BQuick On June 4: Top 10 Stories In Under 10 Minutes

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

1. Savings Account Deposits Are Losing Sheen

A number of top banks have cut interest rates on savings account deposits as lenders remain flush with funds.

• Over the last few weeks, lenders such as State Bank of India, ICICI Bank Ltd., Axis Bank Ltd., Kotak Mahindra Bank Ltd. and Punjab National Bank have cut the interest they offer on savings accounts.
• On Thursday, Punjab National Bank said it will bring down its savings account rate by 50 basis points across all categories.
• A day before, ICICI Bank lowered its savings account rates by 25 basis points to 3% for deposits up to Rs 50 lakh.
• Yes Bank announced the steepest cut in its savings account interest rate for deposits up to Rs 1 lakh, which was cut by 100 basis points to 4%, with effect from June 1.
• Kotak Mahindra Bank now offers only 4% for deposits above Rs 1 lakh and 3.5% for deposits below Rs 1 lakh.
• SBI continues to offer the lowest rate to its savings account depositors at 2.7%.

Find out why banks have started tinkering with savings account interest rates.

2. Banks Expect Loans Under Moratorium To Rise

India’s top lenders expect a larger proportion of their borrowers to seek repayment relief after the Reserve Bank of India extended the temporary provision until the end of August. This, despite the fact that India’s now attempting to restart economic activity after a 72-day lockdown.

• According to four senior bankers who spoke to BloombergQuint on the condition of anonymity, a number of wholesale borrowers, large and small, have started sounding out bank branches on the need for an extended moratorium.
• According to the first of the four bankers cited earlier, a senior official at State Bank of India, when the lender had first offered the three-month loan repayment moratorium in March, there were few takers.
• This was because borrowers feared the accrued interest that would have to be paid in return for a three-month repayment holiday. However, as the period of lockdown continued to stretch out, more and more companies faced cash flow shortages and sought a moratorium.

With a number of companies laying off employees and announcing pay cuts, bankers fear that more retail borrowers will want to defer their repayments.

3. Don’t Fuss Over Nickels And Dimes, Uday Kotak Tells India Inc.

Veteran banker Uday Kotak said Indian companies should use the rebound in markets to raise capital as they look to emerge from the economic crisis triggered by the Covid-19 pandemic.

• “At this point we are walking on the cloudy road,” Kotak said after taking charge as president of the industry lobby Confederation of Indian Industry. The capital market has rebounded 35% from the lows, but that doesn’t mean the economy is fine, he said. “We will need to do the hard work.”
• The market rebound, however, has provided companies ample opportunity to raise capital, he said. “This is an opportunity for corporate India to get capital. The market may be seeing things which are not visible today. But, over a period of time, we will know who is right.”

The financial sector will have to take the lead in augmenting risk capital.

4. Amazon + Airtel Vs Facebook + Jio?

Amazon.com Inc. is in talks with Bharti Airtel Ltd. to buy stake worth $2 billion in India’s second-largest telecom firm, Reuters reported citing three people aware of the matter.

• The talks are in an early stage and deal terms could change, the report said, adding it’s also possible that an agreement is not reached at all.
• The potential deal highlights U.S. technology giants’ increasing interest in India’s battered telecom sector.
• Facebook Inc. has recently picked up 10% stake in Mukesh Ambani's Jio Platforms Ltd..
• Financial Times has also reported that Alphabet Inc.'s Google is considering a stake in Vodafone Idea Ltd.

Find out what Amazon and Airtel said about a potential deal.

5. Nifty Snaps Six-Day Rally; ECB Boosts Emergency Stimulus

Indian equity markets ended their best gaining run in seven months after posting modest losses on the weekly options expiry day.

• The S&P BSE Sensex ended 0.4% lower at 33,980.
• The NSE Nifty 50 managed to close above the 10,000 mark for the second straight day. The index closed at 10,029, down 0.3%.
• Private banks were the primary laggards in today's trading session.

Follow the day’s trading action here.

As the Covid-19 pandemic disrupted economic activity and caused a washout in the last two months, companies likely to manage even flat revenue in the ongoing fiscal will command a premium in the stock market, according to Ayaz Motiwala of the Amala Emerging Asia Fund at Nivalis Partners.

Watch the full interview where Motiwala explains how companies which are able to maintain their revenue are likely to grow going ahead.

Stocks traded mixed in the U.S. and slumped in Europe as concern the recent rally had gone too far too fast blunted the effect of new stimulus measures and encouraging economic data.

