The benchmark Indian stock indices have opened sharply down this morning amid negative global cues.
US stocks last night witnessed a sharp sell-off from the day’s high amid increasing uncertainty around the spread of the coronavirus pandemic.
Join us as we follow the top business news through the day.
Singapore’s Q2 GDP plunges 41.2%
Debt MFs see 95% plunge in June inflow on redemptions in liquid schemes
It’s not just equity mutual funds that are seeing retail patronage drop.
PTI reports: “Mutual funds focused on fixed-income securities witnessed a 95 per cent month-on-month slump in inflow to Rs 2,862 crore in June, mainly due to redemptions in liquid schemes.
Most individual categories that invest in fixed-income securities, or debt funds, saw an inflow. However, liquid schemes and credit risk funds saw withdrawals.
According to the Association of Mutual Funds in India (Amfi), mutual funds (MFs) that invest in fixed-income securities saw an inflow of Rs 2,862 crore as compared with inflow of Rs 63,665 crore in May.
In April, the segment had witnessed an inflow of Rs 43,431 crore. Investors had pulled out a massive Rs 1.95 lakh crore from the segment in March, but had invested Rs 28,000 crore in February and Rs 1.09 lakh crore in January.
“The flows into fixed-income funds came down significantly in June from the previous month. However, that’s not surprising given it was quarter-end, and expectedly, liquid fund category witnessed huge net outflows,” Himanshu Srivastava, Associate Director — Manager Research, Morningstar India, said.
Harsh Jain, co-founder of Groww, attributed the lower inflow to large amount of redemptions in liquid funds by corporate companies that withdraw to pay advance tax.
This is a routine behaviour that has been observed in the past as well, he said.
Of the total inflow seen last month, liquid funds with investments in cash assets such as treasury bills, certificates of deposit and commercial paper for shorter horizon, saw outflow of Rs 44,226 crore as against investment of Rs 61,870 crore in May.
Apart from liquid funds, credit risk funds saw an outflow of Rs 1,494 crore in the period under review, which was much lower than withdrawal of Rs 5,173 crore in May and Rs 19,239 crore in April.
However, low duration category saw inflow of around Rs 12,236 crore and corporate bond funds saw inflow of Rs 10,737 crore.”
Sensex plunges 661 points in line with global selloff
Stocks witnessed a sharp correction today on negative global cues.
PTI reports: “Equity benchmark Sensex plunged 661 points on Tuesday, dragged by losses in financial stocks amid selloff in global markets.
After touching a low of 35,877.42, the 30-share BSE Sensex settled 660.63 points, or 1.80 per cent, lower at 36,033.06.
Likewise, the NSE Nifty fell 195.35 points, or 1.81 per cent, to 10,607.35.
Shares of the HDFC duo led the fall in the indices, shedding up to 2.94 per cent, after HDFC Bank said it has launched a probe into its auto lending practices following allegations against the conduct of a long-time executive who retired on March 31 this year.
IndusInd Bank, Axis Bank, Maruti, Bajaj Finserv, PowerGrid and SBI were among the other major laggards.
On the other hand, Titan, Bharti Airtel and Bajaj Auto closed with gains.
“Key indices corrected close to 2 per cent on weakness in financial and metal stocks. We witnessed profit booking in key auto stocks as their volume numbers are already known to the street for the first quarter,” said S Ranganathan, Head of Research at LKP Securities.
According to traders, besides stock-specific actions, negative cues from global markets amid escalating US-China tension and rising COVID-19 cases dampened investor sentiment here.”
Probe on vehicle-finance lending practices will not cause any loss: HDFC Bank
Private sector lender HDFC Bank on Tuesday said the probe on vehicle-finance lending practices does not have any bearing on loan book and will not cause any loss to the bank.
“It is… important to clarify here that this matter is not related in any manner whatsoever to the lending aspect of the business. Therefore there’s no question of this having any bearing on ‘loan book’ or causing any loss to the bank,” a bank spokesperson said.
The bank on Monday initiated a probe on the lending practices following allegations against the conduct of a key executive in the auto-lending business.
Google in talks to invest $4 bln in Reliance’s digital arm
Stakes in Reliance seem to be selling like hot cakes at the moment.
Reuters reports: “Alphabet Inc’s Google is in advanced talks to invest $4 billion for a stake in the digital arm of Indian conglomerate Reliance Industries Ltd, Bloomberg reported on Tuesday, citing people familiar with the matter.
Google declined to comment, while Reliance did not immediately respond to a request for comment.
Investors, including Facebook and KKR & Co, have already poured in a combined $15.64 billion for just over 25% in Jio Platforms. The funding spree, which began late April, and a share sale by Reliance have helped make India’s biggest company net-debt free.”
