BQuick On March 3: Top 10 Stories In Under 10 Minutes
This is a roundup of the day’s top stories in brief.
1. Fed Cuts Rates Amid Coronavirus Threat; India Reports Sixth Case
The U.S. Federal Reserve delivered an emergency half-percentage point interest rate cut Tuesday in a bid to protect the longest-ever economic expansion from the spreading coronavirus.
- “The coronavirus poses evolving risks to economic activity,” the Fed said in a statement.
In light of these risks and in support of achieving its maximum employment and price stability goals, the Federal Open Market Committee decided today to lower the target range for the federal funds rate by 1/2 percentage point.Federal Reserve Statement
- Fed funds futures are pricing more than a percentage point of central bank rate reductions for 2020, including another quarter-point cut in the first half of the year.
- The central bank also said it is “closely monitoring developments and their implications for the economic outlook and will use its tools and act as appropriate to support the economy.”
In a press conference, Fed Chair Jerome Powell said the central bank acted in the face of new risks to the economy.
Earlier in the day, Group of Seven finance chiefs held a rare conference call and pledged to use all policy tools, including fiscal measures, to support the global economy as toll from the novel coronavirus continued to spike.
- More than 90,000 cases have now been detected across the globe.
- Death toll from infections has risen to 3,123.
- Iran, which has the second-highest number of fatalities from coronavirus, reported 835 new confirmed cases.
Follow all the developments around the coronavirus outbreak here.
India on Tuesday reported one new case of the novel coronavirus, taking the number of people who have tested positive for the illness to six.
- The patient, who is from Jaipur, is in isolation and is stable, according to a health ministry press release.
- Six other cases with high viral load have been detected during sample testing in Agra. These six came in contact with COVID-19 patient from Delhi, reported yesterday.
- The health ministry has advised Indian citizens to refrain from travel to any COVID-19 affected countries.
- It has also suspended visas granted to nationals of Italy, Iran, South Korea and Japan, along with China.
- India has also put under restricted category exports of certain active pharmaceutical ingredients and formulations, including Paracetamol, Vitamin B1 and B12.
Prime Minister Modi tweeted saying "there's no need to panic".
2. RBI Governor Sees Room For Rate Cut, Stays Vigilant Over Coronavirus Fears
Reserve Bank of India Governor Shaktikanta Das reiterated there’s room to cut interest rates amid new risks to economic growth from the spread of the coronavirus.
- Inflation, which had kept the central bank from cutting interest rates since December, is expected to moderate, Das said in an interview to Bloomberg News.
- A rate cut is one policy option, with the other being supporting the market through liquidity measures, he said.
The RBI would be able to quantify the hit to growth from the coronavirus at its next policy meeting in April, Das said.
India’s shadow banking sector has improved, with only about four financiers still being a “cause of concern,” central bank Governor Shaktikanta Das said.
- The Reserve Bank of India, which had been worried about 10 non-bank financiers is now closely monitoring just three to four of the 50 firms it has been assessing for signs of stress, Das said, reiterating that the central bank won’t allow any major bank or financier to collapse.
- These non-bank finance companies have less “interconnectivity with other entities” such as banks and mutual funds, Das, 63, said in an interview in his office in Mumbai on Tuesday.
Das said bank funding to NBFCs has shown a "very good improvement".
3. Rupee Slides To 16-Month Low, U.S. Stocks Drop
Indian equities halted their longest losing streak since May 13, 2019.
- The S&P BSE Sensex ended its seven-session losing streak and advanced 1.26 percent or 480 points to 38,623.70.
- The NSE Nifty 50 rallied 1.53 percent to close at 11,303.30.
- Both the indices registered their best one-day rally in a month.
- The broader markets represented by the NSE Nifty 500 Index advanced 1.59 percent.
- All the 11 sectoral gauges compiled by the NSE ended higher.
- India’s 10-year government bond fell to 6.34 percent from 6.38 percent.
Follow the day’s trading action here.
The Indian rupee fell sharply against the U.S. dollar as more cases of the coronavirus or the COVID-19 virus were reported in the country over the past fortnight.
- The rupee fell 0.8 percent to close at 73.30 against the U.S. dollar.
- The local unit has fallen 1.8 percent in the last five trading days.
- Should the currency continue to fall, it would come within striking distance of the all-time low of 74.45 against the dollar.
How far will the Indian rupee fall?
U.S. stocks dropped and Treasuries advanced after Group of Seven finance ministers pledged to combat the economic fallout from the spread of the coronavirus but stopped short of taking immediate action.
- The S&P 500 retreated as virus headlines told of fresh cases in New York state, rising death tolls and a spate of event cancellations.
- Futures had climbed overnight in anticipation of G-7 action before fading after officials reiterated their readiness to act without signaling any timing for taking measures.
- Oil continued its rebound, approaching $48 a barrel, while gold also rose.
- The yen was higher versus the dollar.
