BQuick On March 23: Top 10 Stories In Under 10 Minutes
This is a roundup of the day’s stories in brief.
1. Coronavirus: Flights Cancelled, State Borders Sealed As India Moves Into Lockdown
With the total number of confirmed Covid-19 cases in India more than doubling in the last four days, the central and state governments sprung to action attempting a lockdown and restricting the movement of people.
- The aviation ministry has shut domestic flight operations from March 25 to March 31.
- All flights will have to be scheduled in a way that they land before the shutdown kicks in.
- Only cargo flights will be allowed.
- This came after the Indian government directed states to impose strict lockdowns as the total infections climbed to 467.
- At least nine states and union territories--Andhra Pradesh, Punjab, Maharashtra, Himachal Pradesh, Delhi, Chandigarh, Assam, Bihar and Kerala--have imposed a complete lockdown.
- Uttar Pradesh and Karnataka have locked down some districts.
- Maharashtra, which has the highest number of cases, will restrict inter-district movement of people. Religious places will be shut and people will only be allowed to step out of their houses to procure essential goods, medical supplies or for some of the other permitted circumstances.
Follow the developments around the coronavirus outbreak in India here.
2. Sensex’s Posts Biggest One-Day Fall, Rupee Weakens Further
Indian equity markets extended their fall after hitting the 10 percent lower circuit in early trade. In fact, both S&P BSE Sensex and the NSE Nifty 50 ended with their worst ever one-day declines.
- The Sensex fell 13.15 percent or 3,934.72 points to 25,981; the lowest closing since December 2016.
- The 50-stock Nifty fell 12.98 percent, or 1,135.2 points, to end at 7,610, the lowest since April 2016.
- All 50 stocks ended the day with cuts, with four of them falling over 20 percent each.
- Rs 4.8-lakh-crore of market cap was eroded today.
Follow the day’s trading action here.
Rupee crashed past the 76/$ mark for the first time ever following a lockdown in much of Asia’s third-biggest economy.
- The currency to 76.28 per dollar, all-time low, during the day's trade.
- It closed 1.46 percent lower at 76.29 against the greenback.
RBI’s measures have failed to assure foreign investors that are dumping Indian assets this month.
3. RBI Keeps The Liquidity Floodgates Open
The Reserve Bank of India is continuing to supply large amounts of liquidity to the markets and the financial system as it tries to prevent a freeze in the credit markets, in the face of the coronavirus impact on the economy and financial system.
- On Monday, the central bank said that it would offer Rs 1 lakh crore to banks via repo operations.
- Of the total amount, Rs 50,000 crore will be offered on Monday and another Rs 50,000 crore on Tuesday.
- Results of the first auction showed that the RBI received bids worth Rs 31,585 crore.
- The bids were accepted at a cut-off rate of 5.16 percent. Through the auction, the RBI has provided funds for a 16-day period.
RBI also said that it is bringing forward planned bond purchases under its previously announced open market operation.
RBI’s Nuclear Options
While an emergency interest rate cut has not yet been announced in India, the Monetary Policy Committee is widely expected to cut rates when it meets in April. But as the shutdown worsens, these steps may not be enough, write Ira Dugal.
- The central bank will at least have to dust off some of its nuclear options in case they need to be used.
- The first of these options is announcing forbearance for loan defaults.
- The second will be on ways to provide support to the corporate debt markets.
The RBI has another truly nuclear option.
4. U.S. Stocks Drop Despite Fed’s Measures
U.S. stocks languished as investors awaited progress on a spending package from Congress to tackle the fallout from the coronavirus pandemic.
- Measures of corporate credit risk eased and the dollar fell after the Federal Reserve announced a massive second wave of initiatives to support a shuttered American economy.
- The S&P 500 dropped at the open after lawmakers failed to agree on a stimulus bill over the weekend. Negotiations continued after Democrats blocked the first effort. The index has now erased almost all gains accrued during Donald Trump’s presidency.
- Gold climbed 2 percent to $1,528.57 an ounce.
Get your daily fix of global markets here.
All this, even as coronavirus cases topped 3,50,000 and the number of deaths crossed 15,300 around the world.
- Finance ministers and central bank governors from the Group of 20 nations joined an emergency call to discuss their response to the pandemic.
- U.K. Prime Minister Boris Johnson threatened a nationwide lockdown as public ignores warnings.
- Meanwhile, an experimental coronavirus vaccine could be available to health-care workers as soon as late 2020 on an emergency basis.
Follow the key developments from the coronavirus outbreak around the world here.
5. HUL To Buy VWash From Glenmark
Hindustan Unilever Ltd. agreed to acquire an intimate feminine hygiene brand from Glenmark Pharmaceuticals Ltd. as part of its plan to enter fast-growing segments of the future in the premium beauty and personal care category.
- The deal includes the acquisition of intellectual property rights, including trademarks, design and know-how related to the VWash brand, the nation’s largest consumer goods maker said in a statement.
