BQuick On Aug. 11: Top 10 Stories In Under 10 Minutes
This is a roundup of the day’s top stories in brief.
1. Axis Bank's Capital Cushion
Axis Bank Ltd., which raised Rs 10,000 crore via a qualified institutional placement, will see its capital adequacy ratio jump to near the highest levels on record. This, according to Chief Executive Officer Amitabh Chaudhry, will leave the private lender well placed to deal with any stress that emerges due to the Covid-19 crisis, while keeping an eye on growth opportunities.
“Even before this capital-raise, capital was enough for any severe scenario because of Covid. This additional capital just adds more confidence and gives us more cushion to manage to any crisis,” Chaudhry told BloombergQuint in an interview.
The bank’s capital adequacy ratio will rise to over 19% after the fundraising.
The true extent of stress is likely to emerge at the end of the third quarter, when two rounds of moratorium permitted by the Reserve Bank of India play out, said Chaudhry.
Axis Bank will take a cautious approach and provision more.
2. Industrial Activity Falls For Fourth Straight Month
India’s industrial output fell for the fourth straight month, led by weakness across most segments except consumer non-durable goods.
The Index of Industrial Production contracted 16.6% in June over last year, compared to a revised contraction of 34% in May, according to data released by the Ministry of Statistics and Programme Implementation on Tuesday.
For the first time since March, the government reverted back to releasing the percentage change, after publishing only index figures in the past two months.
Among the three key sectors, manufacturing and mining saw weaker growth.
3. Nifty's Four-Session Streak; Gold's Biggest Fall In Over 7 Years
Indian equity benchmarks extended their gains to a fourth straight session as investors weighed the prospect of business recovery against the pace of new coronavirus infections.
The S&P BSE Sensex climbed 0.6% to 38,407
The NSE Nifty 50 Index closed 0.4% higher at 11,318.
Ten of the 19 sectoral indices on the BSE advanced led by the 1.5% rise in S&P BSE Metal Index.
The S&P BSE Healthcare & S&P BSE Telecom were the worst performing indies, down nearly 1.5%.
Follow the day’s trading action here.
U.S. stocks were mixed after President Donald Trump said he’s considering a tax cut on capital gains and American hospitalisations for Covid-19 fell to their lowest in a month.
The S&P 500 edged higher for an eighth consecutive session and approached its record close from before the pandemic, while the tech heavy Nasdaq 100 fell for a third day.
West Texas Intermediate crude gained 1.3% to $42.49 a barrel, the highest in about five months.
Gold depreciated 4.2%, its biggest fall in more than seven years, to $1,941.78 an ounce.
Get your daily fix of global markets.
4. How Pandemic Turned Into A Boon For Smaller FMCG Firms
When India herded 1.3 billion people indoors to contain the pandemic, Mala’s Fruit Products Pvt. was sitting on one month of inventory of jams to crushes in anticipation of summer demand. Though an essential category, its salesmen couldn’t take fresh orders and the company didn’t find truckers to ship the stock. The six-decade-old consumer goods maker hit upon an idea.
Mala’s thought of using public transport to ferry its namesake branded products.
It took permission to use Maharashtra State Transport buses for shipping the inventory from its warehouse in Satara, Maharashtra, to Pune and Mumbai. Sales jumped 40% in April and 30% in May, when the lockdown was near-complete, the company said, as it could serve two largest cities of Maharashtra, its biggest market accounting for almost a third of sales.
Consumer firms such as Mala’s struggle to get shelf space as bigger brands pay retailers a premium for the best possible display. The pandemic has been a leveller of sorts.
Smaller companies were able to liquidate their inventory when their larger peers struggled to keep factories open and distribution chain intact.
5. Automakers Eyeing A Revival
Factory-gate shipments of cars and utility vehicles were marginally lower than a year earlier, an improvement from steep contractions seen during the lockdown months.
Domestic wholesales of passenger vehicles declined 3.9% year-on-year to 1,82,779 units last month, according to data released by the Society of Indian Automobile Manufacturers.
While monthly factory-gate car shipments fell 12.02% over the last year to 1,02,773 units in July, sales of utility vehicles rose 13.88% to 71,384 units.
“After a few consecutive of months of plummeted sales in a post-Covid scenario, there are signs of green shoots in passenger vehicles and two-wheelers where the year-on-year de-growth is much lesser than in the previous months,” SIAM President Rajan Wadhera said in a statement on Tuesday.
