BQuick On March 12: Top 10 Stories In Under 10 Minutes
This is a roundup of the day’s top stories in brief.
1. Coronavirus: Delhi, Haryana Declare Epidemic; ECB Boosts Asset Purchases
India’s health ministry today said there have been 74 coronavirus cases in the country. This includes 17 foreign nationals, it added. Of these, three have been cured. The latest case was found in Andhra Pradesh.
- Delhi and Haryana have declared coronavirus as an epidemic and shut all schools, colleges and cinema halls till March 31.
- Earlier in the day, India's health minister said that nearly 35,000 people are under surveillance and there is no need to panic.
- Prime Minister Narendra Modi urged people to stay away from public gatherings.
- Globally, the confirmed cases rose to 1.25 lakh with the death toll climbing to 4,625.
- A number of global sporting events, including the NBA, Formula 1, La Liga and Serie A have been either suspended or cancelled.
Follow developments around the novel coronavirus outbreak here.
Meanwhile, European Central Bank President Christine Lagarde unveiled a calibrated package of monetary policies aimed at “surgically” supporting key parts of the euro area economy hurt by the coronavirus outbreak.
- The Frenchwoman, warning of a “major shock” to global growth prospects, crafted what she described as a “comprehensive package” of measures intended to grease the wheels of the region’s economy before the disease causes it to seize up.
- Rejecting investor pressure to cut its deposit rate again, the ECB promised to buy more bonds and issue additional and cheaper loans to banks in a more nuanced programme than those of other central banks.
It has also allowed banks to run lower capital levels and keep credit flowing to deal with the virus impact.
3. Dow Drops Over 2,000 Points, Sensex Slumps Nearly 3,000
The rout in global stocks deepened as investors showed a lack of faith in the U.S. and European policy responses to the worsening spread of the coronavirus.
- The S&P 500 Index plunged as much 8.5 percent before paring the drop somewhat, with trading settling into a range after an initial bout of selling triggered a 15-minute NYSE-mandated halt.
- Trading will stop again if losses reach 13 percent any time before 3:25 p.m. in New York.
- European stocks tumbled 10 percent in the biggest intraday rout on record.
- The 10-year Treasury yield slid below 0.7 percent.
- Oil tumbled back toward $30 a barrel. Gold sank.
Get your daily fix of global markets here.
Indian markets saw a sharp correction in Thursday's trading session. Volatility also spiked on account of the weekly options expiry.
- The S&P BSE Sensex Index ended 8.18 percent lower at 32,778.
- This was its lowest closing level since March 23, 2018.
- Sixteen out of the 30 constituents of the index ended at a 52-week low.
- The NSE Nifty 50 index fell 8.3 percent to close at 9,590.
- These levels on a closing basis were last seen in June 30, 2017.
- All 50 constituents ended with cuts while 27 of them ended at a 52-week low.
- All sectoral indices at a 52-week low with the PSU Banking index being the top laggard, ending with cuts of over 12 percent and at an all-time low.
Follow the day’s trading action here.
The Indian rupee fell sharply against the U.S. dollar, closing near its lowest level on record as the global and local spread of the coronavirus continued to widen.
- On opening on Thursday, the rupee fell nearly 1 percent to 74.34 against the U.S. dollar.
- After that, it recovered slightly to close 0.78 percent lower at 74.22.
- The all-time low for the Indian currency is 74.48, which it hit on Oct. 11, 2018.
The selling has been led by outflows by foreign portfolio investors.
3. RBI Moves To Support Liquidity, Modi Mulls Spending Boost
The Reserve Bank of India will provide liquidity to the foreign exchange markets amid rising volatility and a surge in outflows from emerging markets, including India.
- The central bank will conduct U.S. dollar-rupee sell/buy swaps worth $2 billion on March 16, it said in a release on Thursday.
- This is being done after taking into account the increased demand for dollars due to outflows from the local equity and debt markets.
The swaps will be conducted through the auction route, the RBI said, suggesting that the $2-billion auction may be the first of more to come.
Prime Minister Narendra Modi’s government is mulling higher spending to shield an already-slowing economy from the coronavirus outbreak, people with knowledge of the matter told Bloomberg News.
- Authorities estimate the virus will shave off about 30 basis points from the growth target.
- Officials are also considering cutting retail pump prices of gasoline and diesel to match the fall in crude oil prices instead of raising duties to bolster revenues, they said.
The official has, however, ruled out a rate decision before the MPC’s next meeting.
4. There’s A Long Way Down To The Bottom: Shankar Sharma
India’s equity indices entered the bear territory amid concerns about the economic impact of the novel coronavirus outbreak. Yet, First Global’s Shankar Sharma said there was still a lot of space for the markets to fall.
