BQuick On June 8: Top 10 Stories In Under 10 Minutes
Here is a roundup of the day’s top stories in brief.
1. SIPs Falling Out Of Favour
Inflows into equity mutual funds fell for the second straight month as benchmark indices remained volatile even as the economic activity resumes in phases.
- Net inflows into equity and equity-linked schemes declined 15% over the previous month to Rs 5,256.52 crore in May, according to data released by the Association of Mutual Funds in India.
- Net equity inflows had fallen by half in April on lower distributors’ activity amid the lockdown to contain the coronavirus pandemic.
- All categories of equity schemes saw a decline. Net investments into the mid caps dropped to the lowest since AMFI started releasing granular data from April 2019.
- While inflows into large caps fell, they have remained above the Rs 1,000-crore mark for a year.
Contribution through systematic investment plans fell to the lowest in nearly a year.
2. GST Council Flashpoint
The issue of compensation to states is expected to dominate discussions at the GST Council’s next meeting on June 12 as the body meets for the first time since the nationwide lockdown, imposed after the Covid-19 outbreak, was lifted.
- States will raise the issue of compensation even as the central government released Rs 36,400 crore to them last week for December-February period, according to two officials with direct knowledge of the matter.
- The central government compensates states bi-monthly after they lost powers to levy indirect taxes such as value added tax with the rollout of goods and services tax.
- The compensation is guaranteed for five years, and is calculated at a growth rate of 14% annually keeping 2015-16 as the base year.
Since August 2019, collections from compensation cess—that’s levied on sin or demerit goods—started falling short compared to the compensation payout.
3. India’s Latest Bet To Deal With Stressed Assets
India is considering a new category of alternate investment fund which will focus on acquiring stressed assets from banks and shadow lenders, a move aimed at resolving some of the highest bad debt in the world.
- The fund will be allowed to buy stressed assets directly from the banks and non-banking financial companies, people with knowledge of the matter told Bloomberg News, asking not to be identified as the matter is not public.
- At present, investors can only access bad loans through securities issued by asset reconstruction companies, but the new fund category will allow them to do so directly.
- This will give foreign investors including global hedge funds easier access to the mountain of local bad debt.
The aim is to supplement the efforts of asset reconstruction companies in reducing the bad loans of these lenders.
4. Zero Loan Growth This Year? Crisil Thinks It’s Likely
Indian banks’ loan growth will slow to nil to 1% in the year started April 1, according to the Indian unit of S&P Global Ratings.
- That’s lower than 6.1% the previous fiscal year, which was already a multi-decade low.
- Corporate borrowings, which account for half of total credit, will be worst hit and loans to individuals will decelerate to “low single digits” from “mid teens” in the past few years, Crisil Ltd. said in a report.
- “This crisis is unprecedented and so will its economic fallout be,” said Crisil’s Senior Director Krishnan Sitaraman.
Crisil predicts loan growth will pick up to high single digits in the next financial year.
5. Survivor... By Uday Kotak
It’s a Paul Revere-like moment for India Inc. in this metaphorical war against Covid-19. As one of its top bankers, now president of a leading industry chamber, warns of an economic disruption like no other. “Even if the valuations are lower, raise capital. Survival and sustainability is more important than percentage ownership,” cautions Uday Kotak, managing director and chief executive officer of Kotak Mahindra Bank Ltd.
- Kotak isn’t quite riding a horse yelling the British are coming (Revere didn’t really use those words). But, in interview after interview, Kotak has underscored the same point regarding survival.
- In his conversation with BloombergQuint, the CII president talked about what will it take for businesses to make it out of this crisis, alive.
- “ ...we need to change the models of how entrepreneurs build businesses in this country,” Kotak said exhorting a shift from debt-dominated financing to equity raises.
Companies need to acknowledge that there are no saviours, according to Kotak.
6. Nifty Surrenders Early Gains; Crude Slumps
Indian stocks pared gains driven by optimism around the country entering the first phase of opening up its economy, with hotels, restaurants and shopping malls permitted to function after more than two months of lockdown.
- The S&P BSE Sensex rose 0.2%, trimming an advance of as much as 1.9%.
- The NSE Nifty 50 Index gained 0.3%.
