BQuick On Oct. 3: Top 10 News Stories In Under 10 Minutes
This is a roundup of the day’s top stories in brief.
1. RBI Eases Overseas Borrowing For State-Run Oil Retailers
State-owned oil marketing companies will be given more leeway to borrow overseas, said the Reserve Bank of India in a notification as it sought to counter the continuing weakness in the rupee.
- As per the new rules, OMCs will be able to raise external commercial borrowings for working capital purposes from “all recognised lenders” under the automatic route.
- Until now, such borrowings for working capital purposes were permitted only from direct or indirect equity holders or from a group company.
- The overall ceiling for such external commercial borrowings has been set at $10 billion.
- The individual limit of $750 million and mandatory hedging requirements have also been waived.
Will it help reduce the demand for dollars from oil companies?
2. $ = Rs 73.34
The Indian rupee fell past the 73-mark against the U.S. dollar for the first time as surging oil prices and widening current account deficit continued to weigh on sentiment.
- The domestic currency fell 0.7 percent to 73.4150 against the dollar in early Wednesday trade, and recovered slightly to close at 73.34.
- Tracking the currency’s weakness, bond yields rose 6 basis points to 8.06 percent from its previous close of 7.99 percent.
- The rupee is now set to outpace its losses seen in 2013 as efforts by policy makers to stem the rout have fallen flat.
- Predictions that crude oil—India's biggest import—could return to $100 a barrel signal that things may get a lot worse for the rupee.
3. Sensex Slumps 550 Points; Dow Hits Record
Indian equity benchmarks fell sharply led by losses in auto, information technology and private sector lenders.
- The S&P BSE Sensex Index fell 1.51 percent or 550 points to 35,975.63, its biggest fall in seven months.
- The NSE Nifty 50 Index dropped 1.36 percent or 150 points to 10,858.
- S&P BSE Auto Index’s 2.9 percent drop made it the biggest loser, while the S&P BSE Metal Index was the top gainer.
Follow the day's trading action here.
U.S. stocks rose toward records and the dollar gained after upbeat private jobs data bolstered confidence in the world’s largest economy. European assets firmed on news the Italian government may rein in spending.
- The S&P 500 Index headed for a record close as technology and financial shares advanced.
- The Dow Jones Industrial Average rose as much as 0.6 percent to a record high of 26,935.
- The Bloomberg Dollar Spot Index climbed 0.1 percent, hitting the highest in almost four weeks with its fifth straight advance.
- West Texas Intermediate crude climbed 0.1 percent to $75.34 a barrel, the highest in almost four years.
Get your fix of global markets update here.
4. Government Woos Farmers
The government approved a 6 percent increase in the support price of wheat a day after thousands of farmers marched to Delhi demanding a hike.
- The cabinet, in a meeting chaired by Prime Minister Narendra Modi, approved a Rs 105 hike in the minimum support price of wheat to Rs 1,840 per quintal for the 2018-19 season, Agriculture Minister Radha Mohan Singh said.
- The MSP for rabi crops (October-March) was increased according to the recommendations of Commission for Agricultural Costs and Prices.
- According to Singh, the MSP for all rabi crops is now higher than the cost of production ranging from 50-112 percent.
Here's the full list of MSP hikes.
5. What’s Next For IL&FS?
As a partially new board of Infrastructure Leasing & Financial Services Ltd. takes charge, there’s one thing most experts seem to agree on. Keep Life Insurance Corporation of India out of the rescue plan.
- “Life Insurance Corporation of India should not be overburdened even if it means IL&FS has to be allowed to collapse,” according to Anil Singhvi, chairman of Ican Investment Advisors and founder of governance advisory firm IiAS, who added that IL&FS does not qualify for a government bailout.
- Nor should LIC, the largest shareholder of the company with a 25.34 percent stake, be forced to infuse further funds, said Sucheta Dalal, veteran journalist and managing editor of Moneylife.
- “The new board needs to first assess the current problem and identify key people to bring in. The way forward is to make the structure simpler,” said former chairman of the Securities and Exchange Board of India, M Damodaran.
