BQuick On Nov. 6: Top 10 News Stories In Under 10 Minutes
1. Rs 3.6 Lakh Crore Question
The stand-off between the government and the Reserve Bank of India is boiling down to one number – Rs 3.6 lakh crore. While the points of difference between the two are many, it is the issue of the central bank’s balance sheet that has become most contentious.
- In a demand conveyed earlier this year, the government suggested that the RBI is sitting on excess capital of Rs 3.6 lakh crore. The estimate, first reported by Cogencis news agency, was confirmed to BloombergQuint by a person familiar with the matter.
- The government wants the RBI to transfer this amount back to the government but the central bank has so far resisted.
- The government thinks that the RBI has been very conservative in its assessment of capital buffers to meet unforeseen risks, said the person quoted above while explaining that an alternative method to assess the need for capital buffers suggests that the RBI could transfer Rs 3.6 lakh crore to the government.
2. Government Vs RBI: Rajan’s Take
Former Reserve Bank of India Governor Raghuram Rajan called for respecting the institutional autonomy of the central bank adding that the RBI has the liberty to say no if the government pushes it to be lenient.
- “The RBI is something like a seat belt,” Rajan told CNBC-TV18 in an interview. “As a driver, the driver being the government, it has the possibility of not putting on a seat belt but of course if you do not put on your seat belt you get into an accident and the accident can be quite severe.”
- Ahead of the Nov. 19 RBI board meeting, Rajan said the objective of the board is to protect the institution and not serve others’ interests.
So, the government will push, will try and get the RBI to be more lenient...We have responsibility for financial stability and therefore we have an authority to say no.Raghuram Rajan, Former Governor, RBI
3. Rs 1.52 Lakh Crore Redemption Challenge
Non-bank lenders need to refinance or redeem about Rs 1.52 lakh crore in November as debt matures.
- More than Rs 31,000 crore of commercial papers have been redeemed in the first three days of November, according to reports by Edelweiss and ICRA.
- Nearly Rs 16,000 crore were redeemed on Monday alone, the prominent among them being Dewan Housing Finance Corporation Ltd.’s Rs 1,150-crore paper.
- The street and the regulators are closely monitoring the redemptions of key housing finance companies like Dewan Housing, Indiabulls Housing Finance Ltd. and PNB Housing Finance Ltd.
- That’s amid fears that non-bank financial companies may default on repaying debt within the next six weeks if additional liquidity is not provided immediately.
4. Indian Markets Flat; U.S. Stocks Steady
Indian equity benchmarks were little changed ahead of Diwali as gains in Reliance Industries Ltd., Tata Consultancy Services Ltd. and ICICI Bank Ltd. were offset by losses in State Bank of India, Axis Bank Ltd. and Vedanta Ltd.
- The S&P BSE Sensex Index rose 0.12 percent or 41 points to 34,992.
- The NSE Nifty 50 Index rose six points to 10,530.
- Eight of 11 sector gauges compiled by the National Stock Exchange ended lower led by the Nifty PSU Bank Index’s 2.2 percent drop.
- On the flipside, the Nifty Media Index was the top gainer, up 0.9 percent.
- In Samvat 2074, Nifty clocked least yearly gains in three years as it rose 3.13 percent, data compiled by Bloomberg showed.
Caution prevailed in markets on Tuesday, with few standout moves as the U.S. midterm elections got underway and investors braced for any fallout.
- U.S. stock gains were led by media and retail shares, while losses in banks blunted the advance.
- The euro recovered from disappointing manufacturing data to gain, while the pound strengthened despite no apparent progress on Brexit negotiations. The dollar fell for a second day.
- West Texas Intermediate crude rose 0.3 percent to $63.27 a barrel.
5. Ridham Desai’s Price Point
There may be a lot of variables affecting the stock market, but the prices—far better than they were eighteen months ago—will bring cheer to Indian equities as we enter a new year.
- That’s according to Ridham Desai, managing director and India equity strategist at Morgan Stanley, who believes valuations are much more lucrative than they were last year.
- There is always uncertainty, sometime good or bad. But if you pay the right price, you make money, Desai told BloombergQuint.
- The overall market is currently at a price to book value of 2.8 times, which is lower than the average of around 3.1-3.2 percent over the last 25 years.
6. Investing Lessons From Samvat 2074
There is joy in sharing during Diwali. In conversations over the last year, a number of wise minds in the market have shared their learnings and offered insight on successful approaches to investing. Here are nuggets of knowledge from the Samvat gone by:
7. Infosys Is Boring Again
Infosys Ltd. has returned to stability, almost a year after the appointment of a new chief executive ended a tumultuous period at the Indian software and services company.
- Chairman Nandan Nilekani, speaking on the sidelines of Bloomberg’s New Economy Forum in Singapore, said that the turnaround is complete. “This is all very much from the past,” he said of the board turmoil that engulfed the company last year.
- “I’ve been chairman now over a year. We have an excellent CEO in Salil Parekh. Infosys is really on a very stable and forward-looking path,” Nilekani said.
- Investors seem to agree. The Bangalore-based company’s shares are up almost 30 percent this year, compared with a 3.1 percent gain in 2017.
8. Slow Down SBI, There’s A Long Way To Go Yet
State Bank of India Chairman Rajnish Kumar wants to assure investors he’s in complete control of the “demon” of soured loans. Not so fast, Aladdin, writes Andry Mukherjee.
- The bank’s first quarterly profit in 12 months is no doubt an encouraging sign, though net income of $129 million on a $284 billion loan book is hardly worth celebrating.
- Besides, it’s premature for India’s largest lender to sound the all-clear on asset quality when it has a $20 billion exposure to shadow financiers facing a liquidity squeeze.
- Meanwhile, don’t underestimate the political dimension. Prime Minister Narendra Modi’s government wants banks to approve SME loans in 59 minutes. Sooner or later, such state-directed credit binges are guaranteed to end – badly.
9. Karnataka Bypolls: Congress-JD(S) Win Four Seats
The Congress-Janata Dal (Secular) combine won four of the five seats in the Karnataka bypolls held on Nov. 3.
Lok Sabha Seats:
- Congress bagged BJP bastion of Ballari by 2,43,161 votes.
- JD(S) defeated BJP in Mandya by 3,24,943 votes.
- BJP won Shivamoga by 52,148 votes.
- Congress won Jamkhandi by 39,480 votes.
- JD(S) won Ramangara seat by 1,09,137 votes.
10. All You Need To Know About U.S. Midterms
The 2018 midterms are the most closely watched, most expensive and most fretted-about U.S. congressional elections in memory. They’re always about the one person not on the ballot -- the president -- but never more so than this year.
- Democrats are expected to take control of the House of Representatives but fall short in the Senate.
- Then again, Democratic candidate Hillary Clinton was expected to beat Donald Trump in 2016.
- The party’s despair over a second loss to Trump would be immeasurable.
- Investors generally like gridlock in a split decision because it means Democrats won’t be able to roll back tax cuts or reinstate key parts of the Dodd-Frank financial regulations.