BQuick On Nov. 2: Top 10 News Stories In Under 10 Minutes
This is a roundup of the day’s top stories in brief.
1. RBI's Lifeline For NBFCs
To further ease the funding strains being faced by non-bank lenders, the Reserve Bank of India has allowed banks to offer partial credit enhancement to bonds issued by some of these firms.
- Credit enhancement is a facility through which a company improves its creditworthiness by securing a backing from a higher-rated entity, in this case a bank.
- The decision to allow banks to offer partial credit enhancement to some non-bank financial companies is intended to help these firms refinance their borrowings and tide over a period of tight liquidity and risk aversion.
2. Will NBFCs Default?
India’s non-bank lenders may default on repaying debt raised from the nation’s money market within the next six weeks if additional liquidity is not provided immediately, a person familiar the matter said, citing a letter written by the Finance Ministry.
- Non-bank financiers and mortgage lenders have Rs 2.7 lakh crore ($37 billion) of debt maturing in the next five months, the person said, asking not to be named as the information is not public.
- According to the letter sent to the corporate affairs ministry, a default could adversely impact productive sectors of the economy, the person said. Bloomberg News has reviewed the correspondence.
3. Modi’s 59-Minute Mantra
The Indian government announced the full launch of a new portal that helps micro, small and medium enterprises to avail credit within an hour.
- Small businesses can use the ‘59-minute’ portal to avail loans of up to Rs 1 crore, Prime Minister Narendra Modi said at an event in New Delhi.
- Small enterprises registered under the goods and services tax will also get a 2 percent tax rebate on incremental loans of up to Rs 1 crore, Modi said.
- The project was implemented on a pilot basis after it was approved at the annual review meeting of public sector banks.
- Since then, more than Rs 72,000 loans worth over Rs 23,852 crore have been sanctioned, Modi’s presentation showed.
4. Indian Markets Rebound; U.S. Stocks Rise
Indian equity benchmarks rebounded strongly along with the rupee after crude fell for the fifth day in a row.
- The S&P BSE Sensex Index rose 1.7 percent or 580 points to 35,012.
- The NSE Nifty 50 Index climbed 1.66 percent or 173 points to 10,553.
- Sixteen of 19 sector gauges compiled by the BSE ended higher led by the S&P BSE Auto Index’s 4 percent surge. S&P BSE IT Index was top loser, down 1.3 percent.
- For the week, Sensex surged 4.98 percent and the Nifty 50 Index rose 5.2 percent.
U.S. stocks opened mixed, with trade-sensitive industrials rallying on hopes of easing tensions with China, while Apple’s poor forecast hit tech-heavy indexes.
- The S&P 500 continued its rebound from the worst month in seven years, though an overnight rally in futures that topped 1 percent on the trade hopes got cut by a jobs report that also indicated annual wage gains surpassed 3 percent for the first time since 2009.
- The Nasdaq 100 fell as Apple retreated after underwhelming sales forecasts.
- The 10-year Treasury yield hit 3.17 percent and the dollar came off its lows as investors speculated the Federal Reserve won’t be deterred from its rate-hike path.
- West Texas Intermediate crude dipped 0.2 percent to $63.54 a barrel, hitting the lowest in 20 weeks with its fifth straight decline.
5. Earnings: Hindalco, IOC, NTPC
Hindalco Industries Ltd.’s second-quarter net profit rose on higher operational efficiency, better realisation and lower interest expenses.
- Net profit rose 54 percent year-on-year to Rs 725 crore.
- Revenue rose 5.4 percent to Rs 10,833 crore.
- Operating income rose 5 percent to Rs 1,922 crore.
- Operating margin remained unchanged at 18 percent.
Indian Oil Corporation Ltd.'s net profit fell by half in July to September quarter on currency and oil headwinds, accompanied by a one-time employee benefit cost.
- Net profit fell 52 percent quarter-on-quarter to Rs 3,250 crore.
- This was despite a higher-than-expected revenue of Rs 32,035 crore.
