSE Nifty 50 ended at 11,168, up 1.2 percent.
- Both the indices closed at their highest levels since Sept. 19.
- Ten out of 11 sectoral gauges compiled by NSE ended higher.
Follow the day’s trading action here.
U.S. stocks bounced back from the worst week of the year, as the latest retail-sales data boosted confidence that the economy isn’t headed for a downturn.
- The S&P 500 rose for the first time in six days, while the Nasdaq 100 jumped after Nvidia agreed to a deal and Apple was upgraded.
- Boeing tumbled after China grounded 737 Max flights following a crash in Ethiopia on Sunday.
- Treasuries slipped and the dollar held steady.
- Brent crude rose 0.7 percent to $66.22 a barrel, the largest advance in a week.
Get your daily fix of global markets here.
5. Standard Life To Sell HDFC Life Stake
Standard Life Aberdeen Plc’s Mauritius arm plans to sell a 3.47 percent stake in HDFC Life Insurance Company Ltd.
- The Scotland-based investment firm will sell 7 crore shares at Rs 357.50 apiece—a discount of 8.3 percent compared with the current market price—through an offer for sale from March 12-13.
- The move will bring down Standard Life’s stake in the life insurer to 24.3 percent from 29.93 percent, according to the company’s shareholding pattern filed with stock exchanges as of December.
- The public shareholding in the company will jump to 24.19 percent after the stake sale.
The move is to meet SEBI’s public shareholding norms.
6. The Market Is Not Different, Are You?
February net inflows into equity schemes (Equity+ELSS) are the lowest since July 2016. But more stark is the pace at which the fall in net inflows has happened, writes Niraj Shah.
- Total equity flows have dropped by more than half in just one quarter – from over Rs 12,000 crore in October 2018 to Rs 5,122 crore in February. This fall is despite an average monthly collection of Rs 7,000-8,000 crore via SIPs in the last 11 months.
- Maybe outflows from balanced funds are to blame. But there’s no denying the message in the net numbers – that this time is not different, and investors are starting to get disenchanted.
- AMFI data suggests the number of new SIPs registered have been waning.
- If SIP flows continue to decline, is that a sign of temporary market-led nervousness or a deeper disappointment that’s prompting investors to turn away from mutual fund investments?
7. Note Ban: What The RBI Board Was Told
The board of the Reserve Bank of India was assured of adequate preparedness before it signed off on the government’s demonetisation decision, show minutes of a RBI board meet held on Nov. 8, 2016, just before Prime Minister Narendra Modi announced the withdrawal of Rs 500 and Rs 1,000 notes.
- The minutes were released following a series of appeals by Right To Information activist Venkatesh Nayak, after the central bank first denied information under the RTI Act.
- The suggestion to demonetise, which would have led to the withdrawal of 86 percent of the country’s currency in circulation, prompted some directors on the RBI board to raise concerns about the impact on the economy and on certain specific segments, the minutes showed.
Here are some of the issues raised by directors on the RBI board.
8. Banks That Are No More
As Vijaya Bank and Dena Bank merge into Bank of Baroda, they join a long list of banks in India which either became moribund or were declared so, writes Amol Agrawal.
- The first prominent bank to close in India had been founded by Rabindranath Tagore’s grandfather.
- Did you know that the end of the American Civil War led to a series of bank failures in Bombay?
- Banking regulation in India changed because of two bank failures in the mid-20th century.
- On the eve of bank nationalisation in 1969, India had 72 banks. Unfortunately, most of them have also vanished.
India's banking history is full of big names with big promoters starting banks amidst euphoria only to decline very quickly thereafter, Agrawal writes.
9. White-Label ATM Operators’ Biggest Problem
Operators of white-label ATMs expect new rules allowing them to source cash from the Reserve Bank of India and banks other than their partners to aid expansion of network. But their biggest concern remains unresolved.
- “These [new norms] are peripheral changes and we may get some additional revenues,” KR Bijimon, chief general manager at Muthoot Finance Ltd., said.
- “But we were all expecting an increase in the interchange rate so that white-label operations can become more viable.”
- White-label ATMs are set up by third parties and are not sponsored by a bank.
- The operators rely on the fee charged from banks for every transaction for their earnings.
- But high transaction and operational costs hurt their revenue.
- The operators have been seeking an increase in the fee for some time and the new rules don’t address that issue.
Here’s what makes their operating model unviable.
10. Global Economy At Its Weakest Since Financial Crisis
The global economy’s sharp loss of speed through 2018 has left the pace of expansion the weakest since the global financial crisis a decade ago, according to Bloomberg Economics.
- A new GDP tracker puts world growth at 2.1 percent on a quarter-on-quarter annualized basis, down from about 4 percent in the middle of last year.
- While there’s a chance that the economy may find a foothold and arrest the slowdown, “the risk is that downward momentum will be self-sustaining,” say economists Dan Hanson and Tom Orlik.
- The reasons for hope? The Federal Reserve’s decision to pause its interest-rate hikes, a U.S.-China trade truce and the fading of the shocks that battered Europe in 2018 could mean stabilization is around the corner.
But the global economy is not out of the woods.