BQuick On Sept. 16: Top 10 Stories In Under 10 Minutes

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

1. The Oil Shock And Its India Impact

The record oil-price surge after a drone strike on a Saudi Arabian oil facility couldn’t come at a worse time for a world economy already in the grip of a deepening downturn.

• While the severity will depend on how long the price spike endures, the development will further erode business and consumer confidence that already are fragile amid the U.S.-China trade dispute and slowing global demand.
• A manufacturing slump around the world is hammering growth in export powerhouses China and Germany.

The oil shock comes amid a flurry of warning signs for the global economy. And the impact could vary around the world.

Saudi Arabian Oil Company, however, has assured that a drone attack on its oilfield won’t disrupt oil supply to India, the oil ministry said on Monday.

• The Ministry of Petroleum and Natural Gas is closely monitoring the situation in consultation with Indian refiners and Saudi Aramco, according to a media statement.
• India imports 75 percent of its oil requirement.
• Of this, about 40 percent comes from Saudi Arabia.

Still, Indian oil marketers aren't too worried. Here’s what they said.

2. Oil Soars; Nifty, U.S. Stocks Slip

Oil surged and assets considered to be havens in times of trouble climbed after a strike on Saudi Arabia’s crude production heightened geopolitical risk.

• Brent oil posted a record intraday jump, soaring as much as 19 percent before paring gains, as news of the devastating strike on the world’s largest exporter also sent currencies of commodity-linked nations higher, including the Canadian dollar.
• Stocks slipped in the U.S. and Europe.
• Gold climbed 0.7 percent to $1,498.40 an ounce.

Get your daily fix of global markets here.

Earlier in the day, Indian equity benchmarks registered their worst fall since Sept. 03.

• The S&P BSE Sensex ended 0.7 percent lower at 37,123.31.
• The NSE Nifty 50 ended 0.65 percent lower at 11,003.50.
• The broader markets represented by the NSE Nifty 500 Index closed 0.46 percent lower.
• Homegrown brokerage and research firm ICICI Securities Ltd. expects the 50-stock index to inch towards 11,200 in coming weeks, according to its research report.
• Besides, ICICI Securities also expects the outperformance of mid and small caps to continue.
• Seven out of 11 sectoral gauges compiled by NSE ended lower.

Follow the day’s trading action here.

3. Wholesale Inflation: Devil’s In The Detail

India’s wholesale inflation remained unchanged in August, showed data released by the Government on Monday. Fine print of the data, however, showed that no increase in prices of manufactured products for the first time in over three years, indicating weak demand.

• Inflation measured by the Wholesale Price Index remained unchanged at 1.08 percent in August compared to the preceding month.
• A Bloomberg poll of 21 economists estimated a reading of 1 percent.
• The zero percent inflation seen in manufactured products is the lowest in 38-months, shows comparable data.

Core wholesale inflation may remain below zero for the rest of 2019.

4. A Year On, And Still Work In Progress

On Aug. 31, the government abruptly announced that it will merge 10 public sector banks into four. It drew confidence from the merger of State Bank of India with its associate banks in 2017 and the consolidation of Bank of Baroda with Dena Bank and Vijaya Bank, announced in 2018.

• On Sept. 4, the heads of 10 large public sector banks met with the top management at Bank of Baroda. The agenda—understand what goes behind a complex merger process involving two or three public sector lenders.
• Top executives of the 10 lenders who are preparing to begin the consolidation spent nearly the entire day at Bank of Baroda, leaving with the realisation that the process ahead was a long-drawn one.
• The merger of Bank of Baroda with smaller peers Dena Bank and Vijaya Bank was itself announced exactly a year ago.
• In that time, a core team in-charge of the merger had dealt with issues ranging from re-organisation of employees to merging of IT systems.

Most of the tasks remain a work-in-progress.

5. High Demand For Air India’s Bond Issue

Air India Assets Holding Ltd., a special-purpose-vehicle of the national carrier, received Rs 20,830 crore worth of bids for its Rs 7,000 crore bond issue on Monday, said bankers familiar with the matter.

• It was over-subscribed by nearly three times from investors including banks, mutual funds, insurance companies and foreign portfolio investors, two bankers close to the issue told BloombergQuint on the condition of anonymity.
• The coupon for the bond issue was set at 6.99 percent, around 86 basis points higher than the three-year government bond yield which stood at 6.13 percent, according to the bankers.
• The Rs 7,000 crore bond had a base issue of Rs 1,000 crore with a green-shoe option of Rs 6,000 crore, BloombergQuint reported on Sept. 13.

