BQuick On July 27: Top 10 Stories In Under 10 Minutes
This is a roundup of the day’s top stories in brief.
1. Deepak Parekh’s Plea To The RBI Governor
Deepak Parekh, veteran banker and head of India’s largest mortgage lender, asked the banking regulator not to extend the moratorium on debt repayments beyond Aug. 31 even as India Inc. sought a one-time restructuring of outstanding loans.
“Do not extend the moratorium as we have seen that people who have the ability to repay, whether it is corporates or individuals, are taking advantage under this moratorium and are deferring payments,” Parekh, chairman at HDFC., said in an interaction with Confederation of Indian Industry members after the Reserve Bank of India governor's speech.
This is going to hurt us and smaller NBFCs.Deepak Parekh, Chairman, HDFC Ltd.
Parekh also said there’s a need for a system-level debt restructuring where lenders can rework outstanding loans without attracting any additional provisions.
The RBI governor said he will review the industry’s suggestion for future policy decisions.
2. NK Singh Says PSU Banks Need 'Decisive' Recapitalisation
A “significant and decisive” bank recapitalisation plan is needed for the next five years if the government continues to be the sole owner of state-run lenders, according to NK Singh.
The huge public outlay, the chairman of 15th Finance Commission said in his address to All India Management Association, will be needed considering the erosion in their asset quality.
To a query on whether state-run banks must be privatised, given that the government has already infused over Rs 3 lakh crore in them, Singh said the sector requires a fundamental relook as recapitalisation isn’t a “panacea”.
Singh said the economy may see a V-shaped recovery from the third quarter. But that doesn’t mean the fundamentals are improving...
3. Nifty Struggles, Gold Smashes Record
Indian equity markets began the first day of the July series expiry week on a negative note, ending with losses after trading in a range for most of the day.
S&P BSE Sensex ended 0.5% lower at 37,934.
NSE Nifty 50 index ended 0.6% lower at 11,128.
Among the sectoral indices, the Nifty Bank index was the top laggard ending 3.6% or over 800 points lower.
Other sectoral indices that declined included the Nifty Pharma and Nifty Realty, both of which fell 1.7%.
Follow the day’s trading action here.
Gold’s unabated march higher shows no signs of slowing after a plunge in the dollar swept prices past the previous high set in 2011 and put the metal on track for even bigger gains.
With the world facing an extended period of unprecedented economic and political turmoil, gold’s now got $2,000 in its sights.
Some in the market suggest the haven could rise even beyond that.
Investment demand has been unrelenting.
4. A Change In Trading Norms That Has Left Brokerages Worried
Brokerages expressed concerns about the new norm that bars using the proceeds of stocks sold for two days to buy fresh shares, saying that it will dent volumes and hurt small investors the most.
National Stock Exchange of India Ltd. and BSE Ltd. published FAQs on margin collection and reporting on July 26.
These follow the new margin requirements that the regulator mandated earlier this year to curb speculative trading when the market tumbled the most in more than a decade.
Among other things, the two exchanges, in a similarly worded FAQs, said that from Aug. 1, investors won’t be able to use proceeds from selling stock holdings to buy other stocks on the same day.
Here are some of the other norms that have worried brokerages.
5. Nilesh Shah’s Advice To Investors
As corporates stare at yet another quarter of missed earnings amid the disruptions caused by the coronavirus pandemic, Kotak Mahindra Asset Management Company's Nilesh Shah is being “selectively optimistic”.
The rally in India’s equity market brings the need to be careful as it is close to reaching its fair value, the group president and managing director at the fund house told BloombergQuint in an interview. “This is the time to be neutral to equity allocation rather than overweight.”
There is, however, enough space to be optimistic as the disruption in business will result in lower competition and increased market share for the companies that make it through, he said.
He advised investors to put money in companies with good quality balance sheets.
6. How Kotak Mahindra Bank, Tech Mahindra And Bharti Infratel Fared In Q1
Kotak Mahindra Bank Ltd.’s quarterly profit fell as the private lender increased provisioning to mitigate the potential impact of the Covid-19 pandemic.
