BQuick On Sept. 23: Top 10 Stories In Under 10 Minutes
This is a roundup of the day’s top stories in brief.
1. Sensex Adds Another 1,000 Points
Indian equity benchmarks extended the rally for a second consecutive trading session to end near a two-month high.
- The S&P BSE Sensex closed 2.83 percent or 1,075.41 points higher at 39,090.03.
- The NSE Nifty 50 ended 2.89 percent higher at 11,600.
- The broader markets represented by the NSE Nifty 500 Index advanced 2.78 percent.
- Nomura expects the Nifty 50 to reach 12,545 by March on the back of a potential 7 percent earnings increase in the current and the next financial year.
- The cut in corporate tax rates on domestic businesses is positive for corporates, economy and market valuations, according to the Japanese brokerage.
- Nine of 11 sectoral gauges compiled by NSE ended higher.
Follow the day’s trading action here.
2. Corporate Tax Cuts: Impact On Earnings, GDP, Foreign Investment
India’s move to lower corporate tax rates alters the negative sentiment plaguing capital markets and the economy, and straight away boosts the earnings growth outlook.
- That’s according to Ridham Desai, managing director and head of equity research at Morgan Stanley India.
- “[Indian government] has altered future cash flows to eternity by above 10 percent with one stroke of the pen,” said Desai in an interview to BloombergQuint.
- “Our earnings forecast is that we can see two back-to-back years of 20 percent-plus growth [for financial years ending 2020 and 2021].”
It is safe to say that there is no country on the planet with that type of earnings outlook.Ridham Desai, MD and Equity Research (Head), Morgan Stanley India
Watch the full interview with Ridham Desai where he explains how India can overcome the only drag on its growth prospects.
Meanwhile, veteran emerging-markets investor Mark Mobius said foreign investors would increase their exposure to the nation after the corporate tax cuts.
- “India stands pretty high in the EM (emerging market) pack,” Mobius, partner and co-founder of Mobius Capital Partners LLP, told BloombergQuint in an interaction.
- “Till now, our fund’s exposure to China was a little higher than India, but now we may see India surpassing China,” he said.
Mobius has also dismissed concerns on the fiscal implications of the tax cut.
India’s decision to cut the corporate tax rate for domestic companies will have a positive impact on growth, said economists even though estimates of the extent of impact differ. One way to assess the growth impact of the corporate tax cuts is to look at the tax multiplier of growth. The measure is used to capture the impact of an increase or a reduction in tax on nominal output.
A fall of about Rs 1 crore in corporate taxes collections, could raise GDP by about Rs 1 crore, says one research paper. Find out how.
3. Cement Prices Fall Again
Cement prices fell for the fourth straight month in September as labour shortage ahead of the festive season weighed on construction activity.
- All-India average cement prices marginally dipped by Rs 2 month-on-month to Rs 338 for a 50-kilogram bag in September, according to the survey of 15 dealers across five regions.
- The price cut on a pan-India basis was cushioned by a big price hike in the southern region.
- The price cut was the sharpest in North and East.
- The central region continued to show resilience in the absence of any substantial capacity addition.
While dealers in North expect demand to recover over the next two months, the South is looking at a weak scenario.
4. SBI To Link Loans To Repo Rate
State Bank of India said it will adopt the repo rate as the external benchmark for all floating rate loans for micro, small and medium enterprises, home and retail loans, from Oct. 1, 2019.
- On Sept. 4, the Reserve Bank of India had mandated all banks to link all new floating rate personal or retail loans and floating rate loans to MSMEs to an external benchmark starting Oct. 1.
- The RBI gave the banks options to benchmark their floating rate loans either to the repo rate, three-month or six-month treasury bills or any benchmark market interest rate published by Financial Benchmarks India Private.
- The bank has also extended the external benchmark-based lending to medium enterprises, to boost lending to the MSME sector as a whole.
5. Why Ambani Didn’t Go All Guns Blazing With Broadband
Mukesh Ambani launched into India’s crowded telecom arena in 2016, wildly swinging the axe at rivals. But earlier this month, Asia’s richest man ambled into the broadband market, shunning aggression.
- The billionaire’s Reliance Jio Infocomm Ltd. started with free unlimited 4G data and voice services three years ago.
- This time, it’s offering higher broadband speeds but has capped usage.
- The telecom war has proven costly for Ambani, with the group’s debt rising.
- It’s among the factors that could have forced him to tone down aggression now.
Is it the debt overhang? Or the state of India's broadband market?
Find out why Ambani changed strategy for Reliance Jio Fiber.