Higher oil prices and the resultant increase in bond yields also led to a higher coupon being set.

6. RCom Unit Files For Bankruptcy

A unit of Reliance Communications Ltd., Anil Ambani’s distressed telecom firm, has filed for bankruptcy protection.

• GCX Ltd., which owns the world’s largest private undersea cable system, is the latest company owned by the tycoon to stumble. The former billionaire’s Reliance Communications itself fell back into bankruptcy earlier this year.
• The move by subsidiary GCX comes after it missed payment on its $350 million of 7 percent bonds that matured on Aug. 1.
• Ambani has been waging a war on debt, and Reliance Group has said that it planned to raise about Rs 21,700 crore ($3.1 billion) by selling assets from roads to radio stations in a bid to cut borrowings.

Another firm controlled by Anil Ambani recently said it is facing an acute cash-flow crunch.

7. Altico Saga: SBI’s Kumar Slams ‘Selfish’ Private Sector Bank

State Bank of India Chairman Rajnish Kumar has criticised a “selfish" private sector bank for issues at Altico Capital India Ltd. as its unilateral move to secure its own money can potentially cause troubles to the wider financial system.

• On Friday, a day after Altico Capital defaulted on payments to Dubai-based Mashreq Bank PSC, HDFC Bank Ltd. netted-off the Rs 220 crore held by Altico Capital in the bank’s fixed deposits against outstanding term loans which the real estate NBFC owed to the lender, BloombergQuint quoted two people as saying in a Sept. 14 report.
• HDFC Bank had extended about Rs 260 crore in term loans to Altico Capital.
• Altico Capital has claimed that the transaction was not in good faith.
• According to the first of the two people quoted in the report, Altico Capital is currently seeking legal advice on initiating proceedings against the bank for carrying out this transaction.

If any bank makes a selfish move, it can have a negative impact on the rest of the system, said Kumar.

8. Restore Normalcy In Kashmir: Supreme Court To Government

The Supreme Court on Monday asked the central government and Jammu & Kashmir authorities to see that normalcy is restored on a selective basis in the state while keeping in mind national interest.

• A bench of Chief Justice Ranjan Gogoi and justices SA Bobde and SA Nazeer asked authorities to restore normal life in the Valley and ensure people have access to welfare facilities.
• The court said the restoration will be on a selective basis keeping in mind national interests.

The apex court said that the so-called shutdown can be dealt with by the Jammu and Kashmir High Court.

Meanwhile, former J&K Chief Minister Farooq Abdullah, under detention since Aug. 5, has now been booked under a provision of the Public Safety Act which allows authorities to detain an individual for six months without trial.

• The tough law against the 81-year-old, confined to his home since the government revoked J&K's special status, was imposed on Sunday.
• The three-time chief minister's Gupkar Road residence has been declared a jail through a government order.

Abdullah is the first J&K chief minister to be booked under the PSA law.

9. Should India Stay In the Proposed RCEP FTA, And On What Terms?

There is nothing wrong with India being hesitant in completely liberalising, writes Srividhya Ragavan.

• The realities in America where foreign goods and services affected local businesses is a stark example for India to consider and exercise caution.
• The line between being a robust trading partner for China and a dumping ground is thin.
• Advocating caution is by no means a call deterring India from the RCEP.
• FTAs can work blissfully well to mutual benefit if the terms are clear, transparent before the arrangement fructifies.

10. U.S. Energy Capital Prepares To Say ‘Howdy Modi’

Indian Prime Minister Narendra Modi’s imminent visit to the U.S. energy capital is fuelling speculation the second most-populous nation will further tap America’s shale gas bonanza.

• Modi is scheduled to address upwards of 50,000 people at a sold-out event at Houston’s NRG Stadium on Sept. 22 that’s billed by organisers as the largest-ever turnout for a foreign elected leader on U.S. soil.
• Energy investors, however, are keenly focused on what happens behind the scenes.
• A long-running trade war between Washington and Beijing has meant China hasn’t imported any American supply since February.
• By contrast, India is open to making purchases, and the nation is already the sixth-largest buyer of U.S. liquefied natural gas.
• The three-hour gathering -- branded as “Howdy Modi!” -- is scheduled to include a “cultural programme” that will be followed by an address by the Indian leader.

Heightening expectations is the timing of Modi’s Texas visit. Here’s why.