India’s mobile subscriber base falls in March; Jio adds 4.7 mln
Some interesting developments in the telecom market.
Reuters reports: “India’s mobile phone customer base fell by 2.8 million subscribers to 1.16 billion in March, according to data released by the country’s telecoms regulator on Tuesday.
As many as 5.7 million mobile subscribers opted to change their service providers through mobile number portability.
Total broadband connections were 687.4 million as of end-March. There were 667.7 million broadband users through mobile phones and dongles, while 19.2 million were using broadband through wirelines. Internet connections with a minimum download speed of 512 Kbps are considered as broadband in India.
The number of fixed-phone line subscribers slipped to about 20.2 million in March from about 20.3 million in Feb.
Including fixed-phone lines, India had 1.18 billion phone users as of Nov 30, or a total tele-density of 87.37.”
CCI directs 10 enterprises, officials to cease, desist from anti-competitive ways
The Competition Commission (CCI) has directed 10 enterprises and some of their officials to cease and desist from indulging in anti-competitive practices but refrained from imposing monetary penalties in a matter related to cartelisation in bidding for certain tenders of the Indian Railways.
The current economic situation due to the coronavirus pandemic and the fact that some of the enterprises were MSMEs, were taken into consideration before the watchdog decided against imposing monetary penalties.
The cease and desist order has been passed against ten entities and some of their officials. The entities include Hindustan Composites Ltd., Industrial Laminates (India) Pvt. Ltd., BIC Auto Pvt. Ltd. (now Masu Brake Pads Pvt. Ltd.), Escorts Ltd. (Railway Equipment Division), Rane Brake Lining Ltd. and Om Besco Super Friction Pvt. Ltd.
WPI inflation falls 1.81% in June, but food prices rise
Food prices shoot up even as drop in aggregate demand causes overall price inflation to drop.
PTI rreports: “The wholesale price-based inflation declined 1.81 per cent in June due to decline in prices of fuel and power, even as food articles remained expensive.
The rate of deflation in May was 3.21 per cent.
“The annual rate of inflation, based on monthly WPI (Wholesale Price Index), stood at (-1.81 per cent) (provisional) for the month of June, 2020, as compared to 2.02 per cent during the corresponding month of the previous year,” the Commerce and Industry Ministry said in a statement.
Inflation in food articles during June stood at 2.04 per cent, as against 1.13 per cent in May. In fuel and power basket, deflation stood at 13.60 per cent in June, against 19.83 per cent in the previous month.
Manufactured products, however, witnessed inflation of 0.08 per cent in June. In May deflation was 0.42 per cent.
Meanwhile, the final print of April WPI inflation stood at 1.57 per cent, the ministry said.”
Recent liquidity measures help reduce financing cost in corporate bond mkt to decadal low: RBI
The RBI seems to be declaring victory in its goal to keep the system flush with liquidity.
PTI reports: “The abundant surplus liquidity in the system provided by the Reserve Bank amid COVID-19 related dislocations in the financial market has helped reduce financing cost in the corporate bond market to decadal lows, according to an article published in the RBI Bulletin.
The article has been prepared by Radha Shyam Ratho and Pradeep Kumar of the Financial Markets Operations Department of Reserve Bank of India (RBI).
RBI deployed several conventional and unconventional tools to restore orderly conditions in financial markets and maintain normal functioning of financial intermediaries, the article published in RBI’s monthly bulletin for July showed.
Abundant liquidity provided through generic (LTROs) as well as targeted instruments (TLTROs), and other policy measures announced by RBI in the backdrop of dislocations observed in the financial markets, have brought down financing costs in the corporate bond market to decadal lows, eased the access of non-AAA rated entities, and led to record primary issuances, the article said.
Yields have dropped and the spreads have compressed despite foreign portfolio investment (FPI) outflows of around USD 3 billion from corporate bonds in 2020, it said.
Over the past few months, RBI infused liquidity through long-term repo operations (LTROs), targeted long term repo operations (TLTROs), TLTRO 2.0, special refinance facilities to NABARD, SIDBI, NHB and Exim Bank, and a special liquidity facility for mutual funds.
On Saturday, RBI Governor Shaktikanta Das said the liquidity measures announced by the central since February 2020 aggregate to about Rs 9.57 lakh crore, which is equivalent to about 4.7 per cent of 2019-20 nominal gross domestic product (GDP).
The article further said the current level of surplus liquidity in the system has ensured that the short-term rates have remained anchored and soft relative to the policy repo rate, aiding monetary policy transmission with positive spillovers to other segments of the market spectrum.
While the corporate bond market in the country has traditionally been a bastion of AAA-rated entities, the stylised evidence suggests that the recent RBI measures were successful in rekindling the investors’ risk appetite, it said.”
