BQuick On May 19: Top 10 Stories In Under 10 Minutes

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

1. Invested In A Hybrid Scheme? Here's What You Should Check Immediately

After Franklin Templeton Asset Management (India) Pvt.’s shock decision to freeze six schemes, investors and financial planners have flagged a spike in less-liquid bond holdings of hybrid schemes of top asset managers.

• In a letter to BloombergQuint last week, an investor pointed to several transfers of non-convertible debentures between schemes of ICICI Prudential Mutual Fund.
• According to data on the asset manager’s website, these bonds rated ‘AA’ and below were moved from its Credit Risk Fund to the Balanced Advantage Fund, and Equity and Debt Fund between April 27 and April 30.
• Other asset managers, too, have made similar debt transfers between schemes.
• It’s a legal way of transferring securities from one scheme to another within the same fund house.
• But this also means that investors are forced to take on more risk than they intended to.

Should you be worried? Here’s what fund houses have told BloombergQuint.

2. How Long Will Franklin India Take To Return Investor Money

Investors in some of the credit funds run by Franklin Templeton’s India unit may have to wait over five years to fully recoup their money, the asset manager said in an email to investors.

• The email and attached documents, which were seen by Bloomberg and confirmed by the company, laid out the latest timeline for scheduled cash flows.
• The timing could wind up being sooner, as any sale of the underlying assets in the frozen funds in the secondary market and prepayments or accelerated payments made by issuers of debt in the funds would quicken the payout, according to the documents.

It may take more than five years for the company to return the entire amount invested in four of the funds.

3. Sensex Surrenders Early Gains; U.S. Stocks Swing

Indian equity benchmarks struggled to hold onto gains as investors, unimpressed by Modi government’s stimulus package, shifted focus to earnings.

• The S&P BSE Sensex closed 0.5 percent higher at 30,196, off around 500 points from the day’s high.
• The NSE Nifty 50 rose 0.6 percent to close at 8,879.
• Among sectoral indices, the Nifty Bank fluctuated between gains and losses through the day.
• The index ended 0.5 percent lower at 17,486, nearly 700 points of the day's high of 18,175.
• Bharti Airtel Ltd. was the top Nifty gainer rising over 10 percent to a record high.

Follow the day’s trading action here.

India’s consumer discretionary sector, including auto, will take a backseat for a while as the country struggles to revive consumption amid the coronavirus pandemic.

• “Valuations are nice but they are not going to regain their highs. We’re taking a pause on that,” said Kenneth Andrade, founder and chief investment officer of Old Bridge Capital.
• “It won’t de-grow in perpetuity but the best is behind us,” he told BloombergQuint in an interview.

Watch the full interview where Andrade says that growth will return to these sectors after a few years.

U.S. equities fluctuated in the wake of a strong start to the week for risk assets.

• The S&P 500 swung between gains and loses after the biggest one-day increase in almost six weeks.
• The Bloomberg Dollar Spot Index slipped for a second session.
• Crude oil rose for a fourth day.

Get your daily fix of global markets here.

4. Bajaj Finance’s Q4 Profit Drops 20%

Bajaj Finance Ltd.’s quarterly profit fell as the non-bank lender’s impairment expenses jumped more than twofold, partly on account of contingency funds to deal with the coronavirus crisis.

• Profit fell 20 percent year-on-year to Rs 892 crore in the quarter ended March.
• Net interest income rose 38 percent to Rs 4,459 crore.
• Bajaj Finance recorded an impairment expense of Rs 1,865 crore during the quarter—more than double of what it did in the previous quarter.
• This includes Rs 850 crore as provisions for the Covid-19 pandemic.
• Providing details about the loans put under a three month moratorium offered by the Reserve Bank of India, Bajaj Finance said that 27 percent of its AUM has availed of the relief.
  

Bajaj Finance said that its liquidity position is comfortable.

5. Covid-19: India Cases Cross 1 Lakh; Mumbai Prepares For Virus Peak

Coronavirus cases in India reached a grim milestone crossing the 1 lakh-mark on Tuesday.

• Confirmed infections rose to 1,01,139 cases today, in 111 days since the first case was reported on Jan. 30, despite the country being under the biggest lockdown in the world.
• India added 4,970 new cases in the last 24 hours, according to the Health Ministry’s 8 a.m. update on May 19.
• Some airlines like IndiGo and Vistara have started bookings for flights from June onwards, PTI reported citing sources, even as commercial flight operations remain suspended.
• Delhi Transport Corporation resumed bus services in the national capital. Only 20 passengers allowed at a time.
• Maharashtra issued revised guidelines for the lockdown. Most standalone shops have been allowed to operate with precautions and e-commerce activity for all items has been permitted.
• Taxis and rickshaws will continue to be prohibited.
• Municipal regions of Mumbai, Pune, Solapur, Aurangabad, Malegaon, Nashik, Dhule, Jalgaon, Akola and Amravati have been declared as red zones. All other regions are either orange or green.

Track news and developments around the Covid-19 outbreak in India here.

Mumbai, India’s financial hub and the epicenter of the nation’s coronavirus outbreak, is converting several of its iconic structures into quarantine facilities as it races to prepare for a predicted peaking of infections this month.

