BQuick On Oct. 22: Top 10 News Stories In Under 10 Minutes

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

1. Fraud, Forgery And Suspicious Transactions

It’s been a downhill ride for shares of technology company 8K Miles Software Services Ltd. The cloud services provider has lost 90 percent of its value since hitting an all-time high of Rs 1,029.95 apiece on Nov. 29, 2017.

• The slide was accelerated by a string of suspicious developments including, most recently, an allegation by its Promoter and Chief Executive Officer Suresh Venkatachari that two brokerages fraudulently sold a large chunk of company shares owned by him.
• Before that an auditor of a private company owned by RS Ramani – Promoter and Chief Financial Officer of 8K Miles Software Services, alleged forgery and resigned.
• And then there’s the issue of suspicious related-party transactions and continuous sale of shares by Ramani, who resigned last month. The company continues to list him as CFO on its website.

Here’s what Venkatachari had to say about the suspicious transactions.

2. Large Caps, Small Returns

Shares of nearly two-thirds of Indian large-cap companies fell in the last one year amid volatility in the market.

• Sixty-four of the top 100 companies have fallen in the range of 1-87 percent since October 2017, according to Bloomberg data.
• That compares with a 1.5 percent gain in the NSE Nifty 50 Index during the period.
• The top 100 firms had a market value ranging between Rs 27,000 crore and Rs 2.8 lakh crore a year ago, data compiled by Bloomberg showed.
• Of these, the biggest losers include Vakrangee Ltd., Tata Motors Ltd., Vodafone Idea Ltd., Hindustan Petroleum Corporation Ltd. and Bharat Electronics Ltd.

Read more to find out the reasons that led to this fall.

3. Indian Markets Fall For Third Day; U.S. Stocks Open Higher

Indian equity benchmarks fell for third day in a row dragged by Reliance Industries Ltd., IndusInd Bank Ltd. and Kotak Mahindra Bank Ltd.

• The S&P BSE Sensex Index fell 0.5 percent or 181 points to 34,134.
• The NSE Nifty 50 Index declined 0.57 percent or 58 points to 10,245.
• For most part of the day, the benchmarks traded firmly higher but selling pressure intensified in last hour of the trade when IndusInd Bank cracked as much as 9.8 percent on concerns over its exposure to IL&FS.
• Seventeen of 19 sector gauges compiled by BSE ended lower dragged by the S&P BSE Energy Index's 3 percent drop.
• On the other hand, the S&P BSE Power Index ended marginally higher.

Follow the day's trading action here.

Tech shares pushed the Nasdaq Composite Index higher, while the broader U.S. equity market was mostly little changed in the wake of a rally in Asian stocks after Chinese officials pledged to support the world’s second-biggest economy.

• Italy’s sovereign bonds pared their advance after the nation’s populist government called for a budget dialogue with the European Union to address their differences.
• The pound retreated as the U.K. blurred more red lines in its Brexit negotiations, heightening the danger to Prime Minister Theresa May.
• The Bloomberg Dollar Spot Index increased 0.2 percent.
• Brent crude decreased 0.1 percent to $79.68 a barrel.

Get your fix of global markets update here.

4. Raw Material Prices Weigh On Asian Paints

Asian Paints Ltd.’s net profit fell short of analysts estimates due to rising cost of raw materials.

• The paintmaker’s net profit fell 14.4 percent to Rs 493 crore year-on-year. That compares with the Rs 578-crore estimate of analysts tracked by Bloomberg.
• Revenue rose 8.76 percent to Rs 4,639 crore.
• Ebitda fell 3.2 percent to Rs 784 crore.
• Operating margin contracted 210 basis points to 16.9 percent.
• Raw material cost rose 30.25 percent to Rs 2,610.28 crore.

Here’s are the other highlights.

5. Guess Who’s Back

India’s top hedge fund has stopped hoarding cash and started buying shares again, expecting a bounce in the South Asian nation’s equities.

• The Avendus Capital Alternate Strategies’ Absolute Return Fund is increasing investments after benchmark indices slumped due to surging oil prices, higher borrowing costs and defaults at IL&FS.
• The intensity of selling for the S&P BSE Sensex Index last week hit levels not seen since the height of the 2008 financial crisis.
• That’s pushed Avendus to start unwinding its cash position, which reached a record 65 percent of assets in September.

Here’s how Avendus is buying into anxiety.

6. How Much Has The Rupee Really Depreciated?

The fall in the Indian currency has been the subject of much debate this year. The depreciation, the response to it and its implications have been discussed threadbare. But economists, including those on India’s monetary policy committee, still differ on the best benchmark to use to understand the depreciation in the rupee and, consequently, the appropriate policy response to it.

• For the year-to-date, the rupee has fallen 13 percent, in response to higher oil prices and foreign portfolio outflows. This fall, one of the steepest seen in recent years, has prompted fears of inflation risks, among other things.
• One reason why some policymakers are comfortable with the fall in the rupee is that its fall is not isolated. The 36-country Norminal Effective Exchange Rate index of the RBI shows a roughly 8 percent decline so far this year, according to Bloomberg data.
• The 36-country Real Effective Exchange Rate index - NEER adjusted for inflation - shows that the rupee has depreciated about 9 percent.

But which measure does the MPC follow?

8. IL&FS: Three Resolution Plan Advisors

The newly constituted board of the Infrastructure Leasing and Financial Services Ltd. today appointed three advisors to formulate and execute a resolution plan for the debt-ridden company.

• Arpwood Capital and JM Financial have been appointed as financial and transaction advisors, according to a release.
• The two agencies will also undertake valuations for asset divestment and monetisation.
• Alvarez and Marsal have been elevated as the restructuring advisor to the company’s board.
• It would assist the board in maintaining strict controls and managing liquidity on a day-to-day basis.

All asset monetisation activities will be harmonised, according to the board.

9. Small Savings, Government’s Big Saviour

Every paisa counts. That’s true for household budgets. It’s equally true for the government’s budget. Faced with increasing demands on its limited resources, the central government has been increasingly relying on the pool of small savings to finance its fiscal deficit and also fund some of the needs of large public institutions, writes Ira Dugal.

• The financing, while well within permissible rules, comes at a slightly higher cost and could also add to the stickiness of interest rates in the economy, should small savings rates be kept high to ensure adequate inflows into small savings schemes.
• This year, for instance, the government is likely to finance more than Rs 75,000 crore of its fiscal deficit from the National Small Savings Fund, according to budget projections. The actual financing via the NSSF could be higher.
• Last year, the government financed over Rs 1 lakh crore of its budget through small savings, accounting for over 17 percent of the total deficit. The quantum financed via the NSSF in 2017-18 was almost 50 percent higher than the previous year, shows data from budget documents.

Here’s what are the implications for the broader economy.

10. CBI Vs CBI

The Prime Minister’s Office on Monday summoned Central Bureau of Investigation Chief Alok Verma and his deputy Rakesh Asthana amid public fighting involving corruption allegations, NDTV reported.

• Kumar, who was earlier the investigation officer in a case involving meat exporter Moin Qureshi, has been arrested on the allegations of forgery in recording the statement of Sathish Sana.
• Asthana has been accused of accepting a bribe from a Hyderabad-based businessman Sana for allegedly clearing his name in a case investigated by CBI’s special investigation team
• Meanwhile, the CBI on Monday arrested Devendra Kumar, Deputy Superintendent of Police, CBI, on the allegation of falsification of records in an ongoing investigation into the Moin Qureshi case.

Read the details of the unprecedented public spat at the CBI.