Barbeque Nation Hospitality gets Sebi’s go ahead to float IPO
The popular restaurant chain has been given the nod by Sebi to float an IPO.
PTI reports: “Casual dining chain Barbeque Nation Hospitality has received markets regulator Sebi’s approval to raise about Rs 1,000-1,200 crore through an initial public offering.
The IPO comprises a fresh issue of shares worth Rs 275 crore and an offer-for-sale of up to 98,22,947 equity shares, according to the draft papers filed with the Securities and Exchange Board of India (Sebi).
The company may consider a pre-IPO placement to the tune of Rs 150 crore.
Barbeque Nation Hospitality, which had filed its draft papers with Sebi in February, obtained “observations” from the regulator on July 7, latest update with the capital markets watchdog showed.
Sebi’s observations are necessary for any company to launch public issues like initial public offering (IPO), follow-on public offer (FPO) and rights issue.
Proceeds of the issue will be utilized to repay an outstanding borrowing of Rs 205 crore in part or full and for general corporate purposes.
The company is promoted by Sayaji Hotels, Sayaji Housekeeping Services, Kayum Dhanani, Raoof Dhanani and Suchitra Dhanani and is backed by private equity firm CX Partners, which made its first investment in 2013 and again in 2015.
The promoters hold 60.24 per cent, CX Partners owns 33.79 per cent and renowned stock market investor Rakesh Jhunjhunwala’s investment firm Alchemy Capital holds 2.05 per cent in the company.
According to market sources, the IPO size will approximately be between Rs 1,000 crore-1,200 crore.
The issue is being managed by IIFL Securities, Axis Capital, Ambit Capital and SBI Capital Markets.
In 2017, the company had filed IPO papers with Sebi seeking to raise Rs 700 crore. However, the regulator kept the processing of the company’s proposed IPO in abeyance “pending regulatory action for past violations” and finally approved the IPO plan in January 2018.
Although, the company could not launch the initial share-sale due to averse market conditions.”
Passenger vehicle sales in India decline 49.59% in June
The coronavirus lockdown has clobbered demand for automobiles.
PTI reports: “Passenger vehicle sales in India declined by 49.59 per cent in June to 1,05,617 units as against 2,09,522 units in the same month last year as the sector looks to recover from the coronavirus pandemic-induced lockdown, auto industry body SIAM on Tuesday said.
According to the latest data by the Society of Indian Automobile Manufacturers (SIAM), two-wheeler sales were also down 38.56 per cent at 10,13,431 units as compared to 16,49,475 units in the same month last year.
Motorcycle sales were at 7,02,970 units as against 10,84,596 units in June 2019, down 35.19 per cent.
Scooter sales were also down 47.37 per cent at 2,69,811 units as against 5,12,626 units in the same month last year.”
Coronavirus lockdowns push more people into hunger
Rupee slips against US dollar in early trade
The rupee depreciated 16 paise to 75.35 against the US dollar in opening trade on Tuesday tracking weak domestic equities and strengthening American currency.
The rupee opened at 75.33 at the interbank forex market, then lost ground and touched 75.35 against US dollar, down 16 paise over its last close.
It had settled at 75.19 against the US dollar on Monday.
Forex traders said steady crude oil prices and foreign fund inflows supported the rupee, while factors like strong dollar, negative domestic equities and rising COVID-19 cases dragged the local unit down.
Oil prices drop on demand recovery fears, OPEC+ easing expectations
The coronavirus pandemic continues to play spoilsport for oil’s recovery.
Reuters reports: “Oil prices fell more than 2% on Tuesday on worries that new clampdowns on businesses to stem surging U.S. coronavirus cases could threaten fuel demand recovery and expectations that OPEC+ might ease output cuts from August in an upcoming meeting.
U.S. West Texas Intermediate (WTI) crude futures slid 96 cents, or 2.39%, to $39.14 a barrel by 0443 GMT, while Brent crude futures fell 88 cents, or 2.06% to $41.84.
Both benchmark contracts lost just over 1% on Monday.
California’s governor on Monday ordered bars to shut and restaurants, movie theatres, zoos and museums to cease indoor operations as coronavirus cases and hospitalizations soared.
The most populous state’s two largest school districts, in Los Angeles and San Diego, also said they would teach only online when classes resume in August.
California’s moves follow the recent reinstatement of some restrictions in other states, such as Florida and Texas.
“With the California soft lockdown now framing the picture, July could be an even more challenging month for oil than expected with even more demand woes emanating from coronavirus-linked uncertainty,” AxiCorp market strategist Stephen Innes said in a note.
The market will be watching the next move from the Organization of the Petroleum Exporting Countries (OPEC) and its allies, collectively known as OPEC+, whose Joint Ministerial Monitoring Committee will meet on Wednesday to recommend the next level of cuts.
