BQuick On May 22: Top 10 Stories In Under 10 Minutes
This is a roundup of the day’s top stories in brief.
1. Can The RBI Pull Out More Rabbits Out Of Its Hat?
India’s Monetary Policy Committee has cut its benchmark repo rate by another 40 basis points, taking the total quantum of rate cuts to 115 basis points since the Covid-19 crisis hit India.
- The repo rate now stands at a record low of 4 percent, while the reverse repo rate, at 3.35 percent, is 10 basis points above its record low.
- Despite the steep reduction in rates already, there may be more to come. The MPC, on Friday, maintained an accommodative stance and said that scope for further monetary policy easing may open up as inflation eases against the backdrop of an extremely weak economy.
- “We believe the central bank still has room to cut rates further,” said Rahul Bajoria, chief India economist at Barclays.
- Suvodeep Rakshit, senior economist at Kotak Securities, expects the MPC to cut rates by another 25-35 basis points. The quantum of rate cuts may go up to another 50 basis points, he said.
- Economists and fixed income managers expect the RBI to work with a mix of conventional interest rate easing, along with more unconventional liquidity and regulatory measures.
Find out the measures that the RBI may use to keep the economy afloat.
2. Loan Moratorium Extension May Bring More Pain For NBFCs
The Reserve Bank of India’s decision to extend a moratorium on loan repayments until the end of August may end up bringing more pain for the country’s non-bank lenders.
- The moratorium, first announced in March, allows term loan and working capital borrowers to defer their repayments. All lenders have been allowed to offer the moratorium to their borrowers as per a board-approved policy.
- The first phase of the moratorium has seen about a third of private bank and NBFC loan books go under moratorium.
- While the relief helps banks immediately, for non-bank lenders, the moratorium has proved to be a double-edged sword. Banks have been selective in granting moratorium to NBFCs, complicating liquidity management for the latter.
Executives at non-bank lenders that BloombergQuint spoke with say there is no single strategy across banks on how to deal with NBFC moratorium requests.
3. Alcohol Home Delivery Allowed In Mumbai...
The Brihanmumbai Municipal Corporation on Friday allowed home delivery of liquor in Mumbai, except in containment zones.
- But over-the-counter sale of liquor will not be allowed yet, it said.
- "E-commerce platforms may be utilised by the liquor shops permitted to do home delivery," said the BMC order.
- Liquor sale was earlier completely banned in the city, which is worst affected by the coronavirus outbreak in the country.
...Even As Covid-19 Cases Continue To Rise
Covid-19 cases continue to mount in India as the highly contagious pathogen infected more than 1.18 lakh people, with authorities reporting more than 6,000 fresh cases in a day for the first time.
- India added 6,066 new cases of Covid-19 in the last 24 hours, taking the total tally to 1,18,447 in Asia’s third-largest economy, according to the health ministry’s update as of 8 a.m. on May 22.
- That included 3,583 deaths and 48,534 patients who have recovered.
- Active cases have gone beyond the 66,000-mark.
Track all news and developments around the Covid-19 pandemic in India here.
4. Equities Drop, Bonds Rally
Indian equity markets snapped a three-day gaining streak to end lower, due to weak cues from other global markets and rising Covid-19 cases in the country.
- The S&P BSE Sensex ended today's session down 0.84 percent at 30,672, while the Nifty 50 index managed to hold on to the 9,000 mark, ending 0.74 percent lower at 9,039.
- For the week, the Sensex ended 1.3 percent lower while the Nifty shed 1.1 percent.
Follow the day’s trading action here.
Sovereign bonds in India rallied after the central bank cut its benchmark policy rate in an emergency session.
- The rupee weakened, falling 0.5 percent to 75.9650 per dollar.
U.S. Stocks Struggle; Oil Snaps Winning Streak
U.S. stocks fell for a second day as the volatility that has whipsawed investors all week showed few signs of abating.
- The S&P 500 index opened lower, led by declines in the energy, financial and industrial sectors.
- The drop comes as traders brace for tension between Washington and Beijing to escalate after China announced plans to impose a national security law on Hong Kong.
- The dollar strengthened and oil snapped a six-day winning steak.
Get your daily fix of global markets here.
5. Ambani Finds Another Investor For Jio Platforms
KKR & Co. will invest Rs 11,367 crore in Jio Platforms Ltd., the fifth investor to bet on Reliance Industries Ltd.’s telecom and technology asset in a month, boosting the efforts of Asia’s richest man to cut debt at his conglomerate.
