BQuick On April 9: Top 10 Stories In Under 10 Minutes
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Here is a roundup of the day’s top stories in brief.
1. IMF Cuts India GDP Growth Forecast
India is projected to grow 7.3 percent in 2019 and 7.5 percent in 2020, supported by the continued recovery of investment and robust consumption, thus remaining the fastest growing major economy of the world, according to the International Monetary Fund.
- In 2018, India's growth rate was 7.1 percent, as against China's 6.6 percent.
- In 2019, the IMF projected a growth rate of 6.3 percent for China and 6.1 percent in 2020, according to the latest World Economic Outlook projections released ahead of the annual spring meetings of the International Monetary Fund and the World Bank.
Nevertheless, reflecting the recent revision to the national account statistics that indicated somewhat softer underlying momentum, growth forecast have been revised downward compared with the October 2018 World Economic Outlook by 0.1 percentage point for 2019 and 0.2 percentage point for 2020, respectively.IMF Report
India’s growth is expected to stabilise at just under 7 percent over the medium term.
IMF Cuts Global Growth Outlook To Lowest Pace Since Crisis
The IMF cut its outlook for global growth to the lowest since the financial crisis amid a bleaker outlook in most major advanced economies and signs that higher tariffs are weighing on trade.
- The world economy will grow 3.3 percent this year, down from the 3.5 percent the IMF had forecast for 2019 in January, the fund said.
- The 2019 growth rate would be the weakest since 2009, when the world economy shrank.
It’s the third time the IMF has downgraded its outlook in six months.
2. India Gets Its First Gaming Unicorn
Dream11 is the latest entrant—and the first gaming company—to India’s growing club of unicorns, or startups valued at over $1 billion.
- The valuation of Dream11 Fantasy, the startup’s parent, soared to just under $1.5 billion after a secondary stake purchase by Hong Kong-based Steadview Capital, according to a person aware of the development. This comes about seven months after the Mumbai-based startup raised $100 million from China’s Tencent Holdings at a valuation of $700 million.
- Three of the startup’s early backers—Kalaari Capital, private equity firm Multiples Alternate Asset Management and hedge fund Think Investments—sold a portion of their stakes in the decade-old company, Dream11 said in the statement.
- “We are excited to welcome Steadview Capital onboard,” Harsh Jain, chief executive officer of Dream11, said in a statement, adding that it has joined the unicorn club without providing any other detail.
Dream11’s rise was plagued with hurdles, particularly legal challenges.
3. The Right Time To Buy A Stock
Are you among the investors who believe that quality stocks are always expensive, so why complain about higher valuations?
- Rajeev Thakkar, chief investment officer at PPFAS Mutual Fund, cautions that investors need to “guard against these excesses”.
- Over a period of 10-15 years, even the best of the names go through valuation cycles, Thakkar told BloombergQuint in an interview.
- If the entry price is very expensive, he said, investors might run into time or price correction.
What an expensive entry price does is that there is no room for error.Rajeev Thakkar, CIO, PPFAS Mutual Fund
“Your expectations need to click like clockwork,” Thakkar added.
4. Nifty Rises, S&P 500 Drops
Indian equity benchmarks ended higher and recovered from yesterday’s losses.
- The S&P BSE Sensex ended 0.62 percent or 238.69 points higher at 38,9839.
- The NSE Nifty 50 ended at 11,671, up 0.58 percent.
- The market breadth, however, was tilted in favour of sellers.
- Ten out of 11 sectoral gauges compiled by the National Stock Exchange advanced, led by the NSE Nifty PSU Bank Index’s 1.4 percent gain.
- On the flipside, the NSE Nifty Media Index was the only sectoral loser, down 0.2 percent.
Follow the day’s market action here.
Stocks fell and Treasuries rose amid renewed concerns about slowing global growth and an escalation of trade tensions.
- The S&P 500 halted an eight-day rally with its steepest drop in two weeks as the Trump administration threatened tariffs on the European Union and the International Monetary Fund cut its global growth outlook to the lowest since the financial crisis.
- Multinationals bore the brunt of the selling, with Caterpillar and Boeing dragging the Dow Jones Industrial Average lower.
- Ten-year Treasury yields fell below 2.50 percent, while the greenback declined for a second day against major currencies.
- The pound was little changed as U.K. Prime Minister Theresa May met with key EU leaders on Brexit.