Under the existing agreement, OPEC+ is set to taper its record supply cut of 9.7 million barrels per day (bpd) to 7.7 million bpd from August through December.
The oil market is getting closer to balance as demand gradually rises, OPEC’s secretary general said on Monday.”
Abundant liquidity kept short-term rates soft: RBI bulletin
The Reserve Bank of India (RBI) said it had deployed several conventional and unconventional tools to restore orderly conditions in financial markets and maintain normal functioning of financial intermediaries when COVID-19 sent financial markets in India and the world into a tailspin.
As a result, markets remained resilient, liquid and stable, establishing conditions for a finance-led recovery of the economy ahead of the revival of demand, it said in its monthly bulletin.
It said that with the onset of COVID-19, financial institutions were faced with liquidity stress, loss of access to funding and tightening of financial conditions amid disruption of cash flows and working capital cycles.
Indian shares slip as virus fears persist; banks, financial stocks drag
The Indian stock bourses are down in line with the late sell-off seen last night in US stocks.
Reuters reports: “Indian shares ticked lower on Tuesday led by losses in banking and financial stocks, as domestic coronavirus cases continued to surge, while a weak performance among Asian peers also weighed on the sentiment.
The broader NSE Nifty 50 index fell 0.68% at 10,729.75 by 0345 GMT and the benchmark S&P BSE Sensex was down 0.74% at 36,423.79.
Coronavirus cases in the world’s second-most populous country rose to 906,752 as of Tuesday morning, according to the federal health ministry data https://www.mohfw.gov.in, leaving investors concerned about its impact on the Indian economy as many states and cities tighten restrictions again.
Asian shares slipped on simmering Sino-U.S. tensions and persistent coronavirus concerns among investors.
In Mumbai, banking and financial fell further after a Moody’s report on Monday warned on COVID-19 related headwinds to Indian banking, which is already facing a high number of bad debt and a loan repayment moratorium which threatens to hurt revenue.
The Nifty banking index fell 1.6% and the financials index shed 1.5% in early Tuesday trading.
Among stocks, HDFC Bank and Axis Bank were the top losers, dropping 1.63% and 1.17%, respectively.
Wipro Ltd was the session’s top gainer, advancing 1.36%, ahead of its quarterly earnings report scheduled for later in the evening.”
HDFC Bank launches probe into auto loan practices following allegations
An inquiry into possible wrongdoing in auto lending.
PTI reports: “HDFC Bank on Monday said it has launched a probe into its auto lending practices following allegations against the conduct of a long-time executive who retired on March 31 this year.
“We would like to state that the executive concerned who was on an extension of service retired on March 31, 2020 in the normal course of his employment. The bank has a well established process of investigating every complaint that it receives and takes actions as appropriate,” an HDFC Bank spokesperson said.
The auto loan department executive could not be contacted for comments.
The allegations pertain largely to the professional conduct which raises issues about possible conflicts of interest, sources said, stressing the quality of the bank’s auto loan book is strong.
The spokesperson said the “due process” was followed in this instance and asserted that the bank has followed “highest standards of governance and propriety at all times“.
The auto loan book had stood at Rs 83,935 crore as of March 31, 2020, constituting less than a fifth of the overall retail book. The auto loans had grown by only 4.04 per cent in FY20 as against the 14.61 per cent growth in the overall retail advances. It can be noted that auto sales were also in the slow lane for much of the year.
Meanwhile, Munish Mittal, the bank’s chief information officer has decided to move on to pursue higher studies at an overseas university, sources said.
Mittal had joined the lender way back in 1996 and had been serving as the CIO since 2015, they said.
HDFC Bank shares closed 2.26 per cent down at Rs 1,080.40 apiece on BSE on Monday against gains of 0.27 per cent on the benchmark index Sensex.”
‘Profitability, asset quality in Indian, ASEAN banks to worsen’
The challenging economic and credit conditions stemming from COVID-19 will weigh on ASEAN and Indian banks’ asset quality and profitability, Moody’s Investors Service said in a new report.
“In ASEAN and India, bank downgrades in 2020 have been driven by Indian banks, following the downgrade of the sovereign in June,” said Eugene Tarzimanov, Moody’s vice-president and senior credit officer.
“That said, the majority of the banks in the region are well-positioned at their ratings, despite a higher share of negative outlooks on bank ratings,” he said.
Moody’s said the asset quality and profitability will deteriorate from good levels in 2019 across most banking systems, with Singapore, Malaysia and the Philippines having the best asset quality with non-performing loans below 2%. While government support measures will offset some of the pressure on banks, they will not fully eliminate the negative impact, the report said.