BQuick On Sept. 30: Top 10 Stories In Under 10 Minutes
This is a roundup of the day’s top stories in brief.
1. No Extra Borrowing Despite Rs 1.45-Lakh Crore Stimulus
India maintained its borrowing plan for the second half of 2019-20 amid concerns that the government will overshoot its fiscal deficit target because of a surprise cut in corporate tax rates.
- The government will borrow Rs 2.68 lakh crore in the October-March period in 17 weekly auctions, Economic Affairs Secretary Atanu Chakraborty told reporters in New Delhi on Monday.
- Size of weekly borrowings will be Rs 16,000 crore, with the last two auctions of Rs 14,000 crore spread over 4-5 maturity buckets.
- The government will issue floating-rate bonds to the extent of 10 percent of gross issuances during the year.
Here’s the share of issuances under different maturity buckets.
2. India’s Fiscal, Current Account Deficit Widen
India’s fiscal deficit widened marginally in August over the previous month.
- The gap between the government’s revenue and expenditure rose to Rs 5.53 lakh crore as of August, according to data released by the Controller General of Accounts.
- That’s 78.7 percent of the budgeted estimate of Rs 7.04 lakh crore for 2019-20.
- In July, the deficit stood at 77.8 percent of the target.
- Still, the fiscal deficit level is lower than that of August last year when it had reached 94.7 percent of the FY19 target.
Here are highlights of fiscal deficit and why India may run over its budgeted target this year.
India’s current account deficit widened in the April-June quarter when compared to the previous three months but remained within comfortable limits.
- The current account gap in the first quarter of financial year 2019-20 stood at $14.3 billion or 2 percent of GDP.
- This is wider than the $4.6 billion (0.7 percent of GDP) in the fourth quarter of FY19 but narrower than the $15.8 billion (2.3 percent of GDP) in the first quarter of last financial year.
The current account contracted on a year-on-year (y-o-y) basis, primarily on account of higher invisible receipts at $ 31.9 billion as compared with US$ 29.9 billion a year ago.RBI Statement
There was a positive surprise in the deficit numbers. Find out why.
3. Nifty’s Best September In Six Years
Indian equity indices halted their three-month losing streak.
- The S&P BSE Sensex and the NSE Nifty 50 rallied over 3.5 percent and 4 percent respectively this month, registering their best September gains since 2013.
- Today, the 31-share index fell 0.4 percent to end at 38,667.
- The 50-stock gauge declined 0.33 percent to close at 11,474.45.
- Yes Bank Ltd. slumped to its lowest level in a decade with wary investors exiting the lender in a hurry.
- Indiabulls Housing Finance Ltd. fell 34 percent as the RBI placed curbs on Lakshmi Vilas Bank Ltd., which it plans to acquire.
- Debt-ridden Housing Development & Infrastructure Ltd. plunged to a record as regulators examined the scale of the real estate developer’s borrowings from Punjab & Maharashtra Bank, which has been sanctioned by the RBI.
Follow the day’s trading action here.
U.S. stocks advanced, while Treasuries edged lower as investors weighed the latest turns in the trade war between the world’s two largest economies.
- The S&P 500 headed for its third monthly gain in four after rebounding from August’s downturn.
- Tech firms lead gainers after Trump administration partially refuted a report it would target Chinese capital, reversing some losses sparked by the news Friday.
- Ten-year Treasury yields trimmed an early advance to trade around 1.69 percent, still about 30 basis points lower than it was at the end of June, after data showed weakening business activity.
- The dollar pared gains, bringing its quarterly rise to 2.6 percent.
- The pound gained as Prime Minister Boris Johnson fought off allegations of sexual impropriety and plots in Parliament to oust him over his Brexit plans.
- West Texas oil fell below $56 a barrel.
Get your daily fix of global markets here.
4. Nifty 50’s Offering Cheap Deals Right Now
The stock surge after India’s tax bonanza has only reinforced the dichotomy between Nifty 50 and most of its constituents. The one-year forward price-to-earnings multiple of the benchmark spiked as the markets rose the most in a decade.
- Nifty 50 now trades at a 16 percent premium to its 10-year average, according to Bloomberg data.
- But nearly three-fourths of the stocks in the index are trading at a discount to the historical valuation.
Here are the companies trading at a discount, in different sectors.
