BQuick On April 29: Top 10 Stories In Under 10 Minutes
This is a roundup of the day’s top stories in brief.
1. Covid-19: India Allows Stranded Workers To Head Home
The total number of confirmed Covid-19 cases in India moved closer to the 32,000-mark as the country nears the scheduled end of a 40-day on Sunday. More than 1,000 people have died because of the virus in the country.
- India added 1,813 new cases of Covid-19 over the last 24 hours, taking the total tally to 31,787, according to the health ministry’s 5 p.m. update.
- This includes 1,008 deaths and 7,797 patients who recovered.
- Over the 24 hours, there have been 71 deaths and 770 recoveries.
- Meanwhile, the Indian government has ordered states and union territories to facilitate the inter-state movement of stranded people including migrant labourers in the country.
- Those travelling back home will have to be assessed by local health authorities and kept in home quarantine folllowing their arrival.
- The state of Punjab has extended curfew restrictions for two more weeks.
Follow how the Covid-19 pandemic is spreading in India here.
Globally, coronavirus cases crossed 31 lakh leaving over 2.17 lakh people dead.
- France and Spain took cautious steps toward reopening, while new cases rose for the first time in three days in Germany as the government weighs removing more curbs.
- Fatalities in the Netherlands rose to 4,711, surpassing the official tally of in mainland China.
- Malaysia reported the highest daily increase in new cases since April 16 due to infections among people who returned from overseas.
Track news updates and developments around the global outbreak of the virus here.
2. Risk Aversion Across Banks Delays Relief To Economy
Burdened with an already elevated level of bad loans—a legacy of imprudent lending nearly a decade ago—banks are not willing to take the risk of a further deterioration in asset quality. Some increase in bad loans is inevitable given the weakness in the economy and lenders are trying to keep this in check.
- The extent of risk aversion seen across banks is perhaps best encapsulated in this one data point.
- Banks are parking more than Rs 7 lakh crore at RBI’s reverse repo window, earning just 3.75 percent on it.
- So much so, that the RBI may now need to a open a new window, known as the Standing Deposit Facility, through which is accepts excess bank reserves at much lower rates without offering collateral in return.
BloombergQuint spoke to senior bankers on what’s behind the risk aversion and why they feel its unfair to expects banks to do the heavy lifting.
3. U.S. Economy Shrinks; Focus Shifts To Fed’s Next Steps
The record-long U.S. economic expansion is over. Gross domestic product contracted at a 4.8 percent annualised rate in the January-March period, the largest drop since 2008, according to Commerce Department data released Wednesday.
- The median projection in a Bloomberg survey of economists had called for a 4 percent drop.
- With estimates for a second-quarter contraction that would be a record in data going back to the 1940s, the first-quarter figures effectively confirm that a recession has begun, ending the expansion that began in mid-2009 in the wake of the global financial crisis.
The report is the first to show the wide-scale hit to U.S. output from Covid-19.
With interest rates near zero, Federal Reserve policymakers are likely to turn attention to other steps they could take to ensure a strong U.S. economic rebound once the coronavirus lock-down ends.
- The Federal Open Market Committee is all but certain to keep its benchmark overnight rate in a target range of 0-.25 percent, where it was lowered at an unscheduled FOMC on March 15 to help soften the pandemic’s blow.
- Powell can expect questions on whether the Fed is prepared to expand the scope of some of its lending programs, provide assistance to specific industries, and is it considering yield-curve targeting, among other topics.
Here’s the decision day guide on what to expect from the U.S. Fed.
4. U.S. Stocks, Oil Rally; Nifty Gains For Third Day
U.S. stocks advanced amid renewed hopes for a drug to fight the coronavirus, helping investors shrug off data showing the biggest economic contraction since 2008 in the first quarter.
- The S&P 500 Index climbed more than 2 percent after Gilead Sciences Inc. said that its experimental drug to treat coronavirus helped patients recover faster.
- Big tech shares added to the rally, with Google parent Alphabet Inc. pacing gains after posting better-than-estimated sales.
- WTI oil futures rebounded after plunging 27 percent in two sessions.
Get your daily fix of global markets here.
Indian equity markets gained for the third day in a row, its best winning streak in a month, tracking positive cues from Europe and from futures in the United States.
- The S&P BSE Sensex ended 1.9 percent higher at 32,720, taking its weekly advance to 4.5 percent.
- The NSE Nifty 50 index ended above the 9,500 mark at 9,553, up by 1.8 percent. The benchmark is up 4.3 percent this week.
- Thirty eight out of the 50 Nifty stocks ended the day with gains.
- Among sectoral indices, the Nifty Metal index ended as the top sectoral gainer with gains of 3.75 percent.
