BQuick On Oct. 1: Top 10 News Stories In Under 10 Minutes
This is a roundup of the day’s top stories in brief.
1. IL&FS Saga: Government Steps In
The government will take over Infrastructure Leasing & Financial Services Ltd. as defaults by the infrastructure group and its subsidiaries triggered fears of a contagion in the financial markets.
- The National Company Law Tribunal allowed the government’s petition to replace all board members. IL&FS’ suspended directors shall not represent the company anywhere, the NCLT ordered.
- The new board shall hold a meeting and report the road map for IL&FS before Oct. 8, it said.
- The new board will elect a chairman among themselves.
- Malini Shankar, while talking to BloombergQuint, said the challenge is very obvious.
It is to study the financial status of IL&FS, see where things went wrong, when things started going wrong, to study the documents and then collectively the board of directors would be responsible for ensuring that it can be brought back to good health and good governance.Malini Shankar, Board Member, IL&FS
Read more about the government’s lifeline to IL&FS.
2. GST Collections Improve In August
The goods and services tax collections for August improved from the previous month even as rates were lowered on some items.
- The revenue from GST paid for August stood at Rs 94,442 crore compared with Rs 93,960 crore in July, according to a statement of the Ministry of Finance.
- Collections in July had declined partly due to the impact of the rate cut on 88 items.
- Total GSTR-3B returns filed for August as on Sept. 30 remained unchanged.
3. Indian Markets Snap Decline; U.S. Stocks Rise
Indian equity benchmarks snapped their three-day losing streak led by HDFC twins, ICICI Bank Ltd. and TCS Ltd.
- The S&P BSE Sensex Index rose 0.8 percent or 299 points to 36,526.
- The NSE Nifty 50 Index climbed 0.7 percent or 78 points to 11,008.
- For most of the day, the benchmarks traded with a negative bias but sentiment improved after the government sought to take over the troubled shadow banker IL&FS by replacing all its board members.
- S&P BSE IT Index was the top gainer, while S&P BSE Realty Index was the top loser.
Follow the day’s trading action here.
U.S. stocks rose toward records and the dollar slipped with Treasuries after negotiators agreed to a new version of the Nafta trade pact. The Canadian dollar and Mexican peso gained.
- The S&P 500 rose 0.5 percent at 9:31 a.m. in New York.
- The MSCI Emerging Market Index was virtually unchanged.
- The Bloomberg Dollar Spot Index declined less than 0.1 percent.
- West Texas Intermediate crude advanced 0.3 percent to $73.45 a barrel, the highest in almost four years.
Get your fix of global markets update here.
4. RBI’s October Shopping List
The Reserve Bank of India has given upfront guidance of its planned bond purchases under the open market operation in the month of October.
- In a statement before debt markets opened for trade, the central bank said it would infuse Rs 36,000 crore via bond purchases this month.
- This would be done via three auctions in the second, third and fourth weeks of October. The specific securities for buybacks will be notified later, the RBI said.
- The announcement is based on an “assessment of the durable liquidity needs going forward and the seasonal growth in currency in circulation observed in build-up to the festive season...” said the RBI.
Here’s more on how RBI is stepping up liquidity injections.
5. The Dent In Rakesh Jhunjhunwala’s Portfolio
The recent stock selloff triggered by liquidity worries in the debt market has eroded more than a tenth of the value of top bets made by billionaire investor Rakesh Jhunjhunwala.
- The market value of his top 10 investments fell nearly 12.3 percent—Rs 1,300 crore— in the last one month and declined 11.4 percent—Rs 1,196 crore— in the year to date.
- The value of his biggest holdings now stands at Rs 9,272 crore, based on data compiled by BloombergQuint from company filings and Bloomberg.
- In contrast to the performance of Jhunjhunwala’s top bets, the benchmark Nifty 50 Index has returned more than 3 percent gains.
6. Yes Bank’s Hunt
Yes Bank Ltd., which earlier wanted to seek an extension for Managing Director and Chief Executive Officer Rana Kapoor till April 30, said the private lender will find his successor by the Jan. 31 deadline given by the Reserve Bank of India.
- The board would appoint two external members on its search and selection committee by Oct. 7, the bank said in a statement today.
- The committee, also comprising three members of the bank’s remuneration and nominations committee, is tasked with finding the next CEO after the RBI cut short Kapoor’s term.
- The search panel, according to the bank, will look at a pool of internal and external candidates.
Watch the conversation with Yes Bank’s Senior Group President Rajat Monga here.
7. September Auto Sales
Indian carmakers had a slow September as vehicle sales remained muted. However, two-wheeler manufacturers enjoyed strong sales growth due to the onset of the festive season.
- Maruti Suzuki Ltd.'s sales fell for the third straight month.
- Bajaj Auto Ltd. and Hero Motocorp Ltd. both reported their best monthly sales.
- Tata Motors Ltd.’s sales, too, rose led by commercial vehicles.
Here’s a detailed look at how automakers performed in September.
8. J. Kumar Infraprojects Under SEBI’s Scanner
The market regulator has directed the National Stock Exchange of India Ltd. to appoint an independent auditor for the forensic audit of J.Kumar Infraprojects Ltd., which figured among the 331 “suspected shell companies”.
- The auditor will verify misrepresentation, including financials and business activities of the company, as well as look into the role of key management personnel, directors and promoters.
- The audit will also look into the misuse of the books of accounts or funds, including any “facilitation of accommodation entries” or compromise of minority shareholder interest, with respect to its dealings with PACL Ltd. and its entities.
- A company official declined to comment on the issue when contacted by phone and email.
9. FPIs, NRIs, And Own Goals In The Name Of ‘Black Money’
SEBI announced that it would roll back most of its recently issued and unconsulted regulations, preventing non-resident Indians from holding senior positions or acting as investment managers for funds investing in India, writes Mark Austen.
- In its clunky attempts to deal with ‘black money’, India is essentially scoring an own goal, by preventing legitimate investors from putting their money to work in the Indian market to grow the economy, and just encouraging those Indians who have their money offshore illegally to invest elsewhere.
- In effect, India is putting the cart before the horse by stifling the offshore market while the onshore markets are not yet ready to welcome foreign investors.
- India is a promising market with a compelling growth story, but it will need to considerably step up its game if it wants to attract—and keep—foreign investors.
10. The MPC’s Dilemma
As a flexible inflation-targeting central bank, the committee should respond to the inflationary consequences of rupee depreciation, rather than hike rates to defend the currency. But that’s not the case this time around, writes Nomura’s Sonal Verma.
- Even as inflation is set to undershoot its previously projected path in coming quarters, currency weakness and rising oil prices have led to the expectation of a rate hike; not only at the October policy meeting, but also beyond that.
- This year alone, emerging market economies from Argentina, Turkey to Indonesia have hiked rates to defend their currencies. In July 2013, India had also announced a steep hike in the Marginal Standing Facility rate to stem currency volatility. However, the evidence on the success of defending a currency is mixed at best.
- It is also important to recognise that India’s macro fundamentals are in a much better shape today, compared with 2012-13.