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BQuick On May 20: Top 10 Stories In Under 10 Minutes

BQuick | Top news, must-read stories and columns – all served up in less than 10 minutes.

A worker arranges jewellery at a shop after the authorities allowed shopkeepers to open their establishments with certain restrictions,in Prayagraj on May 20, 2020. (Source: PTI)
A worker arranges jewellery at a shop after the authorities allowed shopkeepers to open their establishments with certain restrictions,in Prayagraj on May 20, 2020. (Source: PTI)

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

1. Domestic Flights To Resume On May 25 Even As Covid-19 Cases Rise

India will allow airlines to resume domestic flights next week -- exactly two months after a lockdown grounded all planes -- as Prime Minister Narendra Modi seeks to gradually restart economic activity even as coronavirus infections in the nation jumps at the fastest pace in Asia.

  • “Domestic civil aviation operations will recommence in a calibrated manner from Monday 25th May, 2020,” Civil Aviation Minister Hardeep Singh Puri said in a Twitter post.
  • “All airports and air carriers are being informed to be ready for operations from 25th May.”
  • The aviation ministry will issue standard guidelines on passenger movement separately, Puri said.
  • Infections in the South Asian nation of 1.3 billion people were at 106,886, including 3,303 deaths, as of Wednesday morning, according to data from Johns Hopkins University.

Get all the updates from the coronvirus outbreak in India here.

Globally, cases topped 48 lakh and deaths exceeded 3.23 lakh.

  • Brazil reported a record day for infections, making it the world’s fastest-growing virus hot spot.
  • Russia added the fewest cases since the start of the month and recoveries outpaced new infections for the first time.
  • Chinese doctors are seeing the virus manifest differently in its new cluster of cases, suggesting that the pathogen may be changing and complicating efforts to stamp it out.

Read the global virus tracker.

2. NBFC Rescue: RBI To Indirectly Buy Debt

India approved setting up a new entity to provide liquidity to non-bank financial companies under the government’s fully-guaranteed support to help stressed shadow lenders.

  • The special purpose vehicle will issue securities, guaranteed by the government of India, according to the plan approved by the Union Cabinet.
  • The Reserve Bank of India will purchase this paper and a stressed asset fund of the SPV will invest the proceeds in the short-term debt of NBFCs.
  • While the government will infuse Rs 5 crore equity into the SPV, its liability will be equivalent to a default by a non-bank or a mortgage lender which raises money through the special purpose vehicle.
  • The guarantee is, however, capped at Rs 30,000 crore under the measure announced by Finance Minister Nirmala Sitharaman as part of the Covid-19 relief package.

The measure would help NBFCs to get investment-grade or better rating for bonds issued.

Opinion
India to Allow Funds More Exposure to Government Bonds

3. Sensex Rises 2%; Crude Extends Winning Streak

Indian stocks rose for a second straight day as some investors bet there’ll be enough liquidity to support the economy as the nation gradually exits from the world’s biggest lockdown.

  • The S&P BSE Sensex climbed 2.1 percent, the most since April 30, to close at 30,818.61 in Mumbai, while the NSE Nifty 50 Index rose by a similar magnitude.
  • Both measures have sunk more than 25 percent this year.
  • The rupee fell 0.2 percent to 75.7975 per dollar, while the yield on most-traded 2029 bonds was little changed at 6.04 percent.

Follow the day’s trading action here.

The Nifty 50 index may hit a low of 8,000 points, dragged down by financial stocks and as investors remain unenthused by India’s Covid-19 package or global cues, according to Gautam Shah of Goldilocks Premium Research.

U.S. stocks rebounded from a late-session selloff as investors keyed on signs the American economy will continue to reopen and key retail earnings showed signs of resiliency.

  • The S&P 500 jumped more than 1.5 percent after Lowe’s Cos. and Target Corp. reported sales that topped estimates.
  • The index is up more than 30 percent since its March low, but the advance has largely petered out in May as volatility returned.
  • West Texas Intermediate crude rose for the fifth consecutive session, to trade above $33.

Get your daily fix of global markets here.

4. ‘Fate Of Financial Sector Crucial’

The fate of India’s financial sector may be key in determining the outlook for the Indian equity markets, according to Sanjeev Prasad, managing director and co-head of Kotak Institutional Equities.

  • Given the high weightage of financial stocks in local indices, uncertainty over the impact of economic weakness on the financial sector could continue to act as a drag on the broader markets, Prasad said in an interview with BloombergQuint.
  • The Indian economy is seen contracting in FY21, for the first time in decades. Kotak Institutional Equities sees the economy contract by 5.8 percent this year compared to an estimate of 5 percent growth before the Covid-19 crisis hit. This sharp weakness could lead to a further build up of bad loans on the books of Indian lenders.
  • Prasad sees “a very high level of risk” in the small business and personal unsecured lending segments.
  • These risks may be more elevated in the current economic downturn compared to corporate lending risks, which have already crystallised to a large extent.

Markets may like to wait to understand the final outcome of the Covid-19 crisis on the bank balance sheets, said Prasad.

5. Earnings: Bajaj Auto, Dr. Reddy's, UltraTech Cement

Bajaj Auto Ltd.’s quarterly profit remained largely flat as exports partially offset its sales decline in India after the coronavirus pandemic stalled operations and dealt another blow an already struggling automobile sector.

