BQuick On April 3: Top 10 Stories In Under 10 Minutes

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

1. Drought Not Ruled Out: Skymet

Monsoon rains are more likely to be below normal this year with warmer Pacific waters even raising drought fears, according to private weather forecaster Skymet.

• The seasonal rainfall could be at 93 percent of the long-period average (+/-5) through June to September, it said at a press briefing in New Delhi.
• Skymet attributed the prediction to a growing El Nino, the higher-than-normal surface temperature in tropical Pacific Ocean, which has been responsible for several droughts in India’s history. “Chances of a drought are at 15 percent.”
• East and Central India, as well as a few areas of South India, could see less rains in 2019.

Here’s Skymet’s month-wise monsoon progress forecast.

3. Why Ridham Desai Sees More Room For Rally

The Sensex has risen to a record and is trading higher than its historical valuations. Still, Morgan Stanley’s Ridham Desai says the valuations aren’t expensive and there’s room for growth.

• “There’s still a fair bit of scepticism out there. I don’t think people have participated [in the rally],” Desai, managing director and head of Indian equity research at the New York-based investment bank, told BloombergQuint in an interview. “It’s been all too quick and swift.”
• Desai expects growth in the shorter run if the pessimism surrounding the Indian markets subsides. “As far as valuations are concerned, I don’t think the market is rich.”
• With an increase in the inflow into passive or exchange-traded funds, foreign investors have a reduced exposure in the market than what was seen historically, Desai said. For him, that indicates room for more inflows.

Here’s Desai’s sector-wise outlook on the Indian markets.

4. Indian Markets Stumble, U.S. Stocks Rise

Indian equity benchmarks halted a four-day rally ahead of the monetary policy on Thursday.

• The S&P BSE Sensex ended 0.46 lower at 38,877 after hitting an all-time high of 39,720 intraday.
• The NSE Nifty 50 ended at 11,643, down 0.59 percent.
• The 50-share index also clocked an all-time high of 11,761 intraday.
• The market breadth was tilted in favour of sellers. About 1,156 stocks fell and 613 shares advanced on the National Stock Exchange.
• All the sectoral gauges compiled by NSE fell, led by the NSE Nifty PSU Bank Index’s 2.7 percent decline.

Follow the day’s trading action here.

U.S. stocks advanced and bonds retreated globally as upbeat economic reports from China to Europe and renewed hopes for a Sino-U.S. trade deal attracted investors to riskier assets.

• The S&P 500 climbed for a fifth day, equaling the longest winning streak in two months.
• The Dow briefly erased gains after a gauge of U.S. service industries fell in March by more than expected.
• The Stoxx Europe 600 index jumped after a string of economic reports from Italy to Germany eased concern over the euro area’s growth outlook.
• The U.S. and China are making “good headway” in trade negotiations and hope to get closer to a deal this week, President Trump’s top economic adviser Larry Kudlow told reporters.
• In the U.K., the pound advanced after Prime Minister Theresa May announced a cross-party approach to break the logjam over Brexit.
• Treasuries fell with sovereign bonds in Europe, where the key German 10-year yield climbed back above zero for the first time in a week.

Get your daily fix of global markets here.

5. How Asset Managers Fared In March Quarter

Assets of HDFC Mutual Fund and SBI Mutual Fund rose the most among India’s five largest asset managers in the fourth quarter, aided by corporate and pension inflows.

• While assets under management jumped 30 percent year-on-year for SBI Mutual Fund, they rose 13 percent for HDFC AMC, India's largest fund house, in the three months ended March, according to data by Association of Mutual Funds.
• By comparison, growth was slower for No. 2 asset manager ICICI Mutual Fund.
• Aditya Birla Sun Life and Reliance Mutual Fund saw a contraction.
• Large amount of corporate money flowing into liquid schemes of HDFC and ICICI asset management firms mainly led to growth of these fund houses, especially after IL&FS debt crisis, and Dewan Housing Finance Ltd. and Essel Group issues, according to Kaustubh Belapurkar, India investment adviser at Morningstar India.
• “Consistent EPFO flows aided the performance of SBI Mutual Fund.”

Here are the top funds by asset addition.

6. The Fortunate Five

The Supreme Court’s decision to quash the Reserve Bank of India’s Feb. 12, 2018 circular on stressed asset management will bring relief to several large companies, which were otherwise staring at insolvency proceedings.

• While the court’s order will have no impact on the classification of a stressed account as a non-performing asset or on provisions that banks need to set aside, it will give more time and discretion to banks on finalising a resolution plan.
• Any eventual referral for insolvency proceedings is also no longer time-bound.
• The relief will be seen across large power firms, who first challenged the RBI’s circular, and also firms like Jet Airways, where banks are attempting to put a resolution plan in place.
• BloombergQuint spoke to analysts and bankers to understand which accounts may benefit.
• The list presented below is based on these conversations and is not exhaustive.

Here’s what experts had to say about each of these accounts.

7. IBC Should Not Be Lenders’ Default Option

By giving more leeway for bank-led resolution, the Supreme Court judgment restores a certain balance to the resolution process, writes TT Ram Mohan.

• Many bankers regard the 180-day time frame for resolution itself as highly unrealistic.
• Where the time frame for resolution is unrealistic, going to the IBC becomes the default option in resolution.
• Parliament may need to consider passing an Act that provides for a ‘Loan Resolution Authority’ with the necessary powers and the necessary composition.

IBC should be banks’ last resort.

9. India Export Outlook Turns Bleaker

Concerns over a global economic slowdown are growing, with the world’s largest economies including the U.S. and China showing sluggishness. India will not be able to escape the consequences of this slowdown.

• While the Indian economy continues to be driven by domestic-demand, weaker global growth will hit the trade sector via slower exports.
• A regression analysis done by BloombergQuint over a 20-year period until 2017 shows that a change of one percentage point in world GDP growth, can impact India’s merchandise export growth by eight percentage points.

The degree of impact on Indian exports will depend on how steep the global slowdown is.