BQuick On Sept. 4: Top 10 Stories In Under 10 Minutes
This is a roundup of the day’s top stories in brief.
1. Retail, SME Loans: External Benchmarks From Oct. 1
The Reserve Bank of India has made it mandatory for banks to link all retail and small and medium enterprise loans to an external benchmark from Oct. 1.
- Existing borrowers eligible for prepaying floating rate loan without pre-payment charges, shall be eligible for switch over to External Benchmark without any charges/fees, except reasonable administrative/legal costs.
- Banks can choose from RBI's repo rate, three-month T-Bill, six-month T-Bill or any other FBIL benchmark.
- Banks can determine spread to be charged for individual borrowers.
- Credit risk premium can only be adjusted if credit quality of borrower changes.
Here’s what will be the impact on banks.
2. Jet Airways: 2 Suitors Left Standing
The committee of creditors for Jet Airways (India) Ltd. has short-listed two entities to proceed with bidding for the airline from the list of three firms that had expressed initial interest.
- The creditors have allowed South American conglomerate Synergy Group and Russia’s Treasury RA Creator to move to the next step of submitting bids, according to two people familiar with the matter.
- The creditors, however, decided to disqualify Panama-based Avantulo Group from the list of potential bidders for the beleaguered airline, the people said.
- On Tuesday, the committee met to finalise the provisional list of bidders who will have access to the data room at Jet Airways and come up with a final resolution plan.
- At the meeting, the creditors noted that despite repeated requests for submitting eligibility documents, the Avantulo Group had failed to do so.
- The committee finally decided to move ahead with the resolution process with only two potential bidders, the people quoted above said.
The shortlisted bidders will be expected to submit their final resolution plans by Oct. 14.
3. Nifty Rebounds, U.S. Stocks Rise
Indian equity benchmark—S&P BSE Sensex rebounded from its worst fall in 11 months.
- The 31-share index closed 0.44 percent higher at 36,724.24.
- The NSE Nifty 50 ended 0.43 percent higher at 10,844.65.
- The broader markets represented by the NSE Nifty 500 Index ended 0.35 percent higher.
- Indian markets will witness a turnaround only after foreign portfolio investors turn substantial buyers, according to Dimensions Corporate Finance Services’ Managing Director Ajay Srivastava.
- The market breadth was tilted in favour of buyers.
- Six out of 11 sectoral gauges compiled by NSE ended higher.
Follow the day’s trading action here.
U.S. stocks advanced as a broad easing of risks across the globe gave investors a reprieve.
- The S&P 500 rebounded from Tuesday’s losses along with European and Asian shares as political tensions appeared to subside in Hong Kong and the U.K., while indicators in China and Europe hinted economic growth may not be as bad as some expected.
- The 10-year Treasury yield gained, while the dollar fell for a second day.
- West Texas Intermediate crude advanced 2.8 percent to $55.45 a barrel.
Get your daily fix of global markets here.
4. The Wrong Time To Sell Stocks
It is important to not sell companies that are doing well simply because valuations seem to be stretched, according to Morgan Stanley Investment Management’s Swanand Kelkar.
- “If operating momentum is in your favour, one should hang on to investments,” Kelkar told BloombergQuint on a special series—Navigating Through Uncertainty.
If only high valuations would have been the benchmark for selling, India’s most respected bank would not be in anybody’s portfolio.Swanand Kelkar, Managing Director, Morgan Stanley Investment Management
- While calling hope trade as “one day, someday” portfolio which “probably” will grow at some point of time in the future, Kelkar said the growth today is a challenge, but the investor is willing to wait it out.
- He, however, stressed that the “one-day-some-day” set of companies should not be more than 10 percent of the portfolio.
Market share retention and the strength and quality of the balance sheet are the two key areas of a good company, he said.
5. Best Performing AMC Stocks In 2019
India’s largest and third-largest asset managers have created most wealth for investors so far this year.
- Shares of HDFC Asset Management Company Ltd. and Reliance Nippon Asset Management Ltd. have gained over 75 percent so far in 2019—being the top two gainers on the Nifty 500 index.