Get your daily fix of global markets here.
4. NBCC’s Bid For Jaypee Infratech Approved With Riders
The National Company Law Tribunal approved NBCC (India) Ltd.’s bid to acquire Jaypee Infratech Ltd., paving the way for completion of apartments for more than 22,000 homebuyers.
- The tribunal, however, modified the resolution plan, saying the Rs 750 crore deposited by Jaiprakash Associates Ltd.—parent of the debt-laden real estate developer—in the Supreme Court will be part of the plan, among others.
- The state-owned company’s resolution plan had initially proposed to complete the under-construction housing projects of Jaypee Infratech in three and a half years and repay institutional financial creditors in full.
- In January, NBCC had won 97.36 percent of the votes of the committee of creditors.
Jaypee had left homebuyers in the lurch as it struggled to complete houses.
5. Yes Bank’s Potential Investors Lay Down A Tough Condition
Yes Bank Ltd.’s potential investors have laid down a tough condition, which could make it challenging for the lender to strike a deal to raise capital.
- The Mumbai-based private lender received non-binding expressions of interest from JC Flowers & Co. LLC, Tilden Park Capital Management LLP, OHA (U.K.) LLP and Silver Point Capital, it disclosed to the stock exchanges on Feb. 12.
- According to two people with direct knowledge of the conditions laid down, the investors are seeking participation from “sovereign banks” in any fundraising by Yes Bank.
- This, the investors believe, will help reassure the bank’s depositors and safeguard any new investment into the lender.
Any such arrangement would need the approval of the government and RBI but could also stave off investor anxiety.
6. Coronavirus Impacts Demand For SBI Cards IPO
The response to India’s first billion-dollar initial public offering in more than two years has been hampered by the coronavirus outbreak.
- The IPO of SBI Cards and Payment Services Ltd. was subscribed 87 percent as of 5:00 p.m. on Tuesday, the second of the four-day share sale.
- The IPO was subscribed 39 percent on Monday.
- Against an issue size of 10.02 crore shares, the SBI Cards IPO has received bids for 8.75 crore shares.
- With the world reeling from one of the biggest risk selloffs since the global financial crisis, the coronavirus-fueled declines in India may impact the IPO’s over-subscription rate, which in turn may limit the premium on listing.
Find out which class of investors subscribed most to the IPO.
7. To Restructure Debt Or Not: Indian MSMEs’ Dilemma
India’s small businesses are facing fire from all sides. The economy is weak and so are sales. Large businesses are under pressure, leading to delayed payments for smaller units. The goods and services tax is adding to compliance costs.
- India’s small businesses are facing fire from all sides. The economy is weak and so are sales.
- Large businesses are under pressure, leading to delayed payments for smaller units. The goods and services tax is adding to compliance costs.
- However, this restructuring relief, intended to help MSMEs, is a double-edged sword.
- Companies who opt for it see their credit rating impacted, interest rates shoot up and ability to take larger loans curtailed.
The decision on whether to restructure debt is not an easy one for small businesses.
8. Kotak Finally Bets On A Stressed Asset In India
An asset manager backed by Asia’s richest banker has finally invested in a stressed Indian asset, in a positive sign for the broader push to clean up the nation’s massive pile of bad debt.
- Kotak Special Situations Fund invested Rs 500 crore ($69 million) in beleaguered Jindal Stainless Ltd., India’s largest stainless steel producer, according to a statement.
- The fund is backed by billionaire banker Uday Kotak.
- The investment by Kotak Special Situations Fund is in the form of debt and equity to help it out of debt restructuring, the fund said.
- It’s the first deal by the $1 billion fund launched last year.
The investment by Kotak’s fund will help Jindal Stainless repay its dues to banks.
9. Breaking Down SEBI’s Debenture Proposals
A set of proposals by the market regulator, intended to provide increased protection to debenture holders at times of default, may make the process of issuing such securities more complex.
- The Securities and Exchange Board of India, in a Feb. 25 discussion paper, suggested that the practice of non-bank lenders issuing debentures with a floating charge be replaced with a more tangible, identifiable fixed charge.
- It also suggested improved disclosures and a bigger role for debenture trustees.
- The discussion paper followed recent bond defaults by non-bank lenders like Dewan Housing Finance Corporation Ltd., which led to disputes regarding the rights of lenders, debt investors, and debenture trustees.
Read to find out what SEBI has proposed and why improved protection is coming with greater complexity.
10. Unilever Reaches Gender Balance Across Management Team
Unilever, the maker of Dove soap and Ben & Jerry’s ice cream, said it has reached gender balance across its global management ranks a year ahead of the company’s target.
- Half of the Anglo-Dutch company’s 14,000 managers are now female, the company said in a statement, up from 38 percent in 2010.
- That includes 50 percent of the finance department, an area where women have historically been underrepresented.
- About half of Unilever’s board is also female.
The company said that it owes a lot of its success to women.