BQuick On March 27: Top 10 Stories In Under 10 Minutes
This is a roundup of the day’s top stories in brief.
1. You May Get A Break On Your Loan EMI. May.
The Reserve Bank of India has announced a package of measures to support the economy, at a time of severe stress brought on by the spread of the novel coronavirus. As a part of this package, the regulator has allowed banks to offer businesses and consumers a moratorium on their loan repayments for a period of three months.
- But first, banks will need to come out with a board-approved policy on how they will implement this package for 'eligible borrowers'
- Each bank will define its own criteria and decide on the relief based on the criteria.
- The moratorium will not be automatically granted.
- Borrowers will have to approach individual lenders to seek moratoriums.
Who stands to benefit from the package and how easy will it be? BloombergQuint answers all your queries.
2. Experts Welcome RBI’s ‘Whatever It Takes’ Move
Meanwhile, India’s Monetary Policy Committee cut its benchmark interest rate as it advanced the scheduled April announcement. It combined its steepest rate cut since the global financial crisis with a sharp reduction in the cash reverse ratio.
Terming the macroeconomic risks from the pandemic as “severe”, the MPC announced:
- A cut in the repo rate by 75 basis points to 4.40 percent, while retaining its “accomodative stance”.
- The MPC cut the reverse repo rate by an “asymmetrical” 90 basis points, so as to make it unattractive for banks to deposit funds with RBI. The reverse repo rate has been reduced to 4 percent.
- The cash reserve ratio has been slashed by 100 basis points to 3 percent.
Strong fiscal measures are critical to deal with the situation, the policymakers said.
The RBI’s package of measures aimed at addressing the “severe” macroeconomic risks emerging from the local spread of coronavirus is comprehensive and addresses many of the key concerns, said economists and money market experts.
- This really is the RBI “firing a bazooka and nothing less,” said Chinoy, who is chief India economist at JP Morgan.
- It is a fairly comprehensive package and the RBI has delivered a whole bazooka so to speak, said Sonal Varma, chief India economist at Nomura.
- Pranjul Bhandari, chief India economist at HSBC, said the RBI delivered more than expected, and the steps should help in the reconstruction process after the Covid-19 shock abates.
Will more steps be needed by the RBI? Here’s what experts think.
3. Equities Volatile, But Debt And Currency Markets Rejoice
Indian equity markets ended a volatile session mixed, after fluctuating for most parts of the day between gains and losses.
- The S&P BSE Sensex snapped a three-day winning streak to end 0.44 percent lower at 29,815.
- For the week, the index close 0.34 percent lower, despite Monday’s 13 percent crash.
- In fact, since the 21-day lockdown kicked in on Wednesday, the Sensex has gained 11.7 percent.
- The NSE Nifty 50 managed to eke out minor gains, ending higher for the fourth straight day.
- Both the Sensex and Nifty reported their sixth straight weekly loss, the longest weekly losing streak since July 2008.
Follow the day’s trading action here.
Rupee, Bonds Advance
- India’s sovereign curve bull steepened after the RBI announcements, with the yield on three-year bonds plunging as much as 44 basis points.
- The yield on benchmark 10-year debt was down eight basis points after tumbling by as much as 24 basis points to 5.98 percent, the lowest since 2009.
- The rupee, however, pared gains and ended the day 0.3 percent higher at 74.92 after advancing by as much as 1.1 percent earlier as the dollar strengthened.
Market participants say the stimulus was largely “priced in by investors”.
India Inc.’s Borrowing Costs Fall
Borrowing costs for corporations fell swiftly after RBI announced a package of measures to bring relief to the economy. The impact was almost immediate.
- Credit spreads, or the additional interest charged over government bonds, on corporate bonds fell by 75 to 100 bps during the day, depending on the issuer, according to experts that spoke to BloombergQuint.
- According to data from the Clearing Corporation of India Ltd., yields on commercial paper and certificates of deposits dropped.
Fixed income experts say the RBI’s targeted LTRO is well designed and will have a direct impact.
U.S. Stocks Drop, Nymex Crude Slumps Below $22
The fastest U.S. stock rally in nine decades ground to a halt, as volatility continued to grip financial markets roiled by the coronavirus pandemic.
- The S&P 500 sank more than 3.5 percent, giving back one-fifth of its 18 percent surge over the past three days.
- The index is still headed for its best week in 11 years, though it remains 25 percent off its February record.
- The Cboe Volatility Index is on track for a 10th straight close above 60. It averaged 18.7 in the past year.
- West Texas Intermediate crude plunged 6 percent to $21.23 a barrel.
Get your daily fix of global markets here.
4. India Cases Top 700; Boris Johnson Infected
New infections of the novel coronavirus in India continued to grow with total Covid-19 cases in the country rising to 724. Total number of cases have tripled in the last one week.
- This includes 66 cured and 17 who succumbed to the respiratory illness.
- The health ministry has said that the shortage of ventilators is being addressed by roping in public sector units like Bharat Electronics Ltd.
- Government is also looking at indigenous manufacturing of masks and protective equipment amid a shortage, especially for health care workers.
- The Department of Biotechnology has been asked to look at the development of a vaccine for Covid-19.
- India is now also likely to join WHO's solidarity trials which are aimed at generating high quality data on which treatments are most effective.
- India is also willing to go for vaccine trials that have passed animal studies.
Follow developments around the novel coronavirus outbreak in India here.
Globally, cases topped 5.42 lakh leaving more than 24,000 dead. Over 1.24 lakh people have also recovered.
- Spain recorded its deadliest day so far while European leaders struggled to agree on a strategy to fight the outbreak.
- U.K. Prime Minister Boris Johnson said he developed mild symptoms and tested positive for Covid-19.
