BQuick On April 24: Top 10 Stories In Under 10 Minutes

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

2. What Investors Need To Know After Franklin Templeton Winds Down Debt Scheme

The mutual fund industry lobby allayed investors concerns around credit funds after Franklin Templeton shuttered six such schemes citing severe market dislocation and illiquidity caused by the Covid-19 pandemic.

• “The action taken by Franklin Templeton is limited to the six specific credit risk fixed income schemes. The assets under management of these schemes constitute less than 1.4 percent of India’s mutual fund industry’s aggregate assets under management as on March 31, 2020,” the Association of Mutual Funds in India said in a media statement.
• It also assured that majority of fixed income mutual funds’ AUM in the industry is invested in superior credit quality securities and that these have appropriate liquidity to ensure normal operations.

AMFI said it was in the process of collecting data to know liquidity of all asset managers in the industry. Key takeaways here.

The closure of six fixed income mutual fund schemes by Franklin Templeton Mutual Fund has a lot of retail investors worried. BloombergQuint spoke to two financial planners—Suresh Sadagopan, founder of Ladder7 Investment Advisories and Arvind Rao, founder of Arvind Rao & Associates— about the key questions that have emerged after Franklin Templeton’s decision.

• What does the winding down of the six funds mean for investors?
• Should you be worried about your investments in debt mutual fund schemes of other fund houses?
• If your portfolio is well diversified, as it should be, then should they stay invested?

Find out the answers to your worries here.

3. A Star Franklin Manager Gets Burned In Market He Helped Create

Santosh Kamath’s appetite for high-yield Indian debt helped create the nation’s market for lower-rated corporate bonds and turned him into one of the country’s best-known investors.

• Now the Franklin Templeton manager’s embrace of risk is backfiring in spectacular fashion.
• Closing the funds, overseen by Kamath, is the “only viable option to preserve value for investors and to enable an orderly and equitable exit,” the asset manager said in a statement.

Analysts familiar with Kamath’s investments say the money manager was caught out by his preference for higher-yielding but less liquid debt.

4. Nifty’s First Weekly Fall In Three Weeks; U.S. Stocks Volatile

Indian equity markets failed to sustain the momentum of the last two trading sessions, ending with losses not only for the day, but also for the week.

• The S&P BSE Sensex ended 1.68 percent lower at 31,327.
• For the week, the index was down 0.8 percent, its first weekly drop after gaining for back-to-back weeks for the first time in two months.
• The NSE Nifty 50 too ended below the 9,200 mark at 9,154, down 1.7 percent.
• The index shed 1.5 percent for the week as well.
• Large private banks were the principal laggards in today's trading session.
• HDFC Bank Ltd., ICICI Bank Ltd., Axis Bank Ltd. were among the top contributors to the index downside.
• Among sectoral indices, Nifty Pharma index was the only sectoral gainer, ending 1.4 percent higher.

Follow the day’s trading action here.

U.S. stocks erased early gains to trade little changed as investors assessed the latest batch of earnings reports and efforts to reopen the American economy.

• The S&P 500 headed for a loss in the week that’s brought fresh evidence of deep damage to the American economy. Sentiment got a boost overnight from a $484 billion bill.
• Earnings continued to roll in, with Intel Corp. joining the ranks that’ve withdrawn full-year guidance.
• West Texas Intermediate crude futures hovered climbed above $17 a barrel in New York, after collapsing earlier this week.
• Yields on Treasury 10-year notes steadied at about 0.61 percent.

Get your daily fix of global markets here.

5. DHFL Resolution Process Extended

Lenders to stressed housing finance company Dewan Housing Finance Corporation Ltd. have decided to extend the deadline for submission of resolution plans to the last week of May from May 7 before.

