BQuick On Sept. 3: Top 10 Stories In Under 10 Minutes

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

1. Sensex, Rupee Plunge

Indian equity investors lost around Rs 2.8 lakh crore of wealth today, according to data available with Bombay Stock Exchange.

• That came after Indian equity benchmark—S&P BSE Sensex clocked its worst fall since October 2018.
• The 31-share index closed 2.06 percent or 770 points lower at 36,562.91.
• The NSE Nifty 50 closed 2.04 percent lower at 10,797.90.
• The broader markets represented by the NSE Nifty 500 Index ended 1.95 percent lower.
• The benchmark Nifty 50 is likely to fall 10 percent over the next three months to 9,500-10,000 levels, according to Marcellus Investment Managers’ Founder Saurabh Mukherjea.
• The decline in the markets are due to the ‘structural’ issues in the macro environment, followed by the weak auto numbers, according to G Chokkalingam, founder of Equinomics Research & Advisory.

Follow the day’s trading action here.

The rupee hit the year’s lowest level on concerns that foreign funds may continue to head for the exits amid the slump in economic growth.

• The rupee slid as much as 1.4 percent, with the stronger dollar and a lack of progress on the U.S.-China trade talks also weighing on the currency.
• “A few negatives are weighing on the rupee -- not only the GDP data but also a move higher in USD/CNH and weaker equities,” said Dushyant Padmanabhan, a forex strategist at Nomura Holdings Inc. in Singapore.

While the soft data hurt stocks, it bolstered wagers for further easing by the RBI.

U.S. Stocks Decline, Treasuries Rise

Stocks fell as trade talks between the U.S. and China struck another stumbling block, while Treasuries turned higher and the dollar erased gains after American factory data signalled contraction for the first time in three years.

• The S&P 500 declined for the first time in four sessions as Chinese and American officials struggled to agree on a schedule for negotiations after Washington rejected Beijing’s request to delay tariffs that took effect over the weekend, according to a Bloomberg report.
• Semiconductor shares weighed on benchmarks after Huawei Technologies accused the U.S. government of harassing workers and attacking its internal network.
• West Texas Intermediate crude fell 3.5 percent to $53.14 a barrel.
• Gold rose 1.1 percent to $1,545.60 an ounce.
• Meanwhile, Prime Minister Boris Johnson lost his majority in the House of Commons as he faces a showdown with members of his Conservative Party that will determine the U.K.’s exit from the European Union and the length of his premiership.
• Pound fell below $1.20 for first time since 2017 before paring losses

Get your daily fix of global markets here.

2. Cabinet Decisions: IDBI Bank Recapitalisation, Higher Ethanol Prices

The central government and Life Insurance Corporation of India will together infuse more than Rs 9,000 crore in IDBI Bank Ltd., months after the nation’s largest insurer bought a majority stake in the lender.

• Based on their respective shareholding in the bank, LIC will pump in Rs 4,743 crore and the government will infuse Rs 4,557 crore “on a one-time basis”, Prakash Javadekar, Minister of Environment and Information and Broadcasting, told reporters after the cabinet meeting.
• This recapitalisation in IDBI Bank will put the lender on “front foot” to take banking activities to the next level, he said.

IDBI Bank’s provision cover has improved over the last year.

The government on Tuesday announced an increase in the price of ethanol procured by public sector oil marketing companies for one year starting December.

• Prices of ethanol from C-heavy molasses will be increased to Rs 43.75 a litre from Rs 43.46 per litre.
• Prices of ethanol from B-heavy molasses will be raised to Rs 54.27 per litre from Rs 52.43 per litre.

The increased prices have been approved for the forthcoming sugar season 2019-20.

3. August Auto Sales: Bajaj Auto, TVS Motor Skid

Bajaj Auto Ltd. sold 3.9 lakh units in August, a fall of 11 percent from the year-ago month, the Pune-based automaker said in a stock exchange filing.

• Domestic motorcycles sales fell 21 percent to 1.73 lakh units.
• Domestic commercial vehicles sales declined 6 percent to 35,085 units.

TVS Motor’s August sales declined over 15 percent to 2.90 lakh units, according to its exchange notification.

• Two-wheeler sales fell 16.4 percent to 2.75 lakh units.
• Motorcycle sales fell nearly 17 percent to 1.09 lakh units.

Here’s a look at the August auto sales data, all in one place.