6. Demise Of An Iconic Travel Brand, And Its Fallout In India
London-based Thomas Cook Group Plc collapsed under a pile of debt on Monday leaving than 150,000 tourists stranded on overseas beaches and in vacation hotspots.
- The U.K. government deployed the “largest repatriation in peacetime history” to bring home tourists using chartered jetliners after Thomas Cook’s eleventh-hour fundraising talks with investors failed.
- The government will cover the cost of accommodation and their return home around the scheduled time.
- Still, the collapse of Thomas Cook created travel chaos for thousands of people who had yet to depart -- throwing a monkey wrench into family reunions, weddings or honeymoons while sowing confusion among vacationers who vented on Twitter.
Thomas Cook is the highest-profile casualty of a decades-long shift in the travel business.
The ripples reached India too. When the news broke, investors beat down the shares of an unrelated company thousands of miles away in India, ignoring multiple clarifications that it isn’t in any way related to the U.K. firm.
- Thomas Cook India Ltd. resorted to a communication blitz -- exchange filings, statements to the media and advertisements in local newspapers -- in the past few days to clarify that the collapsed U.K. firm exited the Indian company seven years ago. The new owner is Fairfax Financial Holdings Ltd.
- Shares of Thomas Cook India closed 1.75 percent lower, after falling as much as 3.7 percent during the day's trade.
And yet you ask, what's in a name?
7. Bankruptcy Board Wants To Know The Scope Of Its Powers
The Insolvency and Bankruptcy Board of India has approached the Supreme Court seeking clarity on its prosecution powers, over a month after the National Company Law Appellate Tribunal declined to extend the insolvency period for Amtek Auto Ltd.
- The IBBI, represented by Additional Solicitor General of India Madhavi Divan, has challenged a portion of NCLAT's order in the Amtek Auto case, which held that the bankruptcy board can initiate prosecution only in cases that are referred to it by the National Company Law Tribunal or the central government.
- A Supreme Court bench, headed by Justice Arun Mishra, also put on hold Monday the criminal prosecution initiated against Liberty House Group, which had successfully bid for Amtek Auto during the latter’s insolvency process, only to later back out citing irregularities in information shared with them.
The top court will hear the Amtek Auto case and the bankruptcy board’s petition on Tuesday.
8. Hungry Cows Are Eating Away India’s Sugar Output
Sugar output in India’s second-biggest producing region will be less than expected after flood damage and as some farmers sell cane for feed.
- Production in the western state of Maharashtra may total 5.2 million to 5.3 million tons in the year starting Oct. 1, compared with a previous estimate of 6.44 million tons, said Shekhar Gaikwad, the state’s sugar commissioner.
- The new total is half of last year’s 10.7 million tons, according to Gaikwad.
- Prolonged dry weather earlier on caused fodder shortages in the state.
- That’s helping farmers get attractive returns by selling cane for feed.
Cane prices, fixed by the government, generally stay above fodder costs, except in unusual years when poor rains boost feed prices.
9. China Is Placing Its Own Officials At Tech Giants Like Alibaba
The government of one of China’s top technology hubs is dispatching officials to 100 local corporations including e-commerce giant Alibaba Group Holding Ltd., the latest effort to exert greater influence over the country’s massive private sector.
- Hangzhou, in the eastern province of Zhejiang, is assigning government affairs representatives to facilitate communication and expedite projects, the city government said on its website.
- Chinese beverage giant Hangzhou Wahaha Group Co. and automaker Zhejiang Geely Holding Group Co. are among the other companies based in the prosperous region that have been singled out, according to reports in state media.
- The Hangzhou government said the initiative was aimed at smoothing work flow between officials and China’s high-tech companies and manufacturers.
But the move could be perceived also as an effort to keep tabs on a sector that’s gaining clout as a prime driver of the economy.
10. Former Uber Boss Gets A Slice Of Indian Cloud Kitchen
Uber co-founder Travis Kalanick has invested in India’s largest shared-kitchen company, a person familiar with the matter said to Bloomberg, taking his second act in business to one of the world’s fastest-growing internet arenas.
- Kalanick’s real estate company, City Storage Systems, bought a small stake in Rebel Foods Pvt. as part of a previously disclosed $125 million round of funding, the person said, asking not to be identified talking about a private deal.
- The entrepreneur has taken a slice of a business valued at $525 million that delivers butter chicken and paneer-topped pizzas to millions of Indians, backed by big-name investors from Coatue Management and Goldman Sachs to Sequoia Capital and ride-hailing giant Gojek.
- Rebel Foods is now expanding beyond its home turf and into Southeast Asia and the Middle East.
Kalanick is making his first investment in India. But this could be part of his larger strategy to build a kitchen rental service.