- The World Health Organization appealed for a stronger coordinated attack against the coronavirus.
See all the global action taken to address the outbreak here.
5. India Lockdown Triggers Disruptions For Farms, APMCs And Truckers
Less than an hour after Prime Minister Narendra Modi announced a nationwide lockdown on March 24 to counter the spread of Covid-19, people rushed to nearest grocery stores to stock up on essentials. The panic buying also forced some key Agricultural Produce Market Committee markets to close for a couple of days.
- The APMC’s market in Vashi was shut between Saturday and Wednesday. It has been operational since Thursday and isn't facing any supply chain disruptions.
- In Pune, APMC market will operate for shorter hours and sees no shortfall in essential commodities.
See how other APMCs across India are trying to make sure there's food on your table.
The three-week India shutdown has stalled all businesses barring essential items. Trucks carrying anything other than staples and medicines can’t be on the road.
- That has made life hard for truckers who are stranded in different parts of the country.
- As roadside eateries are shut, lack of food and water has caused panic.
- With reports of the police beating up people for venturing out, drivers are scared to go out to buy supplies.
The decision to impose a 21-day lockdown to restrict the spread of the novel coronavirus could also disrupt the rabi harvesting season.
- The lock-down, scheduled to last at least until April 14, 2020, coincides with the harvesting season for rabi crops in several states across the country.
- The central government has issued no specific directive exempting farmers from harvesting rabi crops.
- However, some states are allowing farmers to go into the fields within the guidelines of social distancing.
Beyond harvesting, concerns will emerge on the storage and transport of agricultural produce.
6. India Inc. And The Lockdown
First states shutting down and now a 21-day nationwide lockdown has given scenario planning a whole new meaning across businesses in India.
- Enabling tens of thousands of employees to work-from-home, safely shutting down facilities, watching closely over suppliers and their financial health, and praying the customer returns soon. That’s just one part of the problem.
- Keeping the financial wheels of the business turning for 21 days despite no revenue...nationwide. That’s a different level of unprecedented.
Senior executives at three different businesses narrate what the past few days have been like and make clear the challenges facing the economy.
Marico Ltd.’s biggest concern right now is to make essential commodities available to consumers amid the nationwide lockdown.
- “Our biggest priority right now is to make the products available and not pricing,” Vivek Karve, chief financial officer at the maker of Parachute and Saffola, said.
- “We are operating plants that manufacture food—edible oils, oats, etc.—and prioritising this portfolio,” he told BloombergQuint.
Marico said this lockdown would have implications on capital creation, jobs and overall consumption.
Tech Mahindra Ltd. has not seen project cancellations but its operations are not running at full capacity as clients struggle with lockdowns and stalled business during the Covid-19 pandemic.
- The priority for the software services provider right now are services like telehealth that are in demand.
- “These are unprecedented times but we are coping with it. We have signed a few new deals in healthcare and hospitality segments,” CP Gurnani, MD and CEO told BloombergQuint in an interview. “There is disruption but we are working with our clients through these challenges.”
Gurnani said conversations with clients are more related to providing the service and business continuity.
7. Tata Motors To Hive Off Cars Unit
Tata Motors Ltd., the Indian owner of Jaguar Land Rover, plans to separate its cars business from trucks and buses, as the company seeks partners for a unit slammed by the coronavirus outbreak and a global shift to electric vehicles.
- “The recent outbreak of Covid-19 virus increases the challenges faced by the business,” Tata Motors said in a statement.
- “This decision is a first step in our plans to secure mutually beneficial strategic alliances for the domestic PV business and help secure its long-term viability,” it said.
An investor will bring much needed cash to revive sales.
8. Supreme Court Relaxes Deadline To Stop BS-IV Vehicle Sales
The Supreme Court allowed auto dealers to sell 10 percent of BS-IV inventory beyond the March 31 deadline, providing relief when the pandemic worsened sales of the industry that’s already grappling with a prolonged slowdown.
- The top court, which is hearing only urgent cases during the 21-day lockdown amid the coronavirus outbreak, directed that no vehicles will be sold in the Delhi National Capital Region.
- Also, sales have to take place only during the first 10 days after the lockdown ends, Justice Arun Mishra and Justice Deepak Gupta, who heard the case through video conferencing, said.
Here’s how much unsold BS-IV inventory Indian automakers hold.
9. Promoters Go Shopping
As Indian stocks tumbled because of the Covid-19 uncertainty, tracking the biggest drop in global equity indices in more than a decade, promoters of several domestic companies used the opportunity to increase stake in their firms.
- Among the Nifty 50 constituents, 12 saw controlling shareholders increase stake, according to exchange filings.
- Tata Group led the pack. Tata Sons Pvt. Ltd., parent of India’s largest conglomerate, raised its holding in Tata Motors Ltd., the owner of luxury carmaker Jaguar Land Rover, and Tata Steel Ltd.
- The Japanese parent of Maruti Suzuki India Ltd., the nation’s largest carmaker, also acquired more than 2 lakh shares in the Indian arm in March.
Here’s the list of companies that saw the controlling shareholder increase stake by at least 0.5 percentage points.
10. Government Clarifies On Utilisation Of Tax Credit In M&As
Entities undergoing business reorganisation via merger, demerger, amalgamation, change in ownership and transfer of assets have now been given clarity on utilisation of input tax credit.
- Apportionment of input tax credit must be on the basis of state-wise assets in demerger schemes, the government has clarified.
- Section 18 of the Central Goods and Services Tax Act allows transfer or apportionment of accumulated and unutilised input tax credit between entities undergoing business reorganizations.
- While the Act lays down the method, it is silent on certain practical aspects of such transfer. The circular aims to clarify on such issues.
Experts have welcomed the clarification by the government but still find some gaps.