BQuick On Sept. 12: Top 10 Stories In Under 10 Minutes

1. Factory Output, Retail Inflation Rises

India’s industrial output rose at its fastest pace in eight months in July, beating expectations.

• The Index for Industrial Production rose 4.3 percent in July compared with a 6.5 percent increase a year ago.
• Twenty-nine economists polled by Bloomberg had forecast July’s industrial output growth at 2.3 percent.
• In June, IIP grew 2 percent and started moderating on the back of a weak economy.
• The cumulative growth for April-July over the corresponding year-ago period stood at 3.3 percent.

All the three key sectors—mining, manufacturing and electricity—saw growth in July.

Retail inflation rose marginally in August, led by higher food prices in urban areas.

• CPI inflation stood at 3.21 percent in August compared to 3.15 percent in July, according to data released by the government.
• A Bloomberg poll of 41 economists had estimated CPI inflation at 3.32 percent for June 2019.
• Despite the pick-up, inflation remains well below the Monetary Policy Committee’s target of 4 (+/-2) percent.
• With GDP growth falling to a six-year low of 5 percent in the first quarter of 2019-20 and inflation remaining subdued, the focus of monetary policy will remain on reviving economic momentum.

Here are the inflation internals.

2. $1 Trillion Exports Target

India wants to more than triple its annual exports to $1 trillion in the next five years, an exacting target given slowing global growth and escalating trade tensions.

• Achieving that export goal is key to making India a $5 trillion economy, Commerce Minister Piyush Goyal said in New Delhi on Thursday.
• The South Asian nation’s exports totaled $330 billion in the year ended March, in comparison to China’s $2.6 trillion in 2018.
• The daunting nature of the target becomes clear when you review India’s trade performance in the previous five years -- it managed to grow its exports by a meager $16 billion during that period.

India, along with a number of other economies, is looking to benefit from opportunities created by the U.S.-China trade war.

3. ECB Cuts Rates, Restarts QE

The European Central Bank cut interest rates further below zero and will start open-ended bond purchases after President Mario Draghi overcame critics of his stimulus policies to make a final run at reflating the euro-area economy.

The ECB reduced the deposit rate to minus 0.5 percent from minus 0.4 percent, while giving banks an exemption from the charge for some of their deposits after an outcry from lenders about the squeeze on profitability.

It will buy debt at a pace of 20 billion euros ($22 billion) a month starting Nov. 1.

The ECB also changed its guidance on interest rates.

U.S. Stocks Gain On Global Trade Optimism, ECB Stimulus

Global stocks gained on speculation the U.S. and China could be moving closer to a trade deal and after Europe’s central bankers restarted stimulus.

• U.S. equity gauges advanced after Bloomberg reported that Trump administration officials have discussed offering a limited trade agreement to China that would delay and even roll back some tariffs in exchange for Chinese commitments on intellectual property and agricultural purchases.
• The euro gained and bonds were mixed.
• Gold jumped 0.8 percent to $1,508.97 an ounce.
• West Texas Intermediate crude dipped 1.3% to $55.03 a barrel.

Get your daily fix of global markets here.

Nifty Halts Stretch Of Gains

India’s equity benchmark NSE Nifty 50 halted its five-day gaining streak, its longest in nearly six months.

• The 50-stock index ended 0.48 percent lower to close below 11,000.
• Besides, the S&P BSE Sensex halted to three-day gaining streak to close 0.45 percent lower at 37,104.25.
• The broader markets represented by the NSE Nifty 500 Index ended 0.37 percent lower.
• The markets are expected to undergo a consolidation phase with the increasing volatility, according to ICICI Securities. Seven out of 11 sectoral gauges compiled by NSE ended lower.

Follow the day’s trading action here.

5. Yet Another Victim Of The Slowdown

Softening demand and a changing buying pattern have left the central artery of India’s consumer retail chain clogged.

• Distributors, the conduit between manufacturers and millions of mom-and-pop outlets, have seen inventory bloat and working capital shrink.
• The distress is causing shutdowns.
• Volumes have fallen because of the slowdown and companies are increasingly supplying to modern stores directly, hurting business, Dhairyashil Patil, president of the All India Consumer Products Distributors Federation told BloombergQuint.
• Around 5,000 businesses, he said, left the trade in the last six months.

