BQuick On May 13: Top 10 Stories In Under 10 Minutes
This is a roundup of the day’s top stories in brief.
1. Earnings: ITC, HDFC, Vodafone Idea
ITC Ltd.’s profit for the three months ended March surpassed estimates even as margin slipped.
- Net profit rose 19 percent year-on-year to Rs 3,481 crore.
- Revenue rose 13 percent to Rs 11,992 crore.
- Operating margin contracted 100 basis points to 38.1 percent
Price hikes helped the ITC’s cigarette business.
Housing Development Finance Corporation Ltd.’s profit for the March quarter beat estimates, buoyed by strong loan growth.
- Net profit rose 27 percent year-on-year to Rs 2,862 crore.
- Net interest income jumped 19 percent to Rs 3,161 crore.
- Loan book improved by 15 percent in FY19 over the previous fiscal.
HDFC was focused on selling individual loans this financial year.
Vodafone Idea Ltd.’s loss narrowed in the quarter ended March as the benefits of merger with Idea Cellular Ltd. started to take effect.
- Net loss stood at Rs 4,882 crore in the January-March period compared with Rs 5,005 crore in the previous quarter, India’s largest telecom operator said in an exchange filing.
- That compares with Rs 4,806 crore analyst estimates compiled by BloombergQuint.
- The company achieved 60 percent of its synergy target so far, it said in the filing.
- Its operating expenses fell owing to realisation of merger synergies.
Its average revenue per user rose 17 percent over the previous quarter to Rs 104.
2. CPI Inflation At Six-Month High
Retail inflation accelerated to a six-month high as food prices rose from unusually low levels. However, key components of core inflation showed an easing of price pressures reflecting subdued demand conditions in the economy.
- Consumer Price Index inflation stood at 2.92 percent in April compared to 2.86 percent in March.
- A Bloomberg poll of 39 economists had estimated inflation at 2.99 percent for April.
- Despite the pick-up, inflation remains below India’s inflation target of 4 (+/-2) percent, leaving room for the Monetary Policy Committee to cut rates further.
Here are the inflation internals.
3. China's Tariff Retaliation From June 1
China announced plans to raise duties on some American imports starting June 1, defying a call from President Donald Trump to resist escalating a trade war that is sending stocks tumbling and clouding the outlook for the global economy.
- Less than two hours after Trump tweeted a warning that “China should not retaliate -- will only get worse!” the Ministry of Finance in Beijing announced the measures on its website.
- The new rate of 25 percent will apply to 2,493 U.S. products, with other goods subject to duties ranging from 5 percent to 20 percent, it said.
- The salvo came in response to the U.S.’ decision last week to increase tariffs on $200 billion in Chinese imports to 25 percent from 10 percent.
Trump on Monday accused China of backing out of a deal that was taking shape.
U.S. Markets Selloff
U.S. stocks sank after China retaliated with higher tariffs on a range of American goods.
- The S&P 500 headed for the biggest decline since Jan. 3 and and the Dow Jones Industrial Average slumped more than 500 points.
- Caterpillar Inc. fell over 4 percent and Apple Inc. lost 5 percent.
- Soybeans plunged 2 percent and cotton prices sank 4 percent.
- The dollar erased gains and 10-year Treasury yields fell to the lowest level since late March. The yen also rose.
- Oil climbed as Saudi Arabia said two of its tankers were “sabotaged.”
Get your daily fix of global markets here.
4. Nifty’s Longest Fall In Eight Years
Indian equity benchmarks ended lower for the ninth consecutive trading session.
- The S&P BSE Sensex closed 372 points or 0.99 percent lower at 37,091, the lowest in over two months.
- The NSE Nifty 50 registered its longest losing streak in over eight years and ended below 11,150 after falling 1.16 percent.
- The broader market index represented by the NSE Nifty 500 Index closed 1.4 percent lower.
- Ten out of 11 sectoral gauges compiled by NSE ended lower.
- Shares of Sun Pharmaceutical Industries Ltd. tumbled as much as 21.3 percent on Monday, its biggest drop since July 1997, before closing around 9.06 percent lower at Rs 398 on the BSE. On the National Stock Exchange of India Ltd., the stock closed 5.4 percent lower at Rs 414 apiece.
- That’s also the biggest single-day decline on a closing basis in nearly two years.
- However, what led to the plunge isn’t known yet.
Follow the day’s trading action here.
Rupee Slides To 2.5-Month Low
The rupee fell 61 paise to close at nearly a two-and-a-half-month low of 70.52 against the U.S. currency due to persistent foreign fund outflows and renewed worries over rising crude oil prices.
