BQuick On August 16: Top 10 News Stories In Under 10 Minutes
This is a roundup of the day’s stories in brief
1. Former Prime Minister Atal Bihari Vajpayee Passes Away At 93
Former prime minister of India Atal Bihari Vajpayee died this evening. He was 93.
- Known for his engaging speeches, Vajpayee led India’s right-wing coalition governments from 1998 to 2004, overseeing sweeping policy changes in telecommunications, education and privatization of state-run firms.
- He will be remembered for his repeated efforts at talks with Pakistan, improved relations with the U.S. and India’s second nuclear weapons test in 1998.
- In 2014, the Modi government declared that Vajpayee’s birthday would be celebrated as ‘Good Governance Day.’ In 2015, he was given India’s highest civilian honor ‘Bharat Ratna.’
Read more on the former prime minister’s contribution to the country.
2. SBI Dampens Nifty 50’s Best Earnings Season In Three Quarters
If not for a loss by India’s largest lender State Bank of India, Nifty 50 companies would have met the average estimate in the quarter ended June.
- The combined earnings per share of the benchmark index constituents missed the consensus by 7 percent according to BloombergQuint’s calculations, at a time when three-fourth of the 50 companies either surpassed or met forecasts.
- At the beginning of the quarter on April 1, the EPS estimate was Rs 134.8. Analysts lowered it to Rs 122.8 on July 10, when the earnings season kicked off.
- At the end of the quarter, the Nifty 50 reported an EPS of Rs 114. Excluding SBI’s loss, the remaining 49 companies reported an EPS of Rs 120.2.
Here’s how Nifty 50 companies fared in the first quarter.
3. Sensex, Nifty End Lower On Rupee Woes; U.S. Stocks Climb
Indian equity benchmarks ended lower after the local currency declined to a record low against the U.S. dollar.
- The S&P BSE Sensex Index closed 0.5 percent lower at 37,663.56.
- The NSE Nifty 50 Index closed at 11,385.05, down 0.44 percent.
- Seven of 11 sectoral gauges compiled by NSE fell, led by the NSE Nifty Metal Index that declined 2.2 percent.
Follow the day’s trading action here
- The Indian rupee fell 0.4 percent to close at 70.15 against the dollar. The rupee had dropped to 70.39 in early trading, breaching the earlier intraday low of 70.08 reached on Tuesday.
- The domestic currency has fallen 2.29 percent so far this month, weighed down by the Turkish lira-led emerging market currency rout.
- To make matters worse, India’s trade deficit widened to $18 billion in July, the highest in five years, led by a higher oil import bill.
Watch this brief Rupee explainer...
U.S. stocks surged Thursday after retail behemoth Walmart Inc. reported its best sales growth in more than a decade and China’s Ministry of Commerce said it would hold talks with American officials to resolve the trade war between the two countries. The dollar fell for the first time in six days and Treasuries were steady.
Get your fix of global markets here.
4. The Billionaires And The Guru: How A Family Burned Through $2 Billion
Gurinder Singh Dhillon’s group, the Radha Soami Satsang Beas has more than 4 million followers worldwide. Many call him a God in human form. But in the secular world of money, Dhillon is a key character in the dramatic collapse of Fortis Healthcare owned by Malvinder and Shivinder Singh.
- Over the years, the brothers’ main holding company loaned about $360 million to the Dhillon family and property businesses largely controlled by them, according to documents and people familiar with the matter.
- Some of those outlays were financed with money borrowed from the Singhs’ listed companies, and when combined with other Singh investments gone bad threw their empire into a debt spiral, a Bloomberg News analysis showed.
- Heirs to a generations-old business house once worth billions, the brothers have in the last six months seen a dramatic fall in their fortunes. They’ve had their public shareholdings seized by lenders.
Read more on the role of spiritual guru Gurinder Singh Dhillon in Fortis Healthcare’s collapse.
5. With 4% Inflation Target In Sight, MPC Voted For A Second Rate Hike
Five of India’s six monetary policy committee members voted for a hike in rates at the policy review meeting earlier this month, but most believed that prevailing global and local uncertainties justified a neutral stance, showed minutes of the August meet released on Thursday. Ravindra Dholakia dissented and voted for a status quo, arguing that real rates in the economy are already too high.
The MPC raised the benchmark repo rate by 25 basis points to 6.5 percent on Aug. 1. This was the second rate hike in as many meetings.
- At least three MPC members, including RBI Governor Urjit Patel, cited maintaining consumer price inflation within a band of 4 (+/- 2) percent as one factor behind the vote for a rate hike.
I vote for an increase in the policy repo rate by 25 basis points; this action is a necessary step towards securing the mandated 4 percent inflation target on a durable basis.Urjit Patel, Governor, Reserve Bank of India
- Ravindra Dholakia, the lone dissenter on the committee, voted for a pause in rates arguing that real rates are already too high.
