BQuick On Oct. 26: Top 10 Stories In Under 10 Minutes
This is a roundup of the day’s top stories in brief.
1. Dow Plunges Nearly 450 Points; Sensex Sheds 540
U.S. equities slumped along with European shares on concern that rising coronavirus cases will weaken the global economy and as prospects dimmed for fiscal aid from Washington before the presidential election.
Energy and materials companies were among the worst performers on the S&P 500 Index.
West Texas Intermediate crude declined 2% to $39.04 a barrel.
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India stocks fell as an elusive U.S. stimulus deal kept sentiment subdued in the region, while investors closely watched local companies’ earnings.
The S&P BSE Sensex ended 1.33% or 540 points lower at 40,145.
The NSE Nifty 50 index fell 163 points, and surrendered the 11,800-mark.
Volatility remained high through the session.
Follow the days trading action here.
2. Kotak’s Profit And What A Marriage With IndusInd Could Look Like
Kotak Mahindra Bank Ltd. reported a 27% increase in net profit in the September quarter, on lower provisions and higher core income.
Net profit stood at Rs 2,184 crore as against Rs 1,724 crore a year ago.
Non-performing asset ratio fell to 2.55% from 2.7% in the June quarter.
The bank said it is still not ready to push the accelerator on lending.
The private lender is exploring an all-stock takeover of IndusInd Bank Ltd., Bloomberg reported on Sunday.
The acquisition, if it happens, will still leave the combined entity as the fourth largest private bank. But it will narrow the gap between the top three lenders and the Kotak-IndusInd combine.
A combination would leave the combined entity with adequate capital and an extensive network to grow when economic conditions improve.
But what could be the real reason that’s driving the merger?
3. Yes Bank Braces For More Stress
Yes Bank Ltd. is not ruling out a continued rise in stressed assets, said Chief Executive Officer Prashant Kumar.
This would mean the private sector lender will have additional stress to contend with even as it tries to clean-up the existing pool of bad loans.
“If we see on the corporate side, the overdue book is around Rs 7,500 crore. We are working on each of these loans to see that they don’t slip or end up in restructuring. But at this time it is difficult to predict. We are also not ruling any loans outside this pool which may go for restructuring,” Kumar told BloombergQuint in an interview.
Even as it battles asset quality concerns, Yes Bank will aim to increase retail and MSME credit offtake.
4. Where LIC Is Deploying Funds
Life Insurance Corporation of India, a public sector behemoth that the Narendra Modi administration wants to take public, invested more than Rs 2.8 lakh crore worth of policyholders’ money in the three months ended June. That’s over three times the Rs 82,267 crore in the preceding quarter.
Just over 70% of the Rs 2.8 lakh crore was invested in government securities, central and state.
Of the rest, the life insurer invested the most in equities—over Rs 28,000 crore.
Read more to see the blue-chip stock picks and the bad bets that LIC has made.
5. Aurobindo Pharma To Sell U.S. Unit For $550 Million
Analysts see Aurobindo Pharma Ltd.’s move to sell a wholly owned subsidiary of its U.S. arm as lucrative, with surplus cash and reduced debt strengthening its balance sheet.
The Indian drugmaker has reached a definitive agreement to sell Natrol LLC, a wholly owned subsidiary of Aurobindo Pharma USA, Inc., to New Mountain Capital and its affiliate Jarrow Formulas in an all cash transaction of $550 million, or Rs 4,048 crore.
The cash inflow could leave Aurobindo with a strong balance sheet to pursue further capabilities or research.
6. Future Group's Defence
Kishore Biyani’s Future Group has been directed to put its transaction with Mukesh Ambani’s Reliance Retail Ltd. on hold for now. The arbitral tribunal at the Singapore International Arbitration Centre passed this interim direction after Amazon.com Inc. initiated legal proceedings against Future Group earlier this month.
Future Retail Ltd. responded to this development on Monday morning saying the order of the Emergency Arbitrator will have to be tested under the provisions of Indian Arbitration Act in an appropriate forum.
It said that Future Retail is not a party to the agreement under which Amazon has invoked arbitration proceedings.
Caught between the two—Reliance Retail Ventures Ltd.—has also echoed a similar stance.
7. Vedanta: Credit Rating Warnings
Holding companies controlled by energy-to-mining tycoon Anil Agarwal face the highest debt repayments in several years just as credit rating firms step up warnings.
Vedanta Ltd. holding companies Vedanta Resources Ltd. and Volcan Investments Cyprus Ltd. must repay a combined $1.17 billion next year.
That’s the most since 2017, according to data compiled by Bloomberg.
S&P and Moody's have both cited the increased risks at Vedanta.
Find out the breakdown of Vedanta’s maturing debt and why it’s a cause of worry.
8. Risk Disguised As Alpha?
If a portfolio were compared with a benchmark that had a similar risk profile and factor exposure, one would find that the portfolio had actually underperformed the new appropriate benchmark, writes Abaneeta Chakraborty.
Outperformance may happen in equity funds when, say, the fund manager loads up on ‘factors’ such as low market-cap, low P/E ratio, or high profitability. But then, the investor is being exposed to beta.
Almost all of the inconsistent outperformance of active fund managers could be attributed to some additional risk that they had taken in the first place.
Alpha is not just outperformance.
9. Covid-19: India Adds Fewest New Cases In Over Three Months
India's coronavirus infections inched closer to the 80-lakh-mark even as the outbreak slowed with the country adding less than 50,000 new cases for the second time in seven days.
India added 45,148 fresh cases, lowest since July 22, taking the total tally to over 79.09 lakh.
India's Covid-19 recovery rate crossed 90%, according to the health ministry.
Track all coronavirus related news updates in India, here.