BQuick On June 30: Top 10 Stories In Under 10 Minutes
8. This is a roundup of the day’s top stories in brief.
1. Fiscal Slippage Worries
India’s fiscal deficit reached Rs 4.66 lakh crore, or 58.6%, of the budget estimate in the first two months of 2020-21 as a pandemic-led lockdown affected the government’s revenues.
The gap between government’s revenue and expenditure during the same period in FY20 stood at 52% of the budget target, according to data on the website of the Controller General of Accounts.
The fiscal deficit is 27% higher than the level in April-May 2019, underscoring that a substantial fiscal slippage is inevitable in FY21, according to Aditi Nayar, vice president at ICRA Ltd.
India’s fiscal deficit target is likely to be revised higher with the GDP set to fall.
Rare Current Account Surplus
India’s current account posted a rare surplus last quarter, as measures to contain the coronavirus pandemic crimped imports.
The surplus was $600 million in January-March, or 0.1% of gross domestic product, the Reserve Bank of India said in a statement.
The median in a Bloomberg survey of 15 economists was for a deficit of $3 billion.
The current account was in a deficit of $4.6 billion, or 0.7% of GDP, in the year-ago period.
Here are the reasons for the surplus.
Core Sector Contracts, Again
India’s infrastructure industries’ output contracted for a third straight month as the economy continued to feel the pain of measures to contain the coronavirus pandemic.
The index of eight core infrastructure industries, which comprises output of coal, crude oil, cement and electricity among others, declined 23.4% in May from a year ago, the government said in a statement.
A contraction in output of coal, crude oil, natural gas, steel, cement and electricity weighed on the overall index, while only production of fertilizers rose
The gauge makes up 40% of India’s factory output.
2. India To Keep Its Food Coffers Open For Poor
India will extend a programme for free transfer of foodgrain amid continuing economic disruptions due to the spread of the Covid-19 virus.
In an address to the nation on Tuesday, Prime Minister Narendra Modi announced an extension to Garib Kalyan Anna Yojana, under which about 80 crore people received free foodgrains until June 2020. This scheme will now be extended till November.
The entitlements under the scheme remain unchanged:
Five kilogram of free wheat or rice per month will be provided to 80 crore people.
Every family will additionally be entitled to 1 kilogram of free chana per month.
The extension will cost the exchequer an estimated Rs 90,000 crore more.
3. ONGC's First-Ever Loss
Oil and Natural Gas Corporation Ltd. has posted its first-ever quarterly loss due to a one-time adjustment on its books to account for existing and future impact of the Covid-19 pandemic.
Net loss stood at Rs 3,098 crore in the January-March period.
The unexpected loss was due to a one-time impairment cost of Rs 4,899 crore that the company accounted for during the quarter.
This was done after considering the possible effects of Covid-19 on the recoverability of the company’s cash-generating units.
But things were tough for ONGC even before the pandemic triggered a nationwide lockdown.
4. S&P's NPA Red Flag
Bad loans across the Indian banking system could rise to nearly 13-14% of total loans in the current financial year amid a rare contraction in Indian economy, showed data released by S&P Global Ratings.
At S&P’s projected level of non performing assets, the Indian banking system’s bad loan ratio would be close to the peaks seen during the 1998-2000 period.
According to RBI data, the gross NPA ratio across Indian banks had hit a high of 14.7% in 1999.
“Moreover, the resolution of these bad-debt situations will likely unfold slowly, which means banks may also be saddled with a huge stock of bad loans next year. We assume only about a 100 basis point improvement in nonperforming loans in fiscal 2022,” S&P said.
Find out key highlights from S&P's report on Indian banking.
5. Sensex's Best Quarter Since 2009
Indian stocks capped their best quarter since 2009 after swinging between gains and losses on Tuesday, as investors weighed the reopening of businesses against rising coronavirus infections.
The S&P BSE Sensex and the NSE Nifty 50 Index both eased 0.1% after earlier rising as much as 0.9%.
The benchmark index’s 7.7% monthly advance is the best in Asia, while its 18% increase since the end of March follows its worst ever quarter.
Eleven of 19 sector sub-indexes compiled by BSE Ltd. dropped, led by a gauge of oil and gas stocks.
Maruti Suzuki India Ltd. and Nestle India Ltd. were among the top gainers on the Sensex Index, while shares in Power Grid Corp. and Sun Pharmaceutical Industries Ltd. dropped.
Follow the day’s trading action here.
India’s sovereign bonds climbed after the central bank said it will resume its Federal Reserve-style Operation Twist to cool longer-end yields.
The yield on the most traded 6.45% 2029 bond fell two basis points to 5.99%, while that on the 5.79% 2030 bond also declined two basis points to 5.89%.