Find out how the slowdown is hurting these suppliers who contribute 90 percent to factory-gate sales for the FMCG industry.

6. Altico Capital Defaults

Altico Capital India Ltd., a non-banking finance company backed by a set of marquee global investors, has defaulted on interest payments to Dubai-based Mashreqbank PSC, according to regulatory filing with the Bombay Stock Exchange.

• According to the filing, an interest payment of Rs 19.97 crore was due on September 12. This payment is now in default.
• The principal amount for the external commercial borrowing on which Altico has defaulted stands at Rs 340 crore, the filing said.
• Altico Capital is real estate-focused NBFC and counts Clearwater Capital Partners, Abu Dhabi Investment Council and Varde Partners among it key shareholders.
• The NBFC was chaired by veteran banker Naina Lal Kidwai, who has stepped down as chairman, according to a Times of India report on Thursday. BloombergQuint could not independently confirm this.

An email sent to Altico Capital on Thursday morning was not answered.

7. Essar Power Lenders’ Plan-B

Lenders to Essar Power Ltd.’s Mahan project in Madhya Pradesh have sought details of a proposed settlement plan from the company’s promoters, after negotiations to sell the project to ArcelorMittal fell through.

• According to two bankers with direct knowledge of the matter, ArcelorMittal had offered to pay Rs 4,800 crore to settle the power plant’s Rs 7,500-crore debt in February.
• However, later, the bidder revised its offer lower to Rs 3,000 crore, citing the large liabilities associated with the power plant, the bankers said while speaking on condition of anonymity.
• In contrast, the Ruia family, promoters of Essar Power, had made an offer of Rs 3,450 crore to settle Essar Mahan’s debt, which lenders are now considering, the bankers quoted above said.
• ICICI Bank Ltd. is the lead lender to the project.
• Business Standard first reported on Thursday that lenders had asked the Ruia family to submit details of their offer for Essar Power Mahan.

Lenders to Essar Power Mahan are now likely to meet later this month to discuss the Ruia family’s offer.

8. M&M Adopts Subscription Model

Mahindra & Mahindra Ltd. on Thursday launched a subscription plan where it will offer its cars and sports utility vehicles to buyers for a fee.

• With the auto slowdown in India entering its 10th straight month in August, auto firms and retailers are struggling to clear inventory at plants and showrooms.

• The Mahindra car subscription plan, priced at Rs 19,720/month onwards, will see models like the KUV 100, XUV 500, XUV 300, Scorpio, TUV 300, Marazzo and Alturas G4 offered to consumers for a period of 1-4 years in case of a new car.
• The scheme comes with offers such as zero down payment, no road tax, zero risks on the resale value of the vehicle, and a fixed amount that includes routine maintenance costs, the company said in the release.

The subscription plan has initially been launched for customers in eight cities.

9. Supreme Court's Clarification

In an apparent bid to douse the row over shifting of the Madras High Court Chief Justice VK Tahilramani to the Meghalaya High Court, the Supreme Court on Thursday said each of the recommendations for transfer of chief justices and judges of various high courts was based on "cogent reasons".

• Without naming Justice Tahilramani, a statement issued by the office of apex court's Secretary General Sanjeev S Kalgaonkar said the reasons of transfer of judges were not disclosed in the interest of the institution but the apex court collegium would not hesitate to disclose them in the circumstance it becomes necessary.
• The statement was released against the backdrop of media reports and speculation on the transfer of Justice Tahilramani.
• The judge resigned on Sept. 6, days after the Supreme Court collegium declined her request for reconsideration of her transfer.
• She sent her resignation letter to President Ram Nath Kovind, a copy of which was sent to Chief Justice of India Ranjan Gogoi. The resignation is yet to be accepted or rejected.

10. Going Subprime Isn’t The Answer For India’s Big Banks

Any financing that’s secured by collateral — steel mills, textile factories, power plants, roads or land — is in trouble in India. A multiyear investment slowdown has decimated credit quality. Now, the problem is spreading. The near-recession in the consumer economy means unsecured lending could be the next domino to fall, writes Andy Mukherjee.

• With business collateral losing its sheen, India’s top three private-sector banks have been expanding their credit card and personal loan business at 30 percent-plus rates, double the pace of growth in their corporate loan book.
• They can’t keep up for long.
• If they try, they would only be storing trouble for the future.

Here are the reasons why.