- Among sectoral indices, the Nifty Bank index fell 600 points from its day's high to end 0.9% higher.
- The Nifty I.T. index emerged as the top performer, ending 1.8% higher.
Follow the day’s trading action here.
U.S. stocks rose while Treasuries and the dollar fell as easing lockdowns bolstered economic optimism.
- The S&P 500 extended a rally from this year’s low to more than 40% and is on track to erase this year’s losses.
- Gilead Sciences Inc., maker of the only U.S.-approved coronavirus treatment, jumped as Bloomberg News reported that AstraZeneca Plc has made a preliminary approach.
- West Texas Intermediate crude sank 1.7% to $38.86 a barrel, after OPEC and its allies agreed to extend crude output curbs by an extra month, though Saudi Arabia signaled it wouldn’t continue with additional, deeper curbs after June.
Get your daily fix of global markets here.
7. Petrol, Diesel Prices On The Rise Again
Petrol and diesel prices were hiked by 60 paisa per litre on Monday, for the second day in a row, as state-owned oil firms reverted to daily price revisions after a 83-day hiatus.
- Petrol price in Delhi was hiked to Rs 72.46 per litre from Rs 71.86 on Monday, while diesel rates were increased to Rs 70.59 a litre from Rs 69.99, according to a price notification of state oil marketing companies.
- The refiners had on Sunday raised prices by 60 paisa per litre on both petrol and diesel.
- Daily price revision has restarted, an oil company official said.
Fuel prices had been frozen since March as oil companies wanted to avoid volatility in global markets.
8. Covid-19: Kejriwal In Self-Quarantine; New Zealand Declares Victory
Covid-19 infections crossed the 2.5-lakh mark on a day the country began ending its two-month lockdown. This comes a day after the subcontinent’s case count surpassed Italy’s and Spain’s on the weekend.
- India added 9,983 fresh cases in the 24 hours preceding the Health Ministry’s 8 a.m. update on June 8, taking the total tally to 2,56,611.
- This includes 7,135 deaths and 1.24 lakh patients who have recovered.
- India has now reported more than 9,000 fresh cases for the fifth straight day.
- Delhi Chief Minister Arvind Kejriwal has gone into self-quarantine and will get himself tested for Covid-19 on Tuesday, officials said.
Track news and developments around the Covid-19 outbreak in India here.
Globally, total cases crossed 70 lakh, leaving over 4 lakh dead.
- New Zealand said it will remove social distancing measures after declaring that the country was coronavirus free.
- Malaysia saw the smallest increase in virus cases since March as it prepared to further ease restrictions on people’s movement.
Follow latest news updates on the global spread of the virus here.
9. Titan’s Q4 Outperformance
Titan Co.’s quarterly profit rose even as the nationwide lockdown meant to contain the Covid-19 pandemic shuttered jewellery stores, bringing the industry to a standstill.
- Net profit rose 21.1% year-on-year to Rs 356.8 crore in the January-March period, India’s largest branded jewellery maker said in an exchange filing. That compares with the Rs 285-crore consensus estimate of analysts tracked by Bloomberg.
- Revenue fell 5.2% over the year-ago period to Rs 4,428.8 crore. Analysts had pegged the company’s top line at Rs 4,388 crore.
- Earnings before interest, tax, depreciation and amortisation rose 32.5% year-on-year to Rs 603.7 crore in the quarter ended March.
- Ebitda margin expanded to 13.6% from 9.8% a year ago.
This is the first time in eight quarters that the jewellery segment witnessed a decline.
10. RBI Sets Stage For Listed Residence Mortgage Backed Securities
The Reserve Bank of India is proposing to carve out differential guidelines for residential mortgage backed securities and set the stage for their listing.
- That’s according to a new draft framework for ‘Securitisation of Standard Assets’ issued on Monday.
- After deliberations and recommendations by a Committee and Task Force last year, the RBI has put out a new draft framework, calling for suggestions till June 30.
- The key changes include a revised definition of securitisation, which excluded ‘direct assignment’ loan sales.
- “Only transactions that result in multiple tranches of securities being issued reflecting different credit risks will be treated as securitisation transactions,” the draft said.
Securitisation of exposures purchased from other lenders has been allowed.