- Other income jumped 78 percent to Rs 1,041 crore.
- The gain was offset by factors such as rising employee cost, depreciation of the rupee and a fall in inventory gains triggered by rising crude prices.
NTPC Ltd.’s profit for the quarter ended September missed analyst expectations.
- Net profit remained flat at Rs 2,426 crore.
- Revenue rose 13 percent to Rs 22,261.1 crore.
- Operating income rose 2.8 percent to Rs 5,592.4 crore.
6. Bank Earnings: Axis Bank, PNB
Axis Bank Ltd.’s September-quarter profit beat analyst estimates as interest income rose and bad loans fell.
- Net interest income, or core income of a bank, rose 15 percent year-on-year to Rs 5,232 crore.
- Bad loan ratio declined to 5.96 percent from 6.52 percent in the June quarter.
- Net NPA ratio fell 55 basis points to 2.54 percent.
- Provisioning fell 12.2 percent sequentially to Rs 2,9274 crore.
Punjab National Bank reported a loss for the third straight quarter, as it continued to put aside provisions against the Nirav Modi fraud and its large pool of bad loans.
- Net loss stood at Rs 4,532 crore compared with a profit of Rs 560.6 crore in the corresponding quarter last year.
- Net interest income, or the core income, fell a little over 1 percent year-on-year to Rs 3,974 crore.
- The gross non-performing assets ratio slipped to 17.16 percent from 18.26 percent in the June quarter.
- The net NPA ratio narrowed to 8.90 percent from 10.58 percent.
7. Analysts Slash Target Prices
Analysts lowered target price for more than two-thirds of Indian stocks last month—the worst cut in at least three years—amid rising volatility in the market.
- Target prices were cut for 70 percent of the 276 stocks tracked by at least 10 analysts, according to Bloomberg data.
- That’s when the benchmark NSE Nifty 50 Index declined for the second straight month in October—the most volatile this calendar year.
- The benchmark index declined 4.98 percent last month on concerns over an escalating trade war, higher crude oil prices and a depreciating rupee.
- A change in mutual fund investment classification and the recent liquidity crisis among non-bank lenders after defaults at IL&FS group also contributed to the selloff.
8. New Delhi Pokes Fun At RBI
An uneasy truce between Prime Minister Narendra Modi’s government and the central bank was tested two days after the administration said it respects the central bank’s autonomy.
- Garg is taking advantage of a rally in emerging Asian markets to send a riposte back at Reserve Bank of India Deputy Governor Viral Acharya, who last week said governments that don’t respect central bank independence “will sooner or later incur the wrath of financial markets, ignite economic fire, and come to rue the day they undermined an important regulatory institution.”
9. Is RBI Sitting On Excess Capital?
While some find an excess of gross capital and reserves on the RBI balance sheet, others worry that the RBI may not be adequately capitalised. Here's how the RBI balance sheet should be read, writes Ananth Narayan.
- Without having any commercial intent, RBI has an enviable model of regular income.
- It takes cheap money from the government, banks and us and deploys it interest-bearing foreign currency and rupee assets.
- Foreign currency assets and rupee bonds that RBI holds are subject to revaluation gains and losses.
- Over the last two years, the RBI added Rs 13,190 crore and Rs 14,190 crore respectively to the contingency fund.
- Gross capital is large on RBI’s balance sheet, but given the large government debt on the RBI’s books, it is difficult to justify any one-time standalone transfer to the government now.
10. MJ Akbar Denies Rape Charge
MJ Akbar, who had to resign as the Minister of State for External Affairs following multiple accusations of sexual assault, has now been accused of rape by a U.S.-based journalist, Pallavi Gogoi, who worked with him at The Asian Age.
- In a piece written for The Washington Post, journalist Pallavi Gogoi has claimed she was raped by Akbar back in the 1990s.
- However, MJ Akbar has denied the allegations and said that the relationship between the two was consensual which didn’t end on a good note and caused strife in his personal life, reported ANI.