• The extension in the deadline is to accommodate the delays caused by the national lockdown imposed to curb the spread of Covid-19, two people with direct knowledge of the matter said on the condition of anonymity.
• On March 29, the Insolvency and Bankruptcy Board of India had allowed for the lockdown period to be excluded from the resolution timelines for cases under insolvency.
• As per the Insolvency and Bankruptcy Code, the entire resolution process must be completed within 330 days.

Beyond extended times, lenders fear that other factors could impact the resolution process for DHFL.

6. Large Firms Start Seeking Loan Moratoriums

At least 328 companies have sought a three-month loan repayment moratorium from their respective lenders, a note prepared by rating agency ICRA Ltd. showed on Friday.

• The list comprises firms that have either received an approval for the moratorium after the due date for repayments, or are still awaiting confirmation from their lenders.
• The ratings agency is required to disclose the entities which it rates and have sought the moratorium, as per guidelines issued by the Securities and Exchanges Board of India.
• ICRA, however, hasn’t classified the repayments under the moratorium period as missed repayments.

Here’s a look at some of the top companies which have approached their lenders for the moratorium.

7. Goldman Sachs Has Stock Ideas For The Pandemic

Goldman Sachs Group Inc. expects a deeper global recession and a significant contraction in domestic activities in India as the whole world comes to a virtual standstill amid the new coronavirus pandemic.

• The macro backdrop in India remains challenging in the near term, given uncertain and volatile economic activities, as well as Covid-19-related business disruptions, the global investment firm said in a note.
• Last week, Goldman Sachs even downgraded India by a notch to marketweight from overweight within Asia, citing delayed recovery of the continent’s third-largest economy among peers and expensive valuations.

Against this backdrop, Goldman Sachs lists eight India stocks that it thinks are ‘buy’ ideas and four ‘sell’ calls.

8. Construction Firms May Find This Slowdown Easier To Tide Over

Construction companies, preparing to resume work after the government eased some lockdown restrictions, may be bracing for a hit on their finances in the ongoing fiscal. Yet, they may be in a better position to weather the challenges than in the past.

• The sector, already grappling with lower capex amid rising fiscal stress, could face first contraction in operating margins since 2013-14 because of the Covid-19, Edelweiss Securities said in a report.
• But that’s only part of the story.
• The last time the industry faced a slowdown was on the back of high debt levels, stretched working capital requirements and arbitration cases.
• This time, debt levels have fallen, putting them in a better position, according to Shubham Jain, senior vice-president and group head at ICRA Ltd.

The financial viability situation of the construction companies is way better than the slowdown of 2013-14.

9. Auditing In The Time Of A Pandemic

The coronavirus lockdown has put India Inc.’s auditors in a fix. Travel restrictions and remote working are impacting their audit schedules.

• And while regulators may have relaxed some deadlines, with no clarity on when ‘normal’ life will resume, auditors are relying on a mix of technology and guidelines issued by Institute of Chartered Accountants of India to ensure timely completion of statutory audits.
• Listed companies generally undergo annual statutory audits between March and May every year for their fourth quarter as well as annual earnings.
• An audit process can span weeks and generally involves physical inspection and visits to a company’s premises by an auditor.

Here’s how auditors are coping with the complexities.

Related Coverage

• Covid-19: Making a bankruptcy law work in a pandemic.
• Lockdown to test Indian tradition of buying gold on key day.
• Alt Balaji says its subscriber base is rising 70-80% daily during lockdown.

10. India’s Textile Units Brace For Many Layers Of Uncertainty

The nationwide lockdown is scheduled to lift on May 3. It’s unclear whether activities will be resumed in phases or only in areas where the spread of the novel coronavirus is relatively controlled.

• These uncertainties will mean that the road to normalcy will be a long one, particularly for a sector like textiles which has dispersed supply chains.
• The uncertainty will be magnified for the many who export, as countries open up their economies at different times and at a varied pace.
• There will be still another layer of uncertainty—how soon will stores open and people return to markets?

From Bengaluru to Mumbai to Chandigarh and the UAE, here’s a look at how the lockdown is disrupting India’s textile industry.