BQuick On Oct. 13: Top 10 Stories In Under 10 Minutes
This is a roundup of the day’s top stories in brief.
1. RBI’s Latest Salvo Ineffective? Bankers Think So
The Reserve Bank of India’s plan to offer more long-term funds to banks via its on-tap targeted long-term repo operations is unlikely to boost lending due to lack of demand and nervousness around credit quality, said bankers.
This, despite tweaks made to the scheme which widen the use of funds raised via the new TLTRO facility.
Axis Bank Ltd. Executive Director Rajiv Anand said that while the TLTRO will provide liquidity support to banks, the demand situation on the lending front still needs to improve.
Sujit Kumar Verma, deputy managing director at State Bank of India, said there’s ample liquidity in the system, leading to lenders parking funds at the RBI’s reverse repo window.
While the banking system continues to be risk-averse, analysts expect lending to pick up in the next six months.
2. IMF Cuts India’s GDP Outlook Further
India’s economic growth forecast was slashed further by the International Monetary Fund on Tuesday, with the South Asian nation now facing the biggest contraction of major emerging markets in the wake of the coronavirus pandemic.
Gross domestic product will shrink 10.3% in the fiscal year to March 2021, the Washington-based lender said in its World Economic Outlook, far worse than the 4.5% decline predicted in June.
The 5.8 percentage-point downgrade was the biggest of the world’s main economies.
For emerging and developing economies prospects continue to remain dim, the IMF said.
3. GST Shortfall: 20 States Allowed To Raise Rs 68,825 Crore
The Centre on Tuesday permitted 20 states to raise Rs 68,825 crore through open market borrowings to bridge the goods and services tax revenue shortfall.
The decision came a day after the GST Council meeting failed to reach a consensus on the stalemate over the Centre's proposal of states borrowing against future GST collections to make up for the shortfall.
The projected total compensation shortfall in the current fiscal stands at Rs 2.35 lakh crore.
4. Wipro Announces Rs 9,500-Crore Buyback
Wipro Ltd.’s quarterly profit rose in the quarter ended September as it addressed supply-side constraints that had emerged following the Covid-19 outbreak.
Net profit rose 3.15% over the previous quarter to Rs 2,465.7 crore.
Revenue from IT services rose 3.66% to $1,992.4 million.
IT services margin expanded to 19.2% from 19% earlier.
Wipro expects its IT services revenue to be between $2,022-$2,062 million in the next quarter. That translates to a 1.5%-3.5% growth, higher than the 0-2% growth expected by analysts.
This was the first full quarter of operations for Wipro under its new CEO Thierry Delaporte.
The Bengaluru-based tech firm also announced a Rs 9,500-crore buyback, joining its larger peer Tata Consultancy Services Ltd. in rewarding shareholders.
The board has approved a proposal to buy back 23.75 crore shares, or 4.16% of the equity, at Rs 400 apiece, Wipro said in an exchange filing.
The buyback price is at a premium of 6.45% to Tuesday's closing stock price.
The buyback will be Wipro’s fourth in the last five years.
5. Sensex's Longest Winning Streak Since 2018
India’s stock benchmark eked out gains to rise for a ninth straight day, as investors shrugged off concerns about a halt in Johnson & Johnson’s Covid-19 vaccine study and rising domestic inflation.
The S&P BSE Sensex ended with gains of 30 points to close at 40,625.
The NSE Nifty 50 index too managed to salvage gains of 3 points in the final minutes of trade, to end at 11,934.
The gains in Reliance Industries Ltd. and I.T. stocks were offset by losses in banking majors.
Follow the day’s trading action here.
Nilesh Shah’s Picks
Sectors such as pharmaceuticals, specialty chemicals and information technology are likely to continue to grow in the future. But, according to Nilesh Shah, there is one factor that separates IT from the rest: valuation.
Read more to see Nilesh Shah’s assessment of the markets right now.
U.S. Stocks Halt Rally; Crude Rises
Stocks fell on speculation that a rally to a six-week high has outpaced prospects for a quick end to the stalemate over economic stimulus.