This is certainly not the time and environment to hike the policy rate. Nor is it the time to tinker with the policy stance. Prudence lies in maintaining status quo on both.Ravindra Dholakia, Member, MPC
- Most economists expect the MPC to pause after two consecutive rate hikes. While the MPC members themselves do not give guidance, their statements reflected the conflicting pulls and pressures on growth and inflation.
Highlights of the August monetary policy committee minutes’ here.
6. Banks Can Act Against Personal Guarantors Of Insolvent Companies, Rules Supreme Court
In an important decision for banks and lenders the Supreme Court has ruled that they can proceed against personal guarantors of a corporate debtor even while insolvency proceedings are on.
The top court said the moratorium envisaged under Section 14 of the Insolvency and Bankruptcy Code will not apply to the personal guarantors. The provision places a moratorium on any suits or proceedings against the company during the insolvency resolution period.
More on the Supreme Court decision here.
7. LIC Deal Likely To Close In 3 Months: IDBI Bank’s B Sriram
IDBI Bank is looking to complete the transfer of majority ownership from the government to Life Insurance Corporation of India within the next three months, said B Sriram, managing director and chief executive officer of the bank.
- Sriram told BloombergQuint that while the government has given its no objection certificate for transfer of ownership, the bank is still awaiting regulatory clearances and a detailed plan from LIC before the deal is closed.
- This comes after the Union Cabinet, on Aug. 1, approved the proposal for LIC to acquire 51 percent stake in IDBI Bank, thereby taking control of the state-owned bank.
- The bank is likely to receive Rs 10,000-13,000 crore through the deal, which will provide much needed capital for the lender.
- Commenting on the bank reporting over 30 percent gross bad loan ratio in the June quarter, Sriram blamed it on persistent weakness in the bank’s corporate book.
Here’s why IDBI Bank reported an alarmingly high gross bad loan ratio in the April-June period.
8. Jeff Bezos Vs Mukesh Ambani: Coming soon!
It’s time Jeff Bezos, the Amazon.com Inc., boss took notice of his real rival in India, the only billion-strong consumer market open to Western tech firms, writes Andy Mukherjee in this column.
Here’s an excerpt...
The core contest comes down to warehouses. Foreign-funded firms aren’t allowed to hold e-commerce inventory in India. That’s a disadvantage for Amazon, since it prevents the firm from fully capitalizing on the strengths of its vaunted logistics operation, seen as one of its most decisive edges in the U.S.
Amazon was hoping that those rules would be loosened, but the proposed policy instead calls for harsh controls on even the phantom sellers that Amazon and Flipkart have been using to get around the no-inventory problem. If the new policy is strictly implemented, Amazon, and its preferred resellers, won’t be able to offer deep discounts.
Meanwhile, Indian-managed companies like Ambani’s Reliance Retail Ltd. will be free to control and improve their supply chains while building a fearsome online presence in partnership with his mobile operator, Reliance Jio Infocomm Ltd.
9. Kotak Mahindra Bank Fracas Revives Bank Ownership Debate
Uday Kotak’s failed experiment, to reduce ownership of Kotak Mahindra Bank via issue of preference shares, may help revive a broader debate on whether the RBI needs to review its thinking on bank ownership, writes Ira Dugal in this column.
Here’s an excerpt...
Anyone familiar with the above history of banking regulation knew that Kotak’s move was unlikely to pass muster with the RBI. However, with the Kotak incident now behind us, it is certainly worth asking whether the RBI needs to change that prevailing view.
The PJ Nayak committee of 2013 had recommended that promoter shareholders be allowed to hold upto 25 percent equity stake in a bank. The committee had argued that a promoter stake of 15 percent is too low.
The committee noted: It must be observed that if the maximum shareholding for promoter investors is set very low, the alignment of incentives between shareholders and managements could weaken, and banks could be more vulnerable, as managements could then be primarily concerned with their own interests rather than those of shareholders.
The committee had also suggested that a category of ‘Authorized Bank Investors’ be created, which can be allowed to hold upto 20 percent in a bank. The thinking behind this recommendation was that an investor who holds a large block of equity would be more inclined towards ensuring sound practices and governance at a bank.
Indeed, the recent allegation of weak governance at a institution like ICICI Bank does raise the question of whether diversified ownership has the opposite effect of what is intended.
Read more on the regulator’s view on bank ownership over the last two decades
10. Aretha Franklin, Queen of Soul Who Spelled ‘Respect,’ Dies at 76
Aretha Franklin, the former gospel singer who went on to reign over the music industry as the Queen of Soul with hit songs such as “Respect,” “Chain of Fools” and “(You Make Me Feel Like) A Natural Woman,” has died. She was 76.
Franklin died Thursday of pancreatic cancer at her home in Detroit, according to the Associated Press. In March, Franklin canceled a scheduled tour for medical reasons. Her last known performance was in November at Elton John’s annual AIDS Foundation gala.
Here’s more on the Queen of Soul and her enduring songs.