BQuick On March 14: Top 10 Stories In Under 10 Minutes
This is a roundup of the day’s top stories in brief.
1. Presenting A Loan Labyrinth, Courtesy DHFL
In financial year 2016-17, non-banking finance company Dewan Housing Finance Corporation Ltd. sanctioned loans worth Rs 2,000 crore to four private entities for slum rehabilitation projects in Vile Parle area of Mumbai.
- Curiously, that same year, all four companies decided to invest in the equity of another developer - Darshan Developers Pvt. Ltd.
- They paid Rs 1,424 crore to purchase a total 50 percent stake in Darshan.
- So far, except for the coincidence that all four companies decided to invest in the same developer, the transactions may seem to be in the ordinary course of business.
- But they aren’t.
BloombergQuint dug into the financials of the four developers and Darshan’s shareholders. Here’s what we found.
2. Boeing 737 Max Ban Is A Boon For IndiGo
India’s move to ground Boeing 737 Max 8 aircraft will drive up ticket prices and is expected to benefit IndiGo the most as the low-cost carrier has no Boeing aircraft in its fleet.
- The reduction in seat capacity is expected to push ticket prices up by 20 percent, Sharat Dhall, chief operating officer of the business-to-consumer segment at Yatra Online Pvt Ltd. told Bloomberg.
- That, JPMorgan said in a note, will be favourable for industry yields, including for IndiGo, in the March-June period.
- The grounding of aircraft will only further lower capacity as two large airlines have cut daily flights.
- InterGlobe Aviation Ltd., which runs IndiGo, has been cancelling 30 flights a day because of pilot shortage, while Jet Airways (India) Ltd. has been forced to cut flights as lessors have so far grounded its 37 aircraft for non-payment of dues.
This Indian airline could take the biggest potential hit from the ban.
3. Low Inflation? Not Everywhere
Retail inflation in India has fallen sharply over the past five years. From a period of double digit inflation, India has seen annual price increases moderate to a pace below 4 percent at present. Relatively low oil prices, a sharp fall in food costs and periods of weak demand have kept inflation in check.
- But the low inflation has not benefited all parts of the country equally.
- In fact, the divergence of inflation across states has actually risen even as the headline national-level inflation has fallen, shows a BloombergQuint analysis.
- While all-India CPI inflation was at 2.57 percent in February, inflation across states ranged from -2 percent in Himachal Pradesh to over 6 percent in Nagaland and 7 percent in Andamans.
- As noted in a recent RBI paper, while average inflation has come down across all states, volatility in inflation has risen.
Read more to find out why the inflation divergence matters.
4. Beware Of ‘Value Traps’
When equity valuations are relatively low, investors tend to get allured by “value traps”—stocks that look cheap but never rebound.
- For market veteran Basant Maheshwari, only one thing differentiates value from value traps: return on equity.
- “If a company has got a low return on equity, like 13-15 percent, there has to be a problem somewhere,” Maheshwari, co-founder of Basant Maheshwari Wealth Advisers LLP, said on the sidelines of the BQEdge event in Kolkata.
Value trap is a stock which cannot deliver a return of equity of more than 15-16 percent.Basant Maheshwari, Co-Founder, Basant Maheshwari Wealth Advisers LLP
Watch the full interview with Maheshwari where he likens investing to batting like Chris Gayle.
5. Sensex Flat, U.S. Rally Fades
Indian equity benchmarks ended little changed on a volatile day, after rallying for three consecutive trading sessions.
- The S&P BSE Sensex ended 3 points higher at 37,754.
- The NSE Nifty 50 ended flat at 11,343.
- The market breadth was tilted in favour of sellers.
- Seven out of 11 sectoral gauges compiled by NSE ended higher, led by the NSE Nifty Realty Index’s 2.2 percent rally.
Follow the day’s trading action here.
U.S. stocks edged lower after a three-day rally, while the dollar surged amid concern a trade deal with China remains elusive.
- The S&P 500 fell amid news a meeting between President Donald Trump and President Xi Jinping to sign an agreement ending the trade war is now likely to happen in April at the earliest.
- The index had jumped 2.5 percent in the prior three days, pushing past the 2,800 level that had capped prior advances.
- Treasuries erased a drop and the dollar gained, holding those moves as data showed U.S. unemployment rose to a four-week high.
- West Texas Intermediate crude gained 0.6 percent to $58.60 a barrel.
Get your daily global markets fix here.
6. IDBI Bank’s Private Avatar
The Reserve Bank of India has categorised IDBI Bank Ltd. as a private sector lender following acquisition of a majority stake by Life Insurance Corporation of India.
- IDBI has been categorised as a 'private sector bank' for regulatory purposes with effect from Jan. 21, RBI said.
- In January, LIC completed the process of picking up a controlling 51 percent stake in the nearly crippled lender.
- IDBI Bank has been under the prompt corrective action framework of the RBI that bans it from corporate lending and branch expansions, salary hikes and other regular activities.
IDBI Bank has charted out a revival strategy.
7. Rafale Leaked Papers Case Verdict Reserved
The Supreme Court today reserved its order on the government's objection to allowing the use of new documents released as parts of media reports during the hearing of the review petitions in the Rafale case.
- Attorney General KK Venugopal told the top court that the petitioners weren't authorised to access these documents and the defence of freedom of speech and expression doesn't apply in such situations.
- The attorney general cited Section 123 of the Evidence Act to support his arguments.
- Even the Right to Information Act does not provide protection in such situations, the attorney general said.
Here’s how Prashant Bhushan countered the attorney general.
8. Mumbai’s Redevelopment Plan May Not Take Off
Siddharth Pardhe’s 53-year-old apartment block in Mumbai needs to be rebuilt. The Marathi writer and his neighbours couldn’t go ahead as they didn’t own the land—it was given by the government. New rules allow them to pay a fee and take ownership, something they have been seeking for years.
- The government linked the conversion fee to the minimum market rates decided by the civic authority.
- The Sahitya Sahawas Co-Operative Housing Society, spread over 10,000 square meters with 84 apartments, is located near Kalanagar, Bandra-East.
- The so-called ready-reckoner rate for the area is Rs 1.69 lakh per square metre.
- The society will have to pay Rs 16 crore—or about Rs 20 lakh by every owner.
Follow the story so far and find out why redevelopment projects aren’t catching up.
9. A Manifesto For Political Manifestos
The central theme of progressive governance should be to liberate the citizen from the ghetto of corruption and inefficiency, writes Shankkar Aiyar.
- Essentially everything the parties promise must be paid by higher taxes or borrowings.
- The price of political rent is borne by those wooed for votes.
- Truly competitive politics needs to be about compelling questions and competing answers.
Here are 10 ideas to enable citizen-centric policies
10. Millionaires In The U.S. > Sweden’s Population!
The number of wealthy households in the U.S. reached a new high last year, roughly equivalent to the entire population of Sweden or Portugal.
- More than 10.2 million households had a net worth of $1 million to $5 million, not including the value of their primary residence, according to a survey by the Spectrem Group.
- That’s up 2.5 percent from 2017.
- Even as the ranks of the mass affluent grew, the pace slowed because of “weakening global economic growth and a contentious U.S. political environment,” said Spectrem Group President George Walper.
The number of Americans in the wealthiest category has more than doubled since the Great Recession.