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BQuick On Oct. 12: Top 10 News Stories In Under 10 Minutes 

This is a roundup of the day’s top stories in brief.

1. CPI Stays Below 4%; IIP Slips

Consumer price inflation rose marginally in September, but remained below the four percent mark. An increase in global crude oil prices compared to last year was balanced out by modest food prices and a decline in housing inflation.

  • Data released by the Central Statistics Office on Friday, showed that retail inflation was at 3.77 percent in September, compared to 3.69 percent in August.
  • A Bloomberg poll of 39 economists had estimated inflation at 4.02 percent for September.

See the inflation internals here.

India’s industrial activity lost steam in August as the country faced headwinds from rising fuel prices, higher interest rates and deleveraging by Indian banks.

  • The Index of Industrial Production rose 4.3 percent over last year in August, compared with a revised 6.5 percent growth in July, data released by the Ministry of Statistics and Programme Implementation showed.
  • A Bloomberg poll of economists had projected a 3.8 percent growth.
  • IIP growth was at 4.8 percent in August last year.

See what lead to the sharp fall.

2. KKR's $270-Million NBFC Bet

KKR & Co. is seeking to acquire assets from stressed Indian shadow lenders, as it tries to take advantage of the market disruption after a rare money market default by Infrastructure Leasing & Financial Services Ltd.

  • The private equity firm’s two Indian credit units may spend as much as Rs 2,000 crore ($270 million) combined to purchase portfolios from local non-banking finance companies, Sanjay Nayar, KKR’s India chief executive officer, said in an phone interview.
We believe current market conditions offer attractive opportunities to buy portfolios of structured credit and real estate credit.
Sanjay Nayar, CEO - India, KKR
  • KKR is also seeking outright acquisitions of Indian non-bank lenders and their employee teams, people with knowledge of the matter said.

KKR is looking to diversify its lending.

3. What FPIs Bought And Sold In September

Foreign portfolio investors turned net sellers in September after two months as Indian markets fell on fears of a liquidity crisis triggered by Infrastructure Leasing & Financial Services Ltd. defaults, rising crude and a weaker rupee.

  • Foreign investors net sold stocks worth nearly $1.5 billion (Rs 10,800 crore) for the month, according to National Securities Depository Ltd. data—$900 million of which was sold in the second half of the month.
  • Investors bought metals and mining stocks worth $91 million and shares of pharmaceuticals and biotechnology companies worth $60 million in the second half of September.
  • They were net sellers in metals and pharmaceutical sectors in the first half of the month but turned net buyers of non-banking finance companies in the second half of September.

4. Indian Markets Bounce Back; U.S. Stocks Gain

Indian equity benchmarks erased weekly losses and ended on a higher note, snapping their longest weekly losing streak in over five years.

  • The S&P BSE Sensex Index closed 2.15 percent or 732 points higher at 34,773.
  • The NSE Nifty 50 Index jumped 2.32 percent or 238 points at 10,472.
  • The market breadth was tilted in the favour of buyers. About 1,454 stocks advanced and 317 stocks declined on the National Stock Exchange.

Follow the day's trading action here.

U.S. stocks surged, joining a global rally in equities after two days of market tumult as trade tensions between the U.S. and China seemed to ease, at least temporarily, with the countries planning to meet in November and the Treasury Department saying that China isn’t manipulating its currency.

  • The S&P 500, which is looking to snap a six-day losing streak totaling 6.8 percent, climbed the most since April.
  • The Bloomberg Dollar Spot Index climbed less than 0.05 percent.
  • The yield on 10-year Treasuries gained one basis point to 3.16 percent.
  • West Texas Intermediate crude gained 1.3 percent to $71.90 a barrel, the largest rise in more than a week.

5. HUL’s Profit Meets Estimates

Hindustan Unilever Ltd.’s profit grew as expected in the July-September quarter even as the company braces for rising input costs.