5. First Sign Of Auto Revival?
Retail sales of cars and two-wheelers rose marginally in September over the previous month as automakers offered the year’s biggest discounts yet, according to a BloombergQuint survey of 10 large dealerships across India.
- Automakers, including Maruti Suzuki (India) Ltd., announced discounts ranging between Rs 5,000 and Rs 1 lakh on some of its cars, nearly a week after the government reduced corporate tax rates to spur economic growth from a six-year low.
- “There were a lot of customers who were awaiting clarity on the GST Council’s decision (on reducing the indirect tax on automobiles) at the start of the month who are now making final purchase decisions,” Vinkesh Gulati, director, United Automobiles—a dealer for Mahindra and Mahindra Ltd.—told BloombergQuint.
- Nikunj Sanghi, managing director at JS Fourwheel Motors Pvt. Ltd., a dealer for Hero MotoCorp Ltd., agreed.
However, wholesales volumes are likely to fall.
6. Maruti Suzuki's Newest Bet
India’s largest carmaker is betting on its “Mini SUV” to aid growth in the entry-level segment, and to boost its sales at a time when the industry is going through its worst slowdown in more than two decades.
- With hatchback S-Presso, which Maruti Suzuki India Ltd. calls a “Mini SUV”, the automaker is eyeing first-time buyers who prefer sports utility vehicles.
- “This (S-Presso) caters to a very large segment, and people are looking at this kind of vehicle at this price point,” Shashank Srivastava, executive director for sales and marketing at Maruti Suzuki, told BloombergQuint.
- Maruti’s mini hatchback segment—that includes Alto, Wagon-R—declined by nearly 70 percent in August from a year earlier, the data showed.
Srivastava said the carmaker is prepared for any volumes to meet the demand.
7. Anil Ambani’s Promise To Investors
Four years into one of the biggest, longest unwindings in India’s corporate history, tycoon Anil Ambani found himself in a familiar place Monday: Presenting shareholders with another plan to sell off assets and pay debt.
- His Reliance Group is planning to pay creditors Rs 15,000 crore ($2.1 billion) more by March, the embattled executive told investors at the annual general meeting on Monday in Mumbai.
- Financial unit Reliance Capital Ltd., whose credit rating was downgraded to default by local firms this month, will exit its lending business, he said.
- As it abandons lending, Reliance Capital will be a financial shareholder in its Reliance Commercial Finance Ltd. and Reliance Home Finance Ltd. businesses, while the parent will rely on its insurance business as a “long-term value creator”.
- Reliance Capital’s home and commercial finance businesses are working with lenders on a “resolution” plan it expects to be completed by December, he said.
Here are the key takeaways from the Reliance Group AGMs.
8. HDFC Bank Rolls Out The Red Carpet
India’s largest private sector lender HDFC Bank Ltd. has rolled out a platter of special offers for retail borrowers ahead of the upcoming festive season.
- Such offers, while not unique for this time of year, are being amped-up against the backdrop of a weak economy and a government push to improve access to credit.
- Over the past two weeks, Finance Minister Nirmala Sitharaman has met with bankers asking them to participate in efforts to push retail credit, including loan melas.
- In HDFC Bank’s case, the ‘Festive Treats’ include tie-ups with over 1,000 retail brands that will offer discounts, cash-backs and extra reward points on both in-store and on-line purchases.
The bank will also provide special offers on all banking products.
9. External Benchmarking Of Interest Rates: A Welcome Challenge
In addition to making monetary transmission better, external benchmarking is going to improve transparency in loan pricing and hence enhance consumer protection, writes Harsh Vardhan.
- The systemic benefits of external benchmarking far outweigh the claimed challenges.
- Interest rate risk management does indeed become more challenging with the proposed change.
However, this cannot be an argument for rejecting the change.
10. The First Thackeray To Contest Elections
Shiv Sena leader Aaditya Thackeray, the elder son of party chief Uddhav Thackeray, on Monday said he will contest the Oct. 21 Assembly elections.
- Aaditya made the announcement at a party rally in Mumbai.
- He will become the first member of the Thackeray clan ever to contest an election.
- "I am sure of victory as I have the blessings of you all," he told the gathering.
- Ever since the Shiv Sena was founded by late Bal Thackeray in 1966, no member of the family had contested any election or held any constitutional post.
The Shiv Sena has been projecting Aaditya as the chief ministerial candidate if they bag the highest number of seats.