• The S&P 500 Index dipped for the first time in five sessions, with real estate and energy companies among the worst performers.
• The tech-heavy Nasdaq 100 edged higher after EBay Inc. raised its forecast for sales and earnings.
• Treasury yields rose as weekly jobless claims fell to 1.88 million, reflecting a slowing in job losses.
• The Stoxx 600 stayed lower in the wake of the European Central Bank decision to add 600 billion euros to its pandemic purchase program, more than expected.
• WTI crude fell 1.6% to $36.68 a barrel.

Get your daily fix of global markets here.

6. What Happens If India’s Rating Is Cut To Junk?

A cut in India’s sovereign rating to junk status may threaten the nation’s chances of being added to global bond indexes, steepen the bond yield curve and weaken the rupee, according to UBS Group AG.

• The Swiss bank expects S&P Global Ratings and Fitch Ratings to lower their outlook on the rating to negative from stable over the next couple of months, strategists led by Rohit Arora wrote in a June 3 note.
• Earlier this week, Moody’s Investors Service cut India’s rating to the lowest investment grade, putting it on par with S&P and Fitch at a level above high-yield.

Here are some scenarios from the UBS analysis on the repercussions of a junk rating.

7. India Inc.’s Worst Quarterly Results Since 2014

The world’s biggest lockdown has cost India millions of jobs, resulted in record low economic activity, and fueled the biggest earnings decline in at least six years.

• Profits at NSE Nifty 50 Index members fell about 15% last quarter from the same period last year, the worst drop since at least 2014, according to Bloomberg-compiled data.
• About two thirds of the firms in index have announced results for the March quarter so far.
• Communications, energy and industrials recorded the steepest declines on an adjusted basis.

Here are the key highlights from the Nifty 50’s Q4 earnings scorecard.

8. Plummeting Confidence, Rising Inflation Fears

Consumer confidence fell to the lowest in more than six years in May as people feared falling incomes and poorer employment prospects. Simultaneously, consumers feared an increase in prices of food products among others.

• The consumer confidence indices collapsed with expectations for the present and outlook for the year ahead falling into negative territory, according to the RBI’s Consumer Confidence Survey.
• Consumer confidence collapsed from 115.2 in March to 97.9 in May—the lowest level since March 2014.
• Future expectations, too, plummeted to 63.7 from an already low level of 85.6, further into the pessimistic zone. The range of current and the future indices lie between 0 to 200. An index value below 100 represents pessimism whereas a figure above 100 signals optimism.

Simultaneously, households expect inflation to harden.

9. As Covid-19 Tally Continues To Rise...

Covid-19 cases in India exceeded 2.16 lakh in India with the country reporting its largest spike today, taking it directly behind Italy in the list of most infected countries.

• The total number of cases stood at 2,16,919, according to the health ministry's 8 a.m. update.
• Over the last 24 hours, India added 9,304 new cases, while 3,804 recovered and 260 died.
• The Indian Council of Medical Research’s website shows that a total of 42.42 lakh tests have been done so far, with 1.39 lakh in the last 24 hours.

Track developments around the Covid-19 pandemic in India here.

...Rajiv Bajaj Says India Flattened Wrong Curve

India implemented a “draconian” lockdown that was porous and ended up decimating the economy, industrialist Rajiv Bajaj told Rahul Gandhi in a video interaction released Thursday.

• The managing director of Bajaj Auto Ltd. was in conversation with the Congress leader, as part of the party’s series on India's Covid-19 response and the lockdown.
• “You flattened the wrong curve. It is not the infection curve, it is the GDP curve. This is what we have ended (up) with—the worst of both worlds,” Bajaj said.
• He called for taking fear out of people's minds through a “very clear, aligned narrative” from none other than the prime minister.

According to Bajaj, reopening the economy will be a herculean task.

10. Modi-Morrison Virtual Meet

Indian Prime Minister Narendra Modi and his Australian counterpart Scott Morrison signed a crucial defense agreement and upgraded ties to a Comprehensive Strategic Partnership, as both nations navigate fraught relations with China.

• The agreement, confirmed by Morrison in his opening remarks of a virtual summit between the leaders on Thursday, may allow the two nations to access each other’s bases and ports and strengthen their defense ties.
• The Mutual Logistics Support pact is similar to an agreement India signed with the U.S in 2016.
• Both countries “share a view that many of the future challenges are likely to occur in, and emanate from, the maritime domain,” according to a joint statement released after the meeting.

The two countries will also continue their meetings between foreign and defense ministers to strengthen ties.