  • Net profit rose 19 percent year-on-year to Rs 1,525 crore in the quarter ended September. That’s higher than the Bloomberg consensus estimate of Rs 1,418 crore.
  • Revenue rose nearly 11 percent to Rs 9,234 crore.
  • Operating profit increased 20 percent to Rs 2,012 crore.
  • Margin expanded 170 basis points to 21.8 percent.
  • Volume growth stood at 10 percent.
From our perspective we are clearly seeing that the demand is stable. We are pleased with it.
Sanjiv Mehta, Chairman and MD, HUL

6. Citi’s Q2 Earnings Expectations

India Inc.’s earnings growth is expected to improve in the quarter ended September even as individual sectors are poised to report a mixed set of numbers, according to Citi Research.

  • Earnings are expected to grow 14 percent in the second quarter of 2018-19 compared with 12 percent in the first, according to Citi Research's quarterly report on earnings expectations.
  • While the overall quarter will be steady, investors should keep an eye on management commentary and crude oil price trends, it added.
Earnings are likely to see benefit from rupee depreciation in information technology or pharmaceuticals while low-base is expected to benefit financials. Earnings for autos, healthcare, industrials and telecom sectors are likely to be weak.
Citi Research Report

7. Bandhan Bank Promoters Get Exemption

After being reprimanded by the Reserve Bank of India, the promoters of Bandhan Bank Ltd. have secured an exemption from the markets regulator on a rule which restricts the sale of promoter shares for one year after a company goes public.

  • Bandhan Bank listed on the bourses in March 2018. This meant that promoter shares would be locked-in until March 2019 according to guidelines of the Securities and Exchange Board of India.
  • According to RBI rules, however, Bandhan Bank is required to bring down promoter shareholding to 40 percent within three years of starting operations.
  • Last month, the RBI imposed restrictions on the bank for its inability to comply with these rules.

The exemption will give the bank more elbow-room to meet RBI’s guidelines.

8. Securitisation Volume Soars

The volume of securitisation transactions nearly doubled in the first half of the fiscal year, shows data released by rating agency CRISIL. The surge, which was driven by bank purchases of loan portfolios, is expected to continue in the second half with large lenders like State Bank of India stepping up the pace of such transactions.

  • The increase in securitisation transactions helps the financial system at a time when non-bank lenders are facing tight liquidity conditions and banks have turned risk-averse.
  • According to CRISIL data, securitisation volume jumped by 95 percent year-on-year to Rs 67,700 crore in the April-September period.
  • The increase was led by banks purchasing loans portfolios from non-banking finance companies and housing finance companies.

Here’s the asset class-wise break-up.

9. Fund Carnage Shows Peril Of Ignoring Liquidity

Indian retail investors won’t easily forgive their fund managers, nor will they quickly forget this wealth destruction. Out of 416 open-ended, onshore equity funds, 401 have lost money this year. Tech funds, the only ones to have performed decently, have been helped by Asia’s worst-performing currency of 2018, writes Andy Mukherjee.

  • Fund managers who’d hoped for private-equity type returns by discovering jewels buried in the haystacks of public markets were essentially souping up performance by forgoing liquidity.
  • Now that the markets are punishing them for that recklessness, the search for the elusive alpha is over — in infrastructure; power; banking and finance; small-, mid- and micro-cap shares; transport and logistics; value stocks; state-owned firms; business cycles; and every other fad.
  • With fund asset values collapsing, what happens if investors get up and leave?

The rush for exist may cause problems.

10. The Wrath Of GAAR

If company law schemes are designed to benefit a few large shareholders and do not serve a larger public interest, the wrath of General Anti-Avoidance Rules may fall upon them. That’s the message from the National Company Law Tribunal which recently refused to sanction a scheme of amalgamation between public listed company Ajanta Pharma Ltd. and promoter entity Gabs Investment.

  • NCLT has refused to sanction the merger saying it benefits only a few shareholders and serves no public interest.
  • The revenue department argued that the scheme of merger has been designed to avoid tax.
  • Experts say that NCLT's view is unusual and deviates from the precedent set by the high courts and the Supreme Court.
  • They pointed out that the strict procedure laid down in law to apply GAAR has not followed in this case.

Find out more about the NCLTs view and its impact.