Still, doubts remain on whether the RBI will continue with the support measure.
U.S. Stocks Mixed
U.S. stocks were mixed on the final day of the best quarter since 1998 as traders assessed better-than-estimated consumer confidence data amid concern over new coronavirus infections.
After bottoming in the first quarter, the S&P 500 had its best 50-day surge in nine decades before turning almost flat in June.
The gauge advanced as a report showed the Conference Board’s index had its biggest one-month gain since late 2011.
Uber Technologies Inc. rallied on a news report that it’s in talks to buy Postmates Inc.
The Federal Reserve is preparing for the possibility of a second wave of infections, and lawmakers are likely to question Chairman Jerome Powell about a resurgence of the virus when he appears before the House Financial Services Committee on Tuesday.
West Texas Intermediate crude fell 1.7% to $39.02 a barrel.
Get your daily fix of global markets here.
6. A Crucial Two Weeks For Indian Markets
India’s equities have surged nearly 40% from their lows in March on hopes of an economic revival as the nation eased lockdown curbs, positive global cues and foreign inflows. But the Nifty 50 faces resistance at the current level and Gautam Shah expects the upside to be capped.
“The next couple of weeks are very important because we are about to cross a fragile bridge—the level of 10,500 to 10,700 on the Nifty,” the founder and chief strategist at Goldilocks Premium Research told BloombergQuint.
“If we can cross this bridge, we are good for much more upside. But I would say the chances of a turnaround from here are quite high,” he said.
Nifty might be in a spot of bother, according to Shah.
7. Sunil Mittal Bids For OneWeb
Indian telecommunications tycoon Sunil Mittal has submitted a bid for OneWeb, the bankrupt satellite firm whose investors include SoftBank Group Corp., people with knowledge of the matter told Bloomberg News.
An arm of Mittal’s Bharti Enterprises Ltd. conglomerate made an offer for London-based OneWeb with backing from the U.K. government, according to the people, who asked not to be identified because the information is private.
The OneWeb sale has also attracted initial interest from Canada’s Telesat, the people said.
OneWeb makes low-Earth orbit satellites that provide high-speed communications.
No final decisions have been made, and other suitors could still emerge for OneWeb.
8. Supply Constraints Hurt Auto Sales In June
Auto wholesales declined in June on supply-chain constraints, even as improving rural demand and preference for personal vehicles amid the pandemic drove demand, according to three brokerages.
Factory-gate shipments of passenger cars, two-wheelers and commercial vehicles tumbled in the range of 6%-79% year-on-year in June, according to data compiled from the reports of three brokerages—Nomura, Emkay Global and Motilal Oswal.
Wholesales, however, surged over the preceding month as economic activity resumes after India eased lockdown curbs.
Demand for passenger cars and two-wheeler, too, witnessed a recovery.
9. How India’s App Ban Threatens China
China over the past decade built an alternate online reality where Google and Facebook barely exist. Now its own largest tech corporations from Alibaba Group Holding Ltd. to Tencent Holdings Ltd. are getting a taste of what a shutout feels like.
India’s unprecedented decision to ban 59 of China’s largest apps is a warning to the country’s tech giants, who for years thrived behind a government-imposed Great Firewall that kept out many of America’s best-known internet names.
If India finds a way to carry out that threat, it may present a model for other countries from Europe to Southeast Asia that seek to curtail the pervasiveness of apps like ByteDance Ltd.’s TikTok while safeguarding their citizens’ enormously valuable data.
The surprise moratorium hit Chinese internet companies just as they were beginning to make headway in India.
10. Covid-19: Thane To Go Under Full Lockdown
Covid-19 infections in India continues to mount by the day as the country struggles to prevent new contractions amid a reopening economy.
India added over 18,000 new cases of the novel virus, taking the total tally to more than 5.66 lakh in the world’s second-most populous country, according to the Health Ministry’s update as of 8 a.m.
Thane city will observe a total lockdown between July 2-12 to contain the virus. Non-essential services will not operate during this period, and nor would movement of vehicles for proposes other than medical and essential travel be allowed
Meanwhile, in Bengaluru, private medical colleges in the city agreed to provide about 4,500 beds for the treatment of Covid-19 patients.
Track news and developments around the Covid-19 outbreak here.
Globally cases passed 1.02 crore leaving over 5.04 lakh dead.
The World Health Organization warned the worst of the coronavirus pandemic is still to come because of a lack of global solidarity.
More U.S. areas took steps to scale back reopenings, with Arizona closing bars and New Jersey halting plans for indoor dining.
Daily deaths in Iran reached a record, while cases in Austria rose to the highest level since mid-May.
Follow the global spread of the virus here.