“The sales in August will indicate if this is a sustainable demand and not just pent-up.”
Find out more about the segment-wise auto sales performance in July.
6. Top AirAsia India Officials Suspended
India’s aviation regulator suspended two senior executives at the local affiliate of AirAsia Group Bhd. after a pilot alleged there were safety lapses at the airline and subsequently was fired.
AirAsia India’s head of operations, Manish Uppal, and head of safety, Mukesh Nema, were suspended for three months, Arun Kumar, chief of India’s Directorate General of Civil Aviation, said Tuesday in a text message.
In a video posted in June that’s been viewed more than 6 million times on YouTube, pilot Gaurav Taneja questioned AirAsia India’s policies on sick leave, landing procedures and handling of the coronavirus.
Taneja posts under the username Flying Beast and has more than 3.5 million YouTube subscribers.
Taneja’s allegations come with aviation safety under the spotlight in South Asia.
7. $55-Billion Benefit From Production Linked Incentive Scheme?
India’s incentive scheme for large scale electronics manufacturing in the country could help add 0.5% to economic growth in five years, according to financial services firm Credit Suisse. And iPhone-maker Apple Inc., with its contract manufacturers looking to set shop in India, could be the driving force.
A total of 22 international and local companies have applied for the scheme, including iPhone assemblers Foxconn, Pegatron and Wistron, which will bring an additional almost 10% of global handset production to India in the next five years, Credit Suisse estimated in its recent note.
Even if these companies meet the minimum thresholds for domestic manufacturing, it could end up adding around $55 billion to the country’s GDP over five years, Credit Suisse said.
The government, however, cumulatively expects almost $150 billion to be added to the economy with around three lakh direct jobs.
Read more here.
8. Nandan Nilekani Calls For A Portable Network Of Government Services
The architect of India’s universal identification system has called for building a portable network of government services.
Nandan Nilekani said “internal globalisation” can help fill the gaps and disconnect in government services, which must be universalised.
The whole country needs to be a single market point for delivery of services with a portable infrastructure, he told BloombergQuint’s Sanjay Pugalia in an interview.
“Portability has two aspects to it, wherever you’re in the country, you should get that service,” he said.
“When there are multiple providers of a service, you should be able to go to any of them for the service, so there’s portability and a choice too.”
Nilekani said this will ensure quality of service and empower people with choice.
9. RBI The Outlier
For the third consecutive meet since the outbreak of the Covid-19 pandemic, the Indian central bank has stayed away from providing growth and inflation forecasts. The lack of such forecasts, particularly inflation, makes it tougher to judge the future path of monetary policy, say, economists, even though they acknowledge the difficulties in assessing the economic outlook amid disruptions caused by the pandemic.
India formally moved to an inflation targeting regime in 2015, under which the Monetary Policy Committee is mandated to bring down inflation to 4%, within a tolerance band of +/-2%.
Despite this central role of inflation forecast, the RBI and MPC have only provided directional guidance on inflation.
Until before the Covid crisis hit, the MPC would detail its inflation forecasts in each resolution.
Here’s what other economies have done.
10. Covid-19: India New Cases At Six-Day Low, Russia Claims First Vaccine
Coronavirus infections in India raced ahead with the country adding at least half a lakh cases everyday since two weeks now.
India added more than 53,000 cases in a matter of 24 hours, taking the total tally to 22.6 lakh in the world’s third-worst infected country, according to the Health Ministry’s update as of 8 a.m.
This includes over 45,200 deaths and more than 15.8 lakh patients who have recovered.
The 53,601 fresh cases, though still high, are lower than the 60,000-odd cases reported for the last four days.
Track news and development of the outbreak in India here.
President Vladimir Putin said Russia cleared the world’s first Covid-19 vaccine for use and hopes to begin mass inoculation soon, even before clinical testing has finished.
“The first registration has taken place,” Putin said Tuesday at a televised government meeting, adding that one of his daughters has already been given the vaccine.
“I hope that we can soon begin mass production,” he said.
The move clears the way for widespread use of the vaccine among Russia’s population, with production starting next month, although it may take until January to complete trials.
Medical workers could begin receiving the drug by the end of the month, Deputy Prime Minister Tatyana Golikova said at the meeting.
Yet the speed with which the vaccine has received regulatory approval has drawn criticism.