- HDFC AMC continued its rally from 2018, however, for Reliance Nippon the rally was after a 47 percent decline in value.
- Steady flows into systematic investment plans, pass through impact of reduced total expense ratio and strong financial performance over the last three quarters also aided the rally in share prices of both the asset managers.
But why was India’s second largest asset manager left behind?
6. NHAI Looks To Allay Concerns
National Highways Authority of India is in a “very sound” position with a strong pipeline of projects, its Chairman NN Sinha said on Wednesday.
- NHAI is on its way to construct about 4,500 km of projects, higher by about 1,000 km than last year's 3,300 km of projects, said Sinha.
- It is also likely to float an Infrastructure Investment Trust, or InvIT, by the end of the year and was awaiting cabinet approval for the same, he added.
- "There have been reports in sections of the media that contingent liabilities of NHAI are something of Rs 3 lakh crore. Either people do not understand what contingent liability is or the numbers are misreported. Contingent liability is uncertain in nature,” said Sinha.
On funds, Sinha said NHAI will request the government for more budgetary resources.
7. India’s Power Paradox
An almost 7 percent growth in India’s electricity demand at a time when economic expansion has cooled to its weakest in six years may appear as a paradox at first glance. Clarity emerges with a closer look.
- Power requirement growth in the nation’s most industrialised states decelerated in the April-July period, as demand from businesses cooled in line with the broader slowdown in Asia’s third-largest economy.
- The overall jump in demand, on the other hand, came mostly because of a rise in requirement from states that happened to add a large number of households to the electricity network for the first time.
- Uttar Pradesh, India’s most populous state that added the maximum number of new household power consumers, saw demand rise 9 percent, while Rajasthan saw a demand growth of 11 percent during the four-month period, data from the government’s Central Electricity Authority shows.
This is key to the revival of India’s money-losing electricity distributors.
8. Expensive Election ≠ Higher Growth
Elections, particularly in a large democracy like India, are an expensive affair. Campaigning, travel, goodies doled out to voters all add to the spending in the economy near the time of elections.
- In 2019, close to Rs 55,000 crore, or $8 billion, was spent, according to a report by the Centre for Media Studies, which termed the Lok Sabha elections as the world’s costliest.
- Typically, the spending in the run-up to general elections provides a boost to economic growth. But not this time.
- Data over the last five election cycles, including the recently concluded one, shows that with each cycle came a boost to growth in the quarter in which elections are held. Since general elections are typically held in the April-May period, it’s the June quarter which sees a spurt in growth.
The elements normally seen in regular general elections were missing in this one.
9. Mumbai: Another Episode Of Rain Fury
Heavy rains lashed Mumbai over the past two days crippling normal life across the city as roads were left waterlogged and trains suspended.
- The heavy downpour caused flooding in low-lying areas, leading to cancellation of several local trains on the Central and Harbour railway lines and some sections of the Western line.
- The Western Railway said trains on its slow lines were suspended between Churchgate and Vasai Road due to waterlogging at Matunga Road.
- However, the services were running on its fast lines between Churchgate and Vasai Road.
- A Mumbai airport official said five incoming flights had to do go around while the flights were delayed by an average 25 minutes.
- Vehicular movement on roads in Mumbai and its suburbs was also slow due to flooding.
- The IMD has predicted intense showers in Mumbai and its neighbouring areas in the next 24 hours and issued a 'red alert’, asking authorities to be prepared to handle any situation.
10. World’s Most Liveable Cities
Time to tell your smug New York friends that they’ve made the wrong life choice: The world’s most liveable cities are generally less global capital, more regional second city, a new ranking shows.
- Vienna took the No. 1 spot in the Economist Intelligence Unit’s liveability ranking for the second year running, confirming that life is officially better on the banks of the Danube than it is by the Yarra River in Melbourne, which took second place.
- Australia and Canada dominate the top 10 with three cities each, while Osaka, Tokyo and Copenhagen complete the list.
- Melbourne, Sydney and Adelaide are judged to offer the Antipodes’ best quality of life, while Calgary, Vancouver and Toronto are North America’s top locations.
Vienna liveability score is almost perfect. Here’s how the index examines a city's quality.