- IL&FS’s road assets are cash flow generating, and can generate value, said Rajiv Lall, the managing director and chief executive officer of IDFC Bank Ltd.
My concern is time. This is serious amount of money that needs to be paid for the assets and that needs due diligence.Rajiv Lall, CEO, IDFC Bank
Here’s more on the IL&FS rescue.
6. More Trouble For RCom
Ericsson India Pvt. Ltd. filed contempt of court proceedings against Anil Ambani’s Reliance Communications Ltd. for not paying Rs 550 crore pending dues within the Sept. 30 deadline set by the Supreme Court.
- The telecom network equipment maker, a vendor to RCom, also sought orders from the apex court asking the government to stop Ambani and other senior officials of the company from leaving the country.
- The top court had on Aug. 3 said RCom is expected to repay Rs 550 crore as a settlement amount against Ericsson’s Rs 1,600-crore dues.
- The court set the Sept. 30 deadline and said it would hear the matter again on Oct. 4.
Here’s why RCom has been unable to repay Ericsson.
7. A Bad Year For State-Run Firms
Public sector companies lost nearly Rs 4 lakh crore in market value this year amid concerns about everything from bad loans to higher crude prices.
- Of the 76 state-run listed firms, shares of 74 declined, with the fraud-hit Punjab National Bank tumbling the most at more than 65 percent.
- BEML Ltd., the maker of railway coaches and construction equipment, plunged 62 percent.
- Coal India Ltd. and GAIL (India) Ltd. returned gains of about 1 percent each.
- While the benchmark NSE Nifty 50 Index has gained about 4 percent, concerns around a trade war, rising crude oil and a weaker rupee led to a 4 percent decline in the broader NSE Nifty 500 Index.
Here’s more on the wealth destroyers.
8. Where Analysts See Value
Sell-side analysts upgraded their target prices for stocks trading at a higher valuation in September amid a surge in volatility in the market.
- Target prices were upgraded for one-third of the 439 stocks tracked by at least five analysts, according to Bloomberg data.
- Analysts lowered forecast for over 36 percent of the stocks, while estimates for 30 percent remained unchanged.
- The price-to-earnings multiple for the Nifty 50 Index fell by over 200 basis points in September to 22.3 times, the data showed.
9. Does India Need Its Own Version Of ‘Operation Twist’?
The abrupt pressure on currencies and the delicate policy balance needed to stave off that pressure remains the most critical conundrum for emerging market central banks, writes Soumyajit Niyogi.
- India has continued to see a depreciation in its currency. On Oct. 3, the rupee fell to a record low of 73.35 against the dollar.
- The RBI has allowed the market to adjust to global forces and used foreign exchange reserves to smoothen out market moves.
- In addition, policy rates have been raised by 50 basis points this year to defend against inflation pressures, including those emanating from a weaker currency.
- So should the central bank try and prevent depreciation beyond a point or let markets find their own level? And if the central bank should intervene, should it consider the use of interest rates via another round of 25-50 basis point in rate hikes?
If the level of the rupee is to be protected, then what is the way to go?
10. The Chief Justice Of A Court In Turmoil
When he was appointed as a judge of the Supreme Court of India on April 23, 2012, it was foreordained that Justice Ranjan Gogoi would be in line to takeover as Chief Justice of India in October, 2018 by dint of the seniority convention. No one, least of Justice Gogoi himself, could have possibly imagined that he would be taking over as the Chief Justice of India in the circumstances that the court finds itself in, writes Alok Prasanna Kumar.
- In his expected tenure of a year and two months, Justice Gogoi has the unenviable task of trying to restore an institution whose credibility and reputation lie in tatters given the events of the last two years.
- The judiciary continues to have a serious diversity problem at higher levels.
- While CJIs are inevitably snowed under a mountain of cases and administrative work, Justice Gogoi will have to manage that and fix the processes that have broken down.
Can Gogoi match the high expectations?