BQuick On May 21: Top 10 Stories In Under 10 Minutes

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

1. India Fixes Price Bands For Airfares As Flights Set To Restart...

India has prescribed price bands for airfares along with other rules as the airlines resume operations starting May 25, two months after the nation ordered the lockdown to contain the Covid-19 pandemic.

• The ministry studied existing rates and looked at corresponding rail fares before arriving at “realistic” minimum and maximum fares, said Aviation Minister Hardeep Singh Puri.
• “We have taken into the account that airlines operate on thin margins and their business models are based on high capital costs.”
• Airfares will be categorised in seven bands based on the duration of the flight.
• The band for Delhi-Mumbai, a journey of 90-120 minutes, will be Rs 3,500-10,000, Puri said.
• Forty percent of the seats have to be sold at a fare less than the mid-point of the recommended band.

Flyers and cabin crew will also have to conform to a new normal. Find out the new guidelines for flying after lockdown.

...Even As Covid-19 Cases Rise; Mumbai Crosses 25,000 Mark

Meanwhile, Covid-19 cases continue to mount in India as the highly contagious pathogen infected more than 1.12 lakh people.

• India added 5,609 new cases of Covid-19 in the last 24 hours, taking the total tally to 1,12,359, according to the health ministry’s update as of 8 a.m. on May 21.
• That included 3,435 deaths and 45,300 patients who have recovered.
• Active cases have gone beyond the 63,000-mark.
• The number of confirmed Coronavirus cases in Maharashtra crossed the 40,000 mark, while the cases in Mumbai reached 25,500, according to state government data.
• Meanwhile, inter-district travel has been prohibited in Maharashtra, according to news agency ANI.

Follow developments around the Covid-19 pandemic in India here.

2. Winds Of Change: Food On Amazon, Booze On Swiggy And Zomato

Amazon has finally launched its online food-delivery operations in select pin codes of Bengaluru in India’s competitive food delivery market which earlier this year saw Uber getting out of the business.

• “Free and contactless delivery, hygiene certified restaurants,” Amazon’s message on the app read.
• Amazon spokesperson in an emailed response said that they are launching Amazon Food in select Bangalore pin codes that allows customers to order from handpicked local restaurants and cloud kitchens that pass their high hygiene certification bar.
• The e-commerce behemoth’s foray into the food delivery business also come at a time when two of the largest players – Swiggy and Zomato are struggling as order volumes have taken a sharp dive due to lockdown to curb the coronavirus outbreak.

Here are some of the restaurants and cloud kitchens Amazon has partnered with.

Rivals Swiggy and Zomato have started home delivery of alcohol in Ranchi and are in talks with various state governments to provide support with online processing and home delivery of alcohol in their states.

• The service has gone live in Ranchi and will be launched in other major cities in Jharkhand within a week, Swiggy and Zomato said in separate statements.
• Swiggy is also in an advanced stage of discussions with multiple state governments to provide support with online processing and home delivery of alcohol, it added.

The online processing and home delivery of alcohol is through the 'Wine Shops' category on the app.

3. Aditya Birla Mutual Fund Halts New Investments In Two Debt Schemes

Aditya Birla Sun Life Mutual Fund stopped fresh investments into its credit risk fund and medium-term plan.

• From May 22, there will be no fresh registrations under either the systematic investment or transfer route, according to a notification from Aditya Birla Sun Life Trustee Pvt.
• The SIPs or STPs registered prior to the effective date, however, will be processed.
• The decision to stop fresh investments into the two funds is a measure to protect existing investors in the two schemes as the fund house expects a change in the classification of some of the debt instruments it had written down, A Balasubramanian, managing director and chief executive officer at Aditya Birla Sun Life Mutual Fund, told BloombergQuint over the phone.
• A positive change in the classification of the debt marked down earlier would result in an upward revision in the net asset value of the schemes, Balasubramanian said.

New investors would gain an undue advantage over investors that had stayed invested despite the write-down, he said.

4. Investors Remain In Wait-And-Watch Mode

Indian equity markets ended higher for the third straight day. However, the gains were modest as investors chose to wait on the sidelines for further cues on opening up of the economy.

• The S&P BSE Sensex ended 0.37 percent higher at 30,932 while the Nifty 50 index ended at 9,106, up by 0.44 percent.
• Among sectoral indices, the Nifty Bank emerged as the primary underperformer, ending 0.6 percent lower.

Follow the day’s trading action here.

U.S. stocks fluctuated as investors shifted through weekly unemployment claims amid increased trade tension between America and China.

• All three main U.S. equity gauges started in the red before fluctuating after a report showed another 2.44 million Americans claiming jobless benefits.
• Markets were already on the back foot after the Senate overwhelmingly passed a bill that could bar some Chinese companies from listing on U.S. exchanges.
• President Donald Trump stoked tensions by tweeting criticism of Xi Jinping’s leadership, days before the biggest Chinese political gathering of the year.
• Crude oil gained for a sixth consecutive session.

