Weekly Wrap: Yes Bank’s Slump; SBI Cards’ IPO; Coronavirus Cases In India, Fed Rate Cut
Yes Bank Ltd. lost more than 80 percent of its value in a day. SBI Cards public float was oversubscribed in a market hit by fears of the coronavirus outbreak. U.S. Fed cut rates in an emergency move to contain economic damage from the virus. And RBI governor explained why India’s central bank is different from others.
Here’s what happened in the business world and across the globe between March 2 and March 6.
Yes Bank Saga
Shares of Yes Bank Ltd. plunged as much as 84.65 percent in Friday’s trade — the biggest intra-day decline for a Nifty stock — to Rs 5.65 apiece. Prior to this, fraud-hit Satyam Computers Ltd. had recorded an intra-day decline of 83 percent in 2009. Yes Bank’s stock, however, pared some of its losses to close 51.63 percent lower at Rs 17.80 apiece.
The stock tumbled after the government placed the private lender under moratorium and the Reserve Bank of India superseded its board citing its deteriorating financial health. The central bank also imposed withdrawal limits at Rs 50,000. State Bank of India will acquire a 49 percent stake in the troubled lender at a price not less than about Rs 2,450 crore, according to a draft reconstruction scheme.
- Yes Bank Moratorium Live Updates
- Yes Bank's Bonfire of Insanity Was Left to Burn
- Here’s How Much Mutual Funds Are Exposed To Yes Bank Debt
- Mutual Funds With Equity Exposure To Yes Bank
- Will Not Let Any Institution Fall Off A Cliff, Says Nirmala Sitharaman
- Yes Bank Crisis: Impact On EMIs, Business Loan Repayment And More
India’s first billion-dollar initial public offering in at least two years and the nation’s first by a credit card issuer was subscribed 22.45 times on the final day of bidding on Thursday. Against an issue size of 10.02 crore shares, SBI Cards and Payment Services Ltd.’s maiden offer received bids for 225.09 crore shares, with large investors making the bulk of the purchases.
The portion of shares reserved for retail investors was subscribed 92 percent, while non-institutional investors picked up 23.36 times the shares earmarked for them, according to data available on the National Stock Exchange’s website. Qualified institutional buyers bought 31.86 times the shares reserved for them. The credit card firm’s employees and State Bank of India’s shareholders picked up 35 percent and 15.75 times the shares allocated to them, respectively.
The total number of people tested positive for coronavirus in India has risen to 31. The cases include two in Delhi, one in Gurugram, one in Ghaziabad, six in Agra, 16 Italian tourists and their Indian driver in Rajasthan, one in Telangana and three in Kerala (now cured). Thirty-one laboratories across India have been designated for coronavirus testing in India. Thirteen are active, while the rest will become active by March 6.
Globally, the virus killed over 3,300 people and infected over 1,00,000. This triggered the worst selloff among global equities since 2008, mounting concerns that the coronavirus outbreak will derail economic growth.
U.S. Fed Rate Cut
The U.S. Fed on Tuesday slashed interest rates by half a percentage point in the first such emergency move since the 2008 financial crisis amid mounting concerns that the coronavirus outbreak threatens to stall the record U.S. economic growth. The vote for the emergency cut to a range of 1 percent to 1.25 percent was unanimous. The Fed also said in the statement that the “fundamentals of the U.S. economy remain strong.”
RBI’s ‘Multifarious Responsibilities’
The Reserve Bank of India has “multifarious responsibilities”, much wider than its international peers such as the U.S. Federal Reserve or the Bank of England, according to Governor Shaktikanta Das.
“Currently if you ask, while all departments are important, the main focus of the RBI is maintaining financial stability, supporting growth, maintaining price stability—which is the mandate given to us under the RBI Act—as well as to focus on sharpening our regulation and supervisory functions,” Das said in an exclusive interview with BloombergQuint.
Is there a dichotomy between the RBI's and MPC's thinking? Watch the full exclusive interview here.
How Indian Markets Fared This Week
Indian equities declined for the third straight week, their longest stretch of weekly losses in seven months.
The Sensex and the Nifty 50 fell nearly 2 percent each this week to close at 37,576.62 and 10,989.45, respectively.
Nine of the 11 sectoral gauges compiled by the National Stock Exchange ended lower this week, led by the NSE Nifty Media Index’s 8.6 percent decline. The NSE Nifty Pharma Index was the top gainer, up 5.8 percent.
The broader market represented by the NSE Nifty 500 Index, too, fell 1.9 percent this week, dragged down by Yes Bank Ltd., SpiceJet Ltd. and Gayatri Projects Ltd.
How The Rupee Performed
The Indian currency depreciated as much as 2.18 percent this week to close at 73.78 against the U.S. dollar. The local currency was the only loser among the Asian peers this week.
Key Events To Watch Next Week
- Feb. 12: India to report CPI inflation data for February and industrial production for January.
- Feb. 12-15: India to report trade deficit data for February.
Other Talking Points This Week
- Tata-run Vistara says evaluating Air India, no decision on bidding yet.
- CARO 2020: New audit disclosures aim to prevent IL&FS-like situation.
- Supreme Court refuses to refer pleas against Article 370 to larger bench.
- Jack Welch, much-imitated manager who remade GE, dies at 84.
- NCLT approves NBCC’s bid to acquire Jaypee Infratech but with modifications.
- Billionaire-backed fund wades into India bad debt cleanup.
- SEBI Debenture Proposals: With improved protection against NBFC defaults, comes greater complexity.
- Unilever reaches gender balance across management team of 14,000.
- Supreme Court sets aside RBI circular that curbed cryptocurrencies in India.
- Cabinet approves merger of 10 public sector banks into four.
- Government reworks terms of Air India sale to allow NRIs to own 100% of airline.
- Government approves more amendments to companies law.
- India services activity increases at fastest pace in seven years.
- SoftBank-backed Oyo to cut about 5,000 jobs in overhaul.
- EPFO cuts interest rate on deposits to seven-year low for 2019-20.
- IndiGo, SpiceJet face turbulence as coronavirus hits foreign travel.
- The one thing that’s going in favour of Royal Enfield.
- Supreme Court’s Jaypee ruling casts a shadow over mortgage transactions.
- Ultra-wealthy Indians to double in five years: Knight Frank report.