- HUL will make most of the payment in cash upfront as well as pay a royalty on sales for three years.
- The companies, however, haven’t disclosed the amount of the deal.
- Glenmark will continue to manage the business until the transaction is completed, and will also continue to manufacture for HUL for an agreed period of time.
The transaction is subject to fulfilment of certain conditions.
6. HDFC Bank’s Aditya Puri Calls For Loan Forbearance
India’s largest private lender HDFC Bank Ltd., in a conference call, said that banks reflect the economy and measures such as lock-downs could have some impact on bank portfolios. “This too shall pass,” Managing Director Aditya Puri said after detailing the impact on the industry and the bank.
- Puri argued that the RBI needs to come out with forbearance across the industry as everyone will be affected.
- There's no option but for the regulator to announce forbearance, he said.
- Puri also suggested that at the fiscal end, the government must pull out all the stops to address issues related to daily wages.
Watch Puri’s full conference call here where he talks succession planning and the business impact from Covid-19.
7. Red Flags That Credit Suisse’s Neelkanth Mishra Is Watching Right Now
The possibility of dollar shortages, rising corporate bond yields and availability of credit are some of the strains showing up across Indian financial markets, which authorities must try and quell as India deals with the fast-evolving impact of Covid-19. That’s according to Neelkanth Mishra, India strategist at Credit Suisse.
- While regulators will need to take steps to ensure the smooth functioning of the markets, growth will need large fiscal support, said Mishra, who spoke to BloombergQuint in an interview on Friday.
- Among the first issues to crop up is the reduced availability of dollars.
- Mishra explains that when global trade and supply chains stall, the velocity at which dollars are circulating in the global financial system drops.
- Parallel to that, risk aversion drives outflows from emerging markets raising the demand for dollars. This creates an imbalance.
- The shortage of dollar and dollar funding, in turn, creates a credit problem.
Read more to see how Mishra is assessing the business and stock market impact.
8. Covid-19 And Its Impact On FY20 Financial Reporting
There is discussion about entities invoking ‘force majeure’ clauses in their contracts, the impact of which may need to be considered for financial reporting, writes Sumit Seth.
- Scaled-down economic activity and reduced demand could result in higher than expected sales returns, cancellation or refund.
- The Covid-19 situation may require restructuring of operations, modification of incentive plans such as share-based arrangements.
- Entities that have recognised deferred tax assets may need to review their estimates of future taxable income.
All the important implications for FY20 reporting, here.
9. Fighting The Virus
Avoiding A Default Wave
India has plenty of space to cut interest rates as well as offer a fiscal stimulus, the government’s principal economic adviser said, and the main goal is to ensure that the nation’s economy doesn’t seize up amid a shutdown to contain the coronavirus.
- Policymakers’ immediate focus is ensuring Indians have cash in hand to buy essentials, Sanjeev Sanyal said in an interview in New Delhi on Friday.
- They are also aware that India faces “waves of default” if cash flows aren’t maintained, he said.
‘Whatever it takes to keep the cash flow going in the economy will be done.’
India Frees About $2 Billion Philanthropy Funds
India allowed companies to use their philanthropy funds to prevent the spread of the coronavirus, corralling private resources to fight the pandemic.
- The money can be spent on activities related to Covid-19, including promotion of health care and sanitation, the Ministry of Corporate Affairs said in a notification Monday.
- A total of 21,397 companies spent more than 136 billion rupees ($1.8 billion) on social programmes in the year through March 2018, according to latest government data.
- The measure comes as India weighs the possibility of a fiscal stimulus to buoy its economy, already set for the weakest pace of expansion in more than a decade.
Supreme Court, Delhi Courts To Only Hear Urgent Cases Via Video
The Supreme Court decided to further curtail its functioning by limiting hearing of cases via videoconference as a precautionary measure against the novel coronavirus pandemic.
- Lawyers can now address the court for urgent hearings on video-conferencing apps from their homes and offices.
- The decision came this morning after Chief Justice of India SA Bobde discussed the issue with Dushayant Dave, president of the Supreme Court Bar Association, and Solicitor General Tushar Mehta.
The top court has suspended all the proximity cards used by lawyers to enter the Supreme Court premises.
- India can spend $18 billion to fight virus impact, analysts say.
- Social distancing a luxury that workers on $2 a day can’t afford.
- States lead the fight against rising economic cost of coronavirus.
- Top Indian gold seller shuts shops as industry grinds to a halt.
- Indian API makers to ramp up output of antimalarial drugs found effective against Covid-19.
- Three sectors remain unscathed (so far) from Covid-19 hit.
10. Companies Under IBC Need New GST Registration
Companies under Insolvency and Bankruptcy process must avail a fresh Goods and Services Tax registration within 30 days of a resolution professional being appointed for them.
- If the resolution professionals have already been appointed, GST registration will have to be availed within a month, the government has said.
- The new registration will have to obtained in each of the states or union territories the corporate debtor or the stressed company was registered earlier.
Here's what experts made of the government's decisions.