After notching its biggest four-day surge since April, the S&P 500 dropped, led by banks.
Johnson & Johnson sank as the drugmaker paused its late-stage study of a coronavirus vaccine.
Amazon.com Inc. climbed as its two-day Prime Day sale kicks off, while Apple Inc. came off session lows ahead of a key product event.
West Texas Intermediate crude increased 1.6% to $40.07 a barrel.
Get your daily fix of global markets.
6. Pharmaceutical Sales Get A Shot In The Arm
India’s pharmaceutical market grew at its fastest pace in six months, aided by product launches and sale of medicines for chronic ailments such as cardiac conditions and diabetes.
The year-on-year growth in pharma sales stood at 4.7% in September, the highest since March 2020, Nomura reported citing data released by AIOCD-AWACS—a pharmaceutical market research organisation.
New product growth rose to 3.8% in September, the highest in 36 months.
That, according to the brokerage, maybe on account of products like Favipiravir and Remdesivir, used for the treatment of Covid-19.
Find out more details on company-wise performance here.
7. Vedanta To Return Funds After Delisting Flop
Billionaire Anil Agarwal’s commodities group will return money raised from banks and bondholders after a plan to delist its Indian unit failed.
Vedanta Resources Ltd. will repay $1.4 billion raised via bonds and another $1.1 billion in loans, with a small amount of interest, as early as this week, according to people with knowledge of the matter.
It comes after minority shareholders last week scuppered a plan to take Vedanta Ltd. private, throwing the spotlight on its debt load and whether they’ll try to delist again.
Vedanta said it is committed to investing in the country.
8. Now Pay GST On Long-Term Leases
Two recent decisions by the Authority for Advance Ruling will increase the tax liability on land lease transactions.
At the heart of both the rulings was a common question—can assignment of rights under a lease agreement or payment of premium for a 99-year lease attract goods and services tax or be exempt from it by treating it as a sale of land?
The AAR has answered the question in favour of the tax department, saying that long-term leases can’t be equated with sale of land which is exempt from GST.
The ruling may impact transactions by companies on multiple fronts, Rajat Bose, partner at Shardul Amarchand Mangaldas & Co., told BloombergQuint.
Experts agreed with the ruling but pointed out the need to differentiate between different types of leases.
9. Tanishq Pulls Inter-Faith Ad After Islamophobic Trolling
Tanishq pulled an advertisement showing an inter-faith marriage after the Tata Group company faced boycott calls and trolling for allegedly supporting “love jihad”, an Islamophobic conspiracy theory.
The idea behind the Ekatvam campaign--Sanskrit for oneness--is to celebrate the coming together of people from different walks of life, local communities and families during these "challenging times and celebrate the beauty of oneness", a Tanishq spokesperson said in a statement.
We are deeply saddened with the inadvertent stirring of emotions and withdraw this film keeping in mind the hurt sentiments and well being of our employees, partners and store staff.Tanishq Statement
Get more details here.
Also read: Hamara Bajaj And A Love Lesson For Indians
10. India’s Lowest Fresh Covid Caseload In Almost 2 Months
India reported its lowest new Covid-19 cases in almost two months even as the country remained on track to overtake U.S. as the world's most infected nation.
India added over 55,000 fresh cases in 24 hours taking the total tally to more than 71.7 lakh, according to health ministry's data.
Active cases have now dropped to 8.3 lakh from over 10 lakh in mid-September.
Track the latest updates on the Covid-19 pandemic in India, here.
The Vaccination Challenge
India, which already has the world's largest immunisation programme, plans to immunise 200-250 million people--a sixth of its population--with 400-500 million Covid-19 vaccine shots by July 2021.
Vulnerable population groups including healthcare workers will be prioritised in the first round.
Does India have a logistical advantage to manufacture and distribute enough vaccines to Indians?
Is India’s existing mother and child vaccine programme a backbone strong enough to bear the weight of a mass Covid-19 vaccination effort?
IndiaSpend unpacks the infrastructural and administrative issues that may arise.