- An unabated selloff in domestic equity markets also weighed on the domestic currency, forex dealers told PTI.
- The rupee opened lower at 70.12 and fell further to touch over two-month low of 70.52 at the inter-bank foreign exchange market as oil prices rose over 1 percent in global markets.
The local unit finally settled at 70.52, down by 61 paise over its previous close.
5. Passenger Vehicle Sales Slump
Car and utility vehicle sales fell the most in nearly eight years as tepid sentiment continued to weigh on the auto sector.
- The domestic passenger vehicle sales declined 17.07 percent to 2,47,541 units in April, according to data released by the Society of Indian Automobile Manufacturers.
- A steeper decline was last seen in October 2011, when the passenger vehicle sales were down by 19.87 percent, it said.
- “There has been a gradual decline in sales since the last six months that started with Kerala floods, followed by insurance costs going up, petrol prices, registration issues for taxis, elections and others and all of that has weakened consumer sentiment,” Vishnu Mathur, director general of SIAM, told BloombergQuint in an interview.
- Domestic car sales in April declined by 19.93 percent to 1,60,279 units. Besides, all segments skid to negative for the month of April.
Mathur, however, is optimistic that the demand will pick up.
6. SEBI Issues Show Cause Notices To HDFC AMC
HDFC Asset Management Company Ltd. has received two show cause notices from the Securities Exchange Board of India for delaying repayment to fixed maturity plan investors.
- The notices have been issued in relation to investments of fixed maturity plans of HDFC Mutual Fund in debt instruments of the Essel Group, the company said in a stock exchange filing.
- “We are working with our legal advisors and are in the process of responding to the show cause notices.”
- Last month, HDFC Mutual Fund decided to roll over their fixed maturity plans for one more year, a decision taken after a meeting with Zee Entertainment Enterprises Ltd.’s promoters and a group of lenders.
The asset manager, however, hasn’t specified the contents of the notices.
7. What Mutual Funds’ Exposure To Real Estate Debt Reveals
Even as mutual funds’ lending against shares to promoters has triggered concerns, they are far better placed on exposure to a stressed sector: real estate.
- Mutual funds’ investment in real estate debt accounts for 2 percent of the industry’s exposure to longer-dated paper.
- Total assets of income and liquid schemes, which invest in long-term debt, stood at Rs 10.9 lakh crore as of March, according to data released by the Association of Mutual Funds in India.
- Of this, data by Morningstar show, the market value of investments in real estate non-convertible debentures is Rs 21,462.8 crore.
Here’s what mutual fund exposure to real estate debt looks like.
8. UPI For IPOs?
Come July, any retail investor looking to subscribe to an initial public offering will have to whip out his or her phone and apply using the Unified Payment Interface or UPI platform.
- The rules, being implemented in phases, will lead to quicker verification of applicants and speed up the IPO process, the regulator hopes.
- Last November, the Securities and Exchange Board of India issued a circular which required retail investors to use the UPI facility when subscribing to IPOs from Jan. 1, 2019 onward.
- The regulator later extended the deadline till July 1, 2019 as self certified syndicate banks, or those that are certified by the market regulator to facilitate IPO applications, were not ready.
Here are the new rules for retail IPO investing.
9. Can Foreign Business Come To Godrej Consumer’s Rescue?
Volumes of Godrej Consumer Product Ltd.’s domestic business grew at the slowest pace among peers as consumption slowed in the world’s fastest-growing major economy. But its businesses in Africa and Indonesia outperformed.
- Africa and Indonesia—the Adi Godrej-group flagship’s largest markets after India—contributed 39 percent to its consolidated revenue in the financial year ended March 2019.
- The revenue from these two markets grew 12.3 percent in 2018-19. That compares with 6 percent growth in its domestic business during the period.
The company is confident that the two regions will drive growth. So are analysts.
10. Lodha Struggles To Shake Off Quality Fears
A cash crunch and rising debt are not the only worries for the real estate company controlled by India’s richest property tycoon.
- The Lodha Group is trying to dispel fears that the quality of construction is so bad that people can punch through the walls.
- The concerns were fuelled by plasterboard or gypsum board. Used for partitions and lightweight walls, it’s not that prevalent in India.
- A few buyers of apartments in Lodha’s New Cuffe Parade—four towers of 1,100 premium flats in Wadala, central Mumbai—found them substandard.
Flimsy walls is just one of the concerns of the homebuyers.