- “The market saw back-to-back years of 30 percent gains in 2006 and 2007. We all know how 2008 ended,” he told BloombergQuint in an interview.
- This fall, too, began at a time markets were close to their highs, leaving a large room for a drop, he said.
- “I had said it at the start of the year, we’d be lucky if we end 2020 on a flat note,” he said.
Sharma said that expecting the markets to shrug off the Covid-19 outbreak would be foolhardy.
5. CPI Falls, IIP Picks Up
Retail inflation eased for the first time in seven months as prices of vegetables rose at a slower pace.
- The Consumer Price Index-based inflation stood at 6.58 percent in February compared with 7.59 percent in the preceding month.
- That was aided by a cooling off in inflation in food and beverages at 9.45 percent against 11.79 percent in January, led by a modest rise in prices of vegetables.
- Vegetable prices increased 31.61 percent compared with 50.19 percent in January.
CPI inflation is set to re-enter the RBI’s target band in March as lower energy prices, a pullback in demand and global headwinds mount.
India’s industrial production rebounded after a month of contraction even as the economy faces fresh headwinds from the coronavirus outbreak.
- The Index of Industrial Production rose 2 percent in January over a year earlier.
- Thirty-five economists polled by Bloomberg had forecast January IIP growth at 0.5 percent.
- Factory output growth for December was revised to 0.7 percent from a contraction of 0.3 percent earlier.
Fluctuations in industrial activity continue to throw up mixed signals of a fragile economic recovery.
6. SBI To Pump In More Than Expected In Yes Bank
The country’s largest lender State Bank of India has approved an investment of Rs 7,250 crore in private sector lender Yes Bank Ltd., it said in a notification to stock exchanges on Thursday.
- The executive committee of the central board has approved the purchase of 725 crore equity shares of Yes Bank at a price of Rs 10 per share, the lender informed exchanges.
- Its stake in Yes Bank will remain under 49 percent, SBI said.
- The investment commitment is higher than SBI’s original plan of putting in Rs 2,450 crore to buy 49 percent stake in the private bank.
- SBI’s total investment would not exceed Rs 10,000 crore, Chairman Rajnish Kumar had said last week.
After the investment, SBI will seek participation from other investors to bring necessary equity to recapitalise Yes Bank.
7. RBI Asks States To Avoid Withdrawing Funds From Private Banks
The Reserve Bank of India has advised state governments not to shift their deposits from private sector banks to public sector banks due to fears that private lenders are on a weak footing.
- It has come to the RBI’s notice that a few states plan to transfer funds parked in private banks to their state-run counterparts following advisories from state government agencies, RBI Deputy Governor NS Vishwanathan said in a letter to state government officials.
- Vishwanathan, in his letter, assured state governments that the RBI has adequate powers to regulate and supervise private lenders to ensure depositors’ money is safe.
The letter cautioned that if states transfer funds out of private banks it could have a wide impact on banking and financial stability.
8. India May Miss Revised Divestment Target
India is likely to miss its revised divestment target for the ongoing financial year amid a selloff in the equity market triggered by the novel coronavirus outbreak, according to a senior government official.
- The government won’t be able to move forward with its planned stake sales for now, the official told BloombergQuint on the condition of anonymity, adding they won’t help in garnering the divestment receipts as estimated at the time of making budget calculations.
- India revised its divestment target for 2019-20 to Rs 65,000 crore from Rs 1.05 lakh crore after it could not complete the ambitious privatisation of some state-run firms.
- It has so far garnered Rs 34,845 crore through stake sales, including the Rs 30,868-crore through further fund offers of exchange-traded funds, the government data showed.
But the current market conditions will make it difficult for the government to collect another Rs 30,000 crore before the financial year ends.
9. Lodha Skirts Default As Bonds Repaid
India’s top builder has met a keenly watched debt deadline, even as it grapples with a real estate downturn and more borrowings coming due this year.
- Lodha Developers International Ltd. said it has repaid $324 million of bonds maturing Friday.
- Scrutiny had piled onto the company in recent months after a rating downgrade deeper into junk territory.
- Any stumble could have led to one of India’s largest offshore bond defaults.
The company managed to sell a $200 million bond earlier this month, despite broader global credit market pain amid the coronavirus pandemic.
10. The Curious Case Of Cryptocurrencies
The concluding section of the Supreme Court’s decision leaves the door ajar for the RBI or the government to exercise the nuclear option and ban all cryptocurrency transactions, if they have the appetite to do so, writes Chintan Chandrachud.
- Proportionality review is meant to encourage an institutional interaction between the administration and the courts.
- The court’s call for empirical evidence achieves that objective – its invitation for a prohibition does not.
- That said, if this decision persuades the courts to equally apply evidence-based proportionality review in civil liberties cases going forward, that is a significant achievement in and of itself.