- Hindustan Unilever fell as much as 2.5 percent in trade after Bloomberg reported that GlaxoSmithKline Plc will offload its entire stake in the company.
Follow the day’s trading action here.
5. After Franklin Templeton’s Wind-Down, Credit Risk Schemes See Outflows
Investors have started exiting credit schemes as Franklin Templeton Mutual Fund’s decision to freeze six such plans on liquidity concerns has triggered fresh turmoil in India’s debt market.
- Multiple fund houses have seen a contraction in assets under credit schemes since April 24 when Franklin Templeton announced that it is winding down its schemes, according to data released by Association of Mutual Funds in India.
- Kotak, Aditya Birla Sun Life and HDFC mutual funds are among the firms that have seen assets under credit schemes fall by more than 20 percent during the period.
While assets have largely declined because of withdrawals, another reason may have contributed to it. Find out what.
6. The Stretched Out Tower Deal That’s Hurting Vodafone Idea
The impending merger of Bharti Infratel Ltd. and the unlisted Indus Towers Ltd. that would create the largest tower company outside China has been delayed four times till now, hurting the Vodafone Group and Kumar Mangalam Birla-owned Vodafone Idea Ltd.
- That’s because, the delays, according to BloombergQuint’s calculations, have cost Vodafone Idea nearly Rs 1,300 crore.
- Bharti Infratel recently extended the long-stop date for the merger till June 24 from April 24, despite receiving all approvals from the government.
- As a result, Vodafone Idea will now be getting Rs 1,300 crore less by selling its stake in India’s largest tower operator, Indus Towers Ltd., as share prices of Bharti Infratel fell.
Find out how the valuation is derived and how Vodafone Idea’s stake has diminished.
7. Vodafone Idea Gets Some Relief From Supreme Court
The Supreme Court has directed the revenue department to release Rs 733 crore in tax refunds to Vodafone Idea Ltd.
- The telecom major had however moved court for release of tax refunds worth Rs 4,759 crore.
- On the other hand, Vodafone Idea had relied on previous Supreme Court decisions and tax law provisions to say all refunds have to be processed within one year unless it’s detrimental to the department’s interests.
- Since no correspondence from the revenue department was received in this time period, the company has the right to claim refund.
But the apex court noted that the tax department had followed the statutory requirements in issuing notices to Vodafone.
8. Court Stays Interim Relief For Indiabulls Housing
The Delhi High Court stayed an interim relief granted by its lower bench to Indiabulls Housing Finance Ltd. from any coercive action if the non-bank lender fails to make payments to its debenture holders.
- The April 15 order of the single-judge bench was appealed before the division bench by the Mutual Funds Association of India, Securities and Exchange Board of India and IDBI Trusteeship Services Ltd.
- The two-judge bench comprising Justice Siddartha Mridul and Justice Talwant Singh has now listed the case for final arguments on May 4, Abhishek Baid, counsel for IDBI Trusteeship, told BloombergQuint.
The company sought parity from the court from making its payments. But that order was subsequently challenged.
9. Work Under MGNREGA Falls To Five-Year Low
Employment provided by India’s flagship rural jobs guarantee programme fell to a five-year low in April as the nationwide lockdown stalled work.
- According to data available on the official Mahatma Gandhi National Rural Employment Guarantee Act website, work in terms of ‘persondays’ generated dropped to 3.08 crore, 88.8 percent lower than April last year.
- The work provided was also substantially lower than 26.2 crore persondays in work projected by the government for April.
- A break-up of the data shows that Andhra Pradesh, Chhattisgarh, Bihar, Karnataka, Odisha and West Bengal were among the states generating the highest number of persondays of work for April.
The disruption to India’s only form of social security could not have come at a worse time.
10. Rakesh Mohan’s Out-Of-The-Box Ideas For Economic Revival
A one-time monetisation of the government’s debt, financing support for state governments, loan guarantees for small businesses and interest rate subventions for corporations maybe some of the exceptional measures that India may need to consider as it designs a policy response to deal with the economic fallout of Covid-19.
- That’s according to former Reserve Bank of India deputy governor Rakesh Mohan.
- Speaking to BloombergQuint, Mohan said India’s fiscal response has been surprisingly conservative in the face of one of the worst economic crises the global and local economy has faced in recent years.
- To support the economy through this period, the government will need to step up spending and, if needed, the central bank would need to step in to help finance the additional borrowings, Mohan said.
Watch the full interview with Mohan here.
- Past fiscal profligacy should not stop deficit monetisation now.
- Office space demand might take a 35% hit in the short run, says L&T Realty.
- 'Hand-to-mouth' crisis fuels calls for more fiscal aid.
- Alcohol spat shows India states battling Modi for virus billions.
- India is fighting to avert oxygen shortage during Covid-19 crisis.
- How China is attempting to prevent a second wave of infections.