• From a new hospital being built just a short stroll away from the U.S. Consulate building and the India offices of Citigroup Inc. to quarantine centers being set up in a nature park and planetarium, the metropolis is readying 100,000 beds, or little under five times the current number of positive diagnoses.
• The goal is to be able to treat and isolate at least 75,000 cases, a projection based on last month’s data when cases were doubling almost every week, said Ashwini Bhide, additional commissioner at Mumbai’s municipal corporation.
• The pace has since slowed amid the world’s strictest lockdown and, “while we are unlikely to touch those projections by the end of May, we continue to plan for the worst case scenario,” she added.

Mumbai’s race against time spotlights the challenges for India.

Globally cases crossed 48 lakh leaving over 3.18 lakh people dead.

• Singapore plans to reopen more businesses as the virus is seen to be under control.
• Brazil is now the world’s fastest-growing coronavirus hotspot, accounting for 13 percent of new cases globally in the past week.
• Deaths linked to the virus in Britain exceeded 40,000, making it the first country in Europe to reach that threshold.

Follow the global spread of the virus here.

6. Modi Government Clueless On Covid-19 Response: Chidambaram

The Narendra Modi-led government is “completely clueless” on how to manage the Indian economy in the face of a coronavirus-induced recession, former finance minister P Chidambaram has said.

• The government doesn’t know how to manage a micro-economy and it’s afraid of the repercussions of its actions, Chidambaram said in an interview to BloombergQuint.
• However, “if you do nothing, worse will happen,” he said.

Chidambaram criticised the government’s response through the Rs 20-lakh-crore package which he argued is not a stimulus to revive the economy.

7. Moody’s Red Flags Liquidity At Indian NBFCs

India’s non-bank lenders will face increased liquidity and solvency strains as economic activity slows due to the spread of Covid-19, according to Moody’s Investors Service.

Non-banking financial institutions are more at risk than banks due to exposure to riskier lending segments, the rating agency said in a note, adding that large bank exposure to these entities could also imply greater systemic risks.

Moody’s sees three key risks.

• The weakening economy will accelerate a deterioration of asset quality at NBFCs.
• Cash flows will decline significantly due to the three-month moratorium offered by the Reserve Bank of India and weaker asset quality will further reduce repayments.
• The weakening solvency profile of NBFCs could pose a financial stability risk.

Moody’s sees NBFCs focused on corporate, real estate and unsecured retail loans as being most vulnerable.

8. Centre Paid States More Than What’s Due, Says Expenditure Secretary

The central government transferred 110 percent of tax collected to states in April against 41 percent mandated by the 15th Finance Commission, Expenditure Secretary TV Somanathan said, even as states complain that the Centre is yet to transfer tax and other dues.

• As much as Rs 46,038 crore was devolved to states last month, according to data shared by the government on Sunday.
• This, Somanathan told BloombergQuint, was done leaving the budget estimates unchanged for the ongoing year.
• This suggests, according to the expenditure secretary, that states were actually owed just Rs 17,159 crore.
• It also indicates that the tax collected by the centre in April amounted to Rs 41,853 crore compared with Rs 1.21 lakh crore in the same month last year.
• To be sure, the amount devolved to states will not include the GST compensation cess, which the government has been delaying.

Here’s how the government plans to reprioritise its spending when tax collections are expected to plunge.

9. Super Cyclone ‘Amphan’ Rolls Towards India

Super cyclone 'Amphan' weakened into an extremely severe cyclonic storm over the west-central Bay of Bengal Tuesday afteroon as it rolled towards the Indian shores in West Bengal and Odisha where lakhs of people were evacuated from vulnerable areas and shifted to safety, officials said.

• The two states are on high alert, as the cyclone, cramming high-velocity winds, triggered rains in several parts of Odisha.
• West Bengal Chief Minister Mamata Banerjee said around three lakh people have been evacuated from the coastal areas in the state.
• Odisha is in a state of readiness to evacuate around 11 lakh people living in vulnerable areas, officials said. The process has already started and an unspecified number of people have been sheltered in cyclone centres.
• The cyclone lay centred over west-central Bay of Bengal, about 520 kilometers south of Paradip in Odisha and 670 km south-southwest of Digha in West Bengal.
• It was moving north-northeastwards at a speed of 14 kmph.

The cyclone is likely to make landfall between Digha in West Bengal and Hatiya islands in Bangladesh on Wednesday afternoon.

10. Social Distancing = Airfares Shock?

Qantas Airways Ltd. said putting extra space between passengers on planes could lead to a big increase in airfares and discourage people from flying.

• “Social distancing on an aircraft isn’t practical,” Qantas Chief Executive Officer Alan Joyce said in a briefing with reporters Tuesday.
• If implemented, it could mean there would only be 22 people on a 128-seat aircraft, Joyce said.
• “That means airfares are going to be eight to nine times more than they are today.”
• The airline is currently only flying about 5 percent of its pre-crisis levels domestically and 1 percent of its international network.

The CEO said domestic travel should “significantly” resume from July.