Get your daily fix of global markets here.

5. ‘Particularly Challenging’ April For NBFCs

India’s non-bank lenders are navigating liquidity challenges once again with more than a third of their loan books under the three-month moratorium offered by the Reserve Bank, according to Edelweiss Group’s Rashesh Shah.

• “For us and for most NBFCs, about 35-38 percent of the customers have availed of moratorium,” Shah, chairman of the diversified group, told BloombergQuint in an interview.
• “For the last 18 months, NBFCs have been squeezed for liquidity. Ironically, when we entered January 2020, I felt that liquidity had now been managed. And then Covid-19 happened,” he said.

• April has been particularly challenging for NBFCs from a liquidity perspective, Shah said.
• NBFCs are repaying banks as per schedule as banks have said repay and take fresh loans instead of a moratorium.

Find out why Rashesh Shah thinks NBFCs have been given a step-motherly treatment over the last 18 months.

6. ‘Banks Could Add Rs 5.5 Lakh Crore In Bad Loans In FY21’

India Ratings & Research estimates that the Covid-19 pandemic and the loss of economic growth due to the subsequent national lockdown could exacerbate the pain on bank balance sheets in the ongoing financial year.

• According to the rating agency’s estimates, Rs 5.5 lakh crore worth slippages could show up for banks in financial year 2020-21—of which at least 40 percent will come from non-corporate loan exposures.
• “With a significant drop in economic activity, India Ratings expects most sectors in India  to experience varying degrees of revenue contraction during FY21, due to demand and supply disruptions,” the rating agency said in a statement on Thursday.
• Jindal Haria, director, India Ratings & Research said banks are unlikely to register any major recoveries this year, which means that the outstanding gross bad loans for listed banks could increase from around Rs 9 lakh crore to over Rs 14 lakh crore on the upper side.

The bulk of incremental stress could come from these sectors.

7. How Low Can Interest Rates Go?

With the Indian government’s Rs 20-lakh-crore economic package likely to provide limited fiscal support to the economy, the onus now shifts back to monetary policy. At 4.4 percent, the repo rate is already at its lowest. Still, economists expect steep rate cuts ahead.

• Pranjul Bhandari, chief India economist at HSBC, expects the MPC to cut rates by 40 basis points in June.
• Rahul Bajoria, chief India economist at Barclays, expects the committee to cut rates by 50 basis points in June, followed by a cut of 40 basis points in August.
• Prachi Mishra, chief India economist at Goldman Sachs, also expects another 100 basis points in rate cuts between now and the third quarter.

But what are the factors that will determine how low policy rates can go in India?

8. Moolah Mantra: Monetise Sarkari Silver For Real Stimulus

With the economy under Lockdown 4.0 and the unknowns ahead, the cost to be borne by the government is bound to rise further, writes Shankkar Aiyar.

• How India will fund preservation and thereafter propulsion of the economy?
• Can India raise money without flagging deficit and debt on the rating radar?
• The crisis is an opportunity to set up an India Investment Corporation, à la Temasek of Singapore.
• This is the most opportune moment to get the sarkar out of vyapar.

This crisis must not be wasted.

9. No, India Doesn’t Need A Bigger Stimulus

Prime Minister Narendra Modi and his advisers have gotten it right by practicing fiscal prudence in the economic package, and governments around the world could learn from their caution, writes Mihir Sharma.

• India’s policymakers found the correct prescription because they began with the proper diagnosis.
• A bigger stimulus would have been the right way to address a crisis in aggregate demand. But that’s not India’s problem: Until we figure out the best way to reopen, the country needs less economic activity not more.
• Instead of wasting money it doesn’t have, the government has tried to address the problem we do have.

Thanks to this focus on liquidity support and risk underwriting instead of across-the-board spending, India’s debt might remain under control instead of exploding.

10. Hidesign And The Battle Of Rent

With airports the negotiations are proceeding smoothly, but not with malls. Hidesign Chief Executive Dilip Kapur says “this negotiation is going to be the most critical negotiation that has ever happened in retail in India; how malls and brands are going to survive”.

• Two-thirds of the leather goods maker’s 103 stores are in malls. They’re all shut. So are the 30 located inside airports. Of the six high street stores, a few reopened last week—in Goa and Puducherry.
• Hidesign is among 200 brands that have come together as the Fair Rental Group to negotiate rents with landlords. Malls are willing to charge retailers lower rents for the lockdown period. But on reopening they want full payment.
• “Malls are saying that look, all these cheques which you’re signing to us are already discounted to the bank. If we don’t send those cheques over to them then we are non-performing assets. The banks will declare us NPAs and we are in trouble,” Kapur said.

It’s a question of survival for both malls and brands, says the Hidesign chief.