Profit declined 8.51% year-on-year to Rs 1,244.5 crore.
Net interest income rose 17.8% to Rs 3,723.9 crore.
Gross bad loan ratio rose to 2.7% from 2.25%.
Find out more on the bank's strategy to become selective in handing out new loans.
Tech Mahindra Ltd.’s quarterly profit rose despite sluggish client spending and disruptions from the Covid-19 pandemic.
Net profit rose 21% sequentially to Rs 972 crore.
Revenue in U.S. dollar terms declined 6.7% to $1,208 million.
Revenue in rupee terms declined 4% to Rs 9,106 crore.
The company managed to maintain profits by cutting costs.
Bharti Infratel Ltd.’s quarterly profit rose marginally despite lower rentals and modest tenancy additions.
Net profit rose 8.4% sequentially to Rs 704 crore.
Revenue fell 3.3% to Rs 3,505 crore.
The company has remained relatively sheltered from the Covid-19 pandemic.
7. Bad Loans, Stranded Money And The R-Naught Of Credit Markets
The mapping of risks and management of fragility in the financial sector is akin to pandemic management and demands contact tracing, isolation, and treatment, writes Shankkar Aiyar.
Any disruption in credit flow due to defaults or dues represents a systemic risk not just to the savers and lenders but also to the larger economy and has political consequences.
A failed or stalled housing project impacts banks, NBFCs, housing finance companies, and savings of the buyer stranded with an EMI and no house.
‘Resilience’ calls for cleaning up the bipolar disorder of ownership and regulation.
8. In Solidarity With Prashant Bhushan
A group of 131 civil society members have issued a statement expressing solidarity with lawyer Prashant Bhushan and sought recall of contempt proceedings initiated against him last week by the Supreme Court.
They expressed concern against the contempt case on Bhushan, calling him “a relentless crusader for the rights of the weakest sections of our society”, the statement said.
“In the interest of justice and fairness and to maintain the dignity of the Supreme Court of India, we urge the court to reconsider its decision to initiate suo motu contempt proceedings against Mr. Prashant Bhushan and to withdraw the same at the earliest,” the statement said.
A bench of the Supreme Court issued a contempt notice to Bhushan and Twitter Inc. last week after he posted two tweets that were critical of Chief Justice of India SA Bobde and his predecessors nearly a month ago.
The signatories call for an open and transparent discussion on multiple social issues.
9. Ray Dalio Warns Of A ‘Capital War’
Billionaire investor Ray Dalio said conflict between the U.S. and China could expand into a “capital war” that he suggested would harm the dollar.
The founder of Bridgewater Associates laid out a scenario for the next clash between the two countries, based on measures he said are within the realm of possibility.
He also warned that loose fiscal policy and ideological divisions are pushing the U.S. into decline.
“There’s a trade war, there’s a technology war, there is a geopolitical war and there could be a capital war,” Dalio said on Fox’s “Sunday Morning Futures.”
“The things I worry about the most are the soundness of our money,” he said.
10. Covid-19: India Now Has The Fastest Growing Epidemic
India’s coronavirus epidemic is now growing at the fastest in the world, increasing 20% over the last week to more than 14 lakh confirmed cases, according to Bloomberg’s Coronavirus Tracker.
India added 49,931 fresh cases in 24 hours, taking the total tally to 14.3 lakh,
Of these, more than 9.1 lakh have recovered.
Maharashtra, Tamil Nadu, Andhra Pradesh and Karnataka are among the states where the maximum number of daily cases are being reported.
India and Brazil have some of the world’s lowest testing rates, with 11.8 tests and 11.93 tests per 1,000 people respectively.
Track news and developments around the Covid-19 outbreak here.
Globally, cases exceeded 16.2 million with over 6,48,900 dead.
Health officials around the world are trying to tackle a renewed increase in cases, with outbreaks from China to Spain and Germany underlining the difficulty of curbing the pandemic.
Moderna Inc. received a second round of U.S. funding for an experimental vaccine for Covid-19 and kicked off its late-stage trial.
A British researcher said the effectiveness of vaccines will probably depend on annual doses.
Follow the global spread of the virus here.