- The global private equity firm will buy a 2.32 percent stake in the subsidiary of India’s most valued company, according to an exchange filing, pegging the unit’s equity value at Rs 4.91 lakh crore.
- The valuations are similar to at which Facebook Inc, private equity firms Silver Lake and Vista Equity Partners and growth equity firm General Atlantic invested in Jio Platforms, controlled by Mukesh Ambani.
These investments in Jio Platforms, along with the rights issue, will lower RIL’s consolidated net debt by 82 percent.
6. Bharti Airtel Is Aiming High. Can It Reach Its Goal?
Bharti Airtel Ltd.’s average revenue per user, a key operating indicator, rose to its highest in 12 quarters in the three months ended March. But the company doesn’t think it’s enough and is looking at an improvement of at least 30 percent in the near term. That may be tough to achieve.
- The last time billionaire Sunil Mittal and SingTel-backed wireless carrier generated an ARPU of Rs 200 was before Reliance Jio Infocomm Ltd. upended India’s telecom market with cheap data.
- Bharti Airtel reported a reading of Rs 300 about 11 years ago.
The company has two ways to quickly boost its ARPU. But both pose a challenge, more so during an uncertain period.
7. Jain Irrigation One Step Closer To Restructuring
Lenders to distressed irrigation equipment manufacturer Jain Irrigation Systems Ltd. are likely to sign off on a resolution plan for the company under the Reserve Bank of India’s restructuring guidelines.
- The lending consortium is mulling a resolution plan which involves extending the repayment period for Rs 4,600 crore in outstanding debt from two years to five years, said two people with direct knowledge of the discussions.
- Lenders will not need to take any haircut on the principal amount as part of the plan, they said.
A final proposal is likely to be submitted to in a few days. More details here.
8. After The Devastation, Comes The Contagion?
As the biggest cyclone to hit South Asia in two decades loomed over the Bay of Bengal, emergency relief officials realized they were facing a nightmare: They needed to evacuate more than 5 million people to safety at the risk of spreading Covid-19.
- As rain and wind gathered strength, thousands rushed out for help, overwhelming the facilities. By the end of the week, millions across the region took shelter in relief centers as Cyclone Amphan caused widespread damage in India and Bangladesh, killing about 100 people.
- That illustrates the complicated task of saving lives during a natural disaster at a time when the coronavirus pandemic is hitting one of the most densely populated regions in the world.
- An airport and several low-lying areas were flooded, power supplies to millions of homes were snapped, and trees and buildings were left damaged.
The storm has now dissipated, but not before leaving a trail of disaster.
- Prime Minister Narendra Modi announced an advance assistance of Rs 1,000 crore for cyclone-hit West Bengal and Rs 500 crore for Odisha.
9. Raghuram Rajan Says Rs 20 Lakh Crore Package Is Not Enough
Calling India’s Rs 20-lakh-crore package inadequate for reviving an economy pummelled by Covid-19 pandemic, former Reserve Bank of India Governor Raghuram Rajan said the package gave free foodgrains but migrant workers, rendered jobless by the lockdown, needed money to buy milk, vegetables and cooking oil and to pay rent.
- The world is facing the greatest economic emergency and almost any resource is inadequate, he said.
- “I think it is particularly so in the case of India because we have years of economic drift in which our growth had slowed, our fiscal deficit has gone up. There is a lot more we need to do to put the economy back on track,” he said in an interview to Karan Thapar for news portal ‘The Wire’.
- “The package has some good points but it probably needs to do more.”
We must pull out all stops... if more is not done, the economy will be a shadow of its former self.Raghuram Rajan, Former Governor, RBI
Here’s what Rajan prescribes for the ailing Indian economy which is on the brink.
10. JSW Steel’s Profit Plunges, UPL’s Profit Spikes
JSW Steel Ltd.’s quarterly profit tumbled as demand for the alloy fell amid disruptions caused by the coronavirus pandemic, and overseas subsidiaries continued to suffer losses.
- Consolidated net profit of the steelmaker fell 85 percent year-on-year to Rs 231 crore.
- Revenue fell 20 percent to Rs 17,887 crore.
- Operating profit declined 33 percent to Rs 2,975 crore.
Find out how JSW Steel’s sales and production were disrupted by the lockdown.
UPL Ltd.’s quarterly profit more than doubled in the March quarter, aided by growth in its two biggest markets—Latin America and India.
- Net profit rose to Rs 617 crore from Rs 250 crore a year ago.
- The company incurred an exceptional loss of Rs 171 crore during the quarter.
- UPL’s revenue rose 31 percent to Rs 11,141 crore.
Find out how UPL performed in various geographies.