  • Net profit of the two-wheeler maker rose 0.35 percent percent year-on-year to Rs 1,310.3 crore in the quarter ended March, according to its exchange filing.
  • That compares with the Rs 991-crore consensus estimate of analysts tracked by Bloomberg.
  • Revenue fell 8.15 percent year-on-year to Rs 6,815.9 crore—higher than the estimated Rs 6,481 crore.
  • Operating profit rose 2.1 percent to Rs 1,252.8 crore.

Margin expanded 190 basis points to 18.4 percent.

Drugmaker Dr. Reddy’s Laboratories Ltd.’s quarterly profit more than doubled on the back of a jump in sales in the U.S. and Europe.

  • Net profit of the Hyderabad-based drugmaker rose to Rs 764 crore in the quarter ended March from Rs 343 crore a year ago, according to an exchange filing. That compares with the Rs 530-crore consensus estimate of analysts tracked by Bloomberg.
  • Its revenue rose 10 percent over the last year to Rs 4,432 crore in the January-March period. That’s against the Rs 4,268-crore forecast.

Dr. Reddy’s reported sales growth of 21 percent in North America.

UltraTech Cement Ltd.’s quarterly profit surged threefold on account of a deferred tax reversal.

  • The cement maker’s net profit stood at Rs 3,242.8 crore in the quarter ended March compared with Rs 1,084.04 crore a year ago, according to an exchange filing. That compared with the Rs 702.3-crore consensus estimate of analysts tracked by Bloomberg.
  • The bottom line was aided by a Rs 2,024-crore deferred tax reversal, the filing said.
  • Its revenue, however, fell 13.1 percent year-on-year to Rs 10,745.6 crore.

Company lowered its capex outlay.

6. SEBI Urges Listed Companies To Reveal Coronavirus’ Impact On Business

The Securities and Exchange Board of India has said listed entities must perform a qualitative and quantitative evaluation of coronavirus’ impact on their business performance and financials and provide such information to shareholders.

In order to ensure proper disclosures, SEBI has directed that listed entities must not resort to selective disclosures and ensure transparency in reporting. Among others, listed entities must disclose:

  • Impact of Covid-19 on business, ability to maintain business operations and details of offices functioning and closed down.
  • Covid-19’s impact on capital and financial resources, assets, profitability, debt-servicing ability, internal financial reporting controls and supply chain.
  • Impact of Covid-19 on financial statements.
  • Details of existing agreements where non-fulfillment of obligations by a party will have significant impact on its business.

Experts welcomed the market regulator’s move.

Opinion
TA Associates in Advanced Talks to Buy Piramal Pharma Stake

7. Ola To Lay Off 1,400 Employees

Cab aggregator Ola is laying off 1,400 staff from rides, financial services and food businesses as revenues declined by 95 percent in the last two months due to the coronavirus pandemic, a note by Chief Executive Officer Bhavish Aggarwal said.

In an email to employees, Aggarwal made it clear that the prognosis ahead for the business is "very unclear and uncertain" and the impact of this crisis is "definitely going to be long-drawn for us".

Related Coverage:

8. India’s Most Vulnerable State Economies

The lockdown to contain the Covid-19 pandemic has pummelled economic activity across India and all states were almost uniformly hit during first and second phases. But, according to CRISIL Ltd., the third and fourth phases would impact them differently.

  • Under the third phase of the nationwide lockdown, eight states had a higher share of districts classified under the most-affected red zone than the national average—West Bengal, Maharashtra, Andhra Pradesh, Tamil Nadu, Gujarat, Uttar Pradesh, Rajasthan and Telangana, according to Crisil’s ‘States of Disarray’ report.
  • These states account for nearly 60 percent of India’s gross domestic product and 58 percent of the workforce, it said.
  • Maharashtra, Tamil Nadu and Gujarat, being most dependent on output from industry and services, are more vulnerable to output losses as they face restrictions.

Here’s how other states will be impacted, according to CRISIL.

BQuick On May 20: Top 10 Stories In Under 10 Minutes
Opinion
Debt Binge to Widen India’s Fiscal Gap to 13%, HSBC Says

9. How Mumbai Emerged As India’s Covid-19 Epicenter

India’s financial hub has emerged as the epicentre of the nation’s coronavirus outbreak as the city alone accounts for more than a fifth of the total case count.

  • Mumbai alone had 22,746 confirmed cases as on May 19, according to Maharashtra’s Public Health Department.
  • So far, 800 people in the city have succumbed to the disease, while 3,730 recovered.
  • This is only the situation in the metropolitan region of Mumbai and doesn’t include adjoining areas like Thane and Navi Mumbai, which are seen as a part of the city.
  • A higher incidence of cases has been noted in the southern half of the city.

Here’s how Mumbai compares with megacities like New York, Madrid, London and Milan.

10. Millions Evacuated As Cyclone Makes Landfall

Extremely severe cyclonic storm ‘Amphan' made a landfall at Digha in West Bengal on Wednesday, leaving a trail of destruction which led to the death of two persons in the state.

  • The cyclone with wind speed of 160-170 kilo meters per hour, gusting to 190 kmph coupled with heavy rain hit the Digha coast in East Medinipur district around 2.30 p.m., officials said.
  • Two women were killed in Howrah district and Minakhan area of North 24 Parganas district due to uprooting of trees, an official said.
  • The landfall process would continue for four hours, bringing in its wake heavy rain and triggering three-five metres of tidal waves, the Meterological Department said.

Apart from the storm threatening lives of people and animals, authorities face another risk -- evacuating millions of people during a pandemic, which may lead to a jump in infections.