4. This Could Hurt IndiGo’s Profit

InterGlobe Aviation Ltd.’s foreign exchange losses may jump in the July-September quarter of 2019-20 as the operator of IndiGo airlines adopted a new accounting standard and the rupee fluctuated.

• As the company adopted Ind AS-116 accounting standard, it had to capitalise its operating leases on aircraft, which resulted into a lease liability of Rs 16,070 crore as of June 30, according to IndiGo’s note to investors, a copy of which has been reviewed by BloombergQuint.
• Every Re 1 movement in the rupee-dollar exchange rate over and above Rs 68.90 will roughly have a Rs 233-crore mark-to-market foreign exchange impact on profit and loss account, the operator of the budget carrier said in the note.
• According to BloombergQuint’s calculations, may result into Rs 800 crore of foreign exchange losses from operating leases for IndiGo.

IndiGo also clarified that the slowdown in passenger growth is due to capacity reduction and not lower demand.

5. What Beaten-Down Valuations Of Steelmakers Reveal

India’s steelmakers are trading at valuations lower than the previous two downcycles as U.S. President Donald Trump’s protectionist tariffs and China’s retaliation, waning demand in a slowing global economy and a stronger dollar pulled down metal prices.

• The Nifty Metal Index has tumbled nearly 30 percent so far in 2019, the most in four years. Fourteen of the 15 constituents of the gauge have fallen.
• Iron ore turned costlier this time following disruption of supplies at Brazil’s Vale SA, the world’s largest producer of steelmaking raw material. Chinese steel price benchmark has fallen 8.50 percent this year while iron ore has jumped as much as 32 percent.
• But margins and return on equity—a measure of profitability— are better than 2016, aided by higher volumes and cost cuts.

The two indicators, however, pale in comparison with 2009.

6. How Real Estate Developers Are Tiding Over Liquidity Crisis

India’s real estate developers have been struggling to raise funds as lenders turned selective after a shock default by the IL&FS Group triggered a liquidity crisis in the economy. Non-bank lenders that lent heavily to developers have been the worst hit, which made refinancing difficult.

BloombergQuint spoke with real estate stakeholders to find out the ways they have adopted to tide over their liquidity crunch.

• Cash-starved developers pay one-third fee to vendors and service providers for their services and for the balance amount they offer apartments in the project being built.
• Small and big developers come together to complete a project. While smaller developers help to get approvals and land rights, larger peers get the brand value.

Here are other ways developers are adopting to survive.

8. Anil Ambani’s Shipyard Risks Insolvency

The shipyard controlled by embattled Indian tycoon Anil Ambani is facing the prospect of bankruptcy after failing to get creditors’ approval for restructuring Rs 7,000 crore ($970 million) of debt, people familiar with the matter told Bloomberg News.

• India’s bankruptcy tribunal will consider putting Reliance Naval & Engineering Ltd. in bankruptcy on Wednesday as no new repayment plan was submitted after lenders led by IDBI Bank Ltd. rejected an earlier offer in July, the people said.
• The court can also defer the decision on bankruptcy.
• Any court ruling favoring the banks would deal another blow to the tycoon’s stressed empire after his wireless carrier slipped into insolvency earlier this year.

Here’s why revival of the shipyard is crucial for the tycoon.

9. Extracting Surpluses From RBI’s Revaluation Reserves

It may now be possible for the Reserve Bank of India to theoretically extract over Rs 2 lakh crore of income from its revaluation reserves in FY20, writes Ananth Narayan.

• Does the commercial logic of marking-to-market an asset apply to a central bank like RBI?
• The debate should likely be less about whether this accounting change is appropriate or not, and more about how much the RBI can and should monetise the government.
• We already are deep in the midst of an uncharted print-and-spend cycle. Past experiments of this nature have invariably ended badly.

This time around feels different, but is it?

10. Chidambaram’s Custody Extended

The Supreme Court on Tuesday said the Central Bureau of Investigation custody of former finance minister P Chidambaram would continue till Sept. 5 in the INX Media corruption case.

• The apex court asked Chidambaram’s counsel not to press for the interim bail plea, which they had filed before the trial court on Monday and is scheduled to be heard during the day, till Sept. 5.
• A bench of Justice R Banumathi and Justice AS Bopanna said it would on Sept. 5 hear Chidambaram’s plea in which he has challenged the non-bailable warrant issued against him as well as the subsequent trial court’s orders remanding him to CBI custody.

The bench said they were conscious that they should not usurp the jurisdiction of another trial court.