- West Texas crude fell 0.5 percent to $64.09 a barrel.
Get your daily fix of global markets here.
5. Shriram Capital Nearer To Merging Its Units
R. Thyagarajan, founder of Shriram Capital Group, said the Indian company is getting close to merging its listed units, a move the firm hopes will help the non-bank financier boost its lending and insurance businesses.
- Shriram Capital, which counts billionaire Ajay Piramal and private equity firm TPG as investors, is considering combining with its publicly traded units Shriram Transport Finance Co. and Shriram City Union Finance Ltd.
- The transaction will result in the holding company getting listed, Thyagarajan said.
- No timeline has been set, he said.
“When Ajay came in he asked about merger, now we are nearer to the time,” Thyagarajan, 81, said in an interview in Chennai. “Buy-in is taking place,” he said, referring to conversations with stakeholders of the companies.
The deal will give TPG and Piramal an opportunity to exit.
6. Sterlite Technologies’ Credit Rating Jolt
Shares of Sterlite Technologies Ltd. fell to their lowest in more than a year after Moody’s Investors Service withdrew its credit rating for the company.
- Moody’s decided to withdraw the rating for its “own business reasons”, according to the website of the international credit rating agency.
- Sterlite Technologies later in an exchange filing said it had no debt instrument rated by Moody’s and hence “requested” the agency to withdraw rating from the company.
- The last rating by Moody’s on Sterlite Technologies was a corporate family rating of B1 with a ‘Stable’ outlook.
- Sterlite Technologies also said it will now interact with only two rating agencies—Crisil and ICRA Ltd.
- Shares of Sterlite Technologies tumbled as much as 12.6 percent at Rs 188.7 apiece—the lowest level since July 2017—after the announcement. The stock, however, recovered most of its losses to end 3.64 percent lower on the stock exchanges today.
Shares have fallen 46 percent in last six months due to concerns including promoters’ pledged shares.
7. Adani One Step Closer To Australia Project
Indian mining conglomerate Adani has taken a step closer to the construction of its controversial coal mine in Australia after the federal government gave a green light to the billion dollar project's groundwater management plans.
- Environmental Minister Melissa Price on Tuesday announced that she had approved the groundwater management plans submitted by the mining giant after The Commonwealth Scientific and Industrial Research Organisation and Geoscience Australia found they met scientific requirements.
- She said that the project must meet further stringent conditions of approval from the Commonwealth before it can begin producing coal.
- Price noted that the project was subject to the most rigorous approval process of any mining project in Australia.
The massive coal mine in Queensland state has been a controversial topic.
8. Diagnostic Chains Are Losing Pricing Power
Even as Metropolis Healthcare Ltd. launched its initial public offering earlier this month, revenue growth of listed diagnostic companies is slowing amid stiff competition from their unorganised peers—comprising 85-90 percent of the market.
- The challenge for listed players, according to A Velumani, the promoter and chief executive officer of Thyrocare Technologies Ltd., is the costs related to compliance and regulations, which unorganised players don’t incur.
- “The competition is intense in the diagnostic space.”
- Listed players are advertising heavily to gain market share, and that’s affecting their pricing power.
Here’s why diagnostic firms are at a crossroad.
9. Old Bank Licences Are Back In Vogue
Why did Indiabulls Housing Finance Ltd. choose a merger with Lakshmi Vilas Bank Ltd. instead of applying for a new bank licence under the ‘On-Tap’ licensing regime, asks Ira Dugal.
- There have recently been four deals between non-bank financial companies and banks.
- Is it just about access to an existing franchise or more than that?
- If it is the licence, then it must be asked whether acquiring an old bank licence is easier than getting a new one?
Is there a regulatory gap that allows for a quicker back-door entry into banking?
10. Winners And Losers Of Election Manifestos
India’s farmers and the poor stand to gain irrespective of whether Prime Minister Narendra Modi wins a second term or his main opponent Rahul Gandhi wrests power in elections starting this week.
- The biggest losers will be loan defaulters-on-the-run.
- Poll promises of both Modi’s Bharatiya Janata Party and Gandhi’s Indian National Congress include spending billions of dollars to provide income support to the poor and farmers.
- A closer review of their manifestos shows many others who are poised to win and some who may end up losers.
Here a look at the companies that stand to benefit.