The benchmark stock indices started the week with a strong rally on the back of gains in the index heavyweight Reliance which hit a new high but pared gains towards the end of the day.
The global rating agency Fitch expects the Centre to announce another set of fiscal reforms to help the economy as many feel the previous stimulus may be insufficient.
Join us as we follow the top business news through the day.
What past pandemics can tell us about the economic recovery
India very likely to announce another set of fiscal stimulus measures: Fitch
Interesting prediction from Fitch at a time when many feel the government's stimulus measures may be inadequate.
PTI reports: "India is very likely to come out with another round of fiscal stimulus package, worth about 1 per cent of GDP in the coming months, Fitch Ratings said on Monday.
Fitch, which last week lowered India’s sovereign rating outlook to negative from stable, said it has factored in the outgo for additional fiscal stimulus while deciding on the rating action.
Fitch Director Sovereign Ratings Thomas Rookmaaker said COVID-19 is still in India and it is very likely that the government will have to spend a bit more on fiscal measures to support the economy.
In our forecast we have factored in a larger stimulus package, not just 1 per cent of GDP of fiscal measures that have been announced so far. You may recall that Prime Minister Narendra Modi announced 10 per cent of GDP as measures, but 9 percentage points were non-fiscal in nature. There was also an announcement of bond issuance, borrowing requirement of government and that was 2 percentage points of GDP.
That could give an indication that another 1 percentage points could come in the months ahead to provide relief for those who need it, Rookmaaker said while addressing a Fitch Ratings webinar.
The Rs 21 lakh crore economic package announced last month, includes government measures and RBI liquidity.
The central government has also raised the estimated gross market borrowing to Rs 12 lakh crore from Rs 7.8 lakh crore as per the Budget Estimates for 2020-21."
Sensex rises 180 points; financial stocks rally
Weakness prevailed as the benchmark stock indices failed to hold on to much of its initial gains at open.
PTI reports: "Equity benchmark Sensex advanced by about 180 points on Monday, led by gains in financial stocks, in contrast with the global peers.
After rallying 482 points during the day, the 30-share index pared gains to end 179.59 points, or 0.52 per cent, higher at 34,911.32.
The NSE Nifty too rose 66.80 points, or 0.65 per cent, to close at 10,311.20.
Bajaj Auto was the top gainer in the Sensex pack, surging around 7 per cent, followed by Bajaj Finance, Bajaj Finserv, Kotak Bank, PowerGrid and Axis Bank.
On the other hand, ONGC, HDFC, TCS and Reliance Industries were among the laggards.
According to Narendra Solanki, Head - Equity Research (Fundamental), Anand Rathi, Indian market opened on a positive note despite mixed cues from its Asian peers.
During the afternoon session, benchmarks sustained their positive trend amid buying in stocks of banks, financial services, metals and midcap stocks, he said.
Further, he stated that the liquidity situation in June also remained positive as foreign portfolio investors (FPI) have infused a net Rs 17,985 crore into the Indian capital markets so far.
However, volatility remained in the market amid rising number of coronavirus cases in the country."
ICICI Bank sells 1.5% stake in life insurance arm for ₹840 crore
ICICI Bank on June 22 said it sold 1.5% stake in its life insurance subsidiary for around ₹840 crore with an aim to strengthen the balance sheet.
Last week, the lender had informed exchanges about selling a little less than 4% stake in its general insurance subsidiary for ₹2,250 crore.
While announcing its results for 2019-20 on May 9, the bank had said it would look at further strengthening the balance sheet as opportunities arise.
“In line with this intent and pursuant to approval granted by the Board, the Bank has today divested 2,15,00,000 equity shares of face value of ₹10 each of ICICI Prudential Life Insurance Company, representing 1.50% of its equity share capital at March 31, 2020, on the stock exchange for an approximate total consideration of ₹8.40 billion (₹840 crore ),” ICICI Bank said in a regulatory filing.
Rupee surges 17 paise to 76.03 against US dollar
The positive sentiment in domestic equities helped the rupee gain against the dollar today.
PTI reports: "The rupee on Monday appreciated 17 paise to close at 76.03 (provisional) against the US dollar in line with positive equity markets amid sustained foreign fund inflows.
Besides, a weak US dollar against major global currencies also aided the rupee’s upward movement, forex dealers said.
At the interbank foreign exchange market, the rupee opened strong at 76.16 and it further rushed to touch a high of 75.98 during the trade.
The domestic currency finally settled at 76.03 against the US dollar, registering a rise of 17 paise over its previous close of 76.20.
On the equities front, the 30-share BSE benchmark Sensex was trading 442.58 points higher at 35,174.31 and broader Nifty rose 123.10 points to 10,367.50.
Foreign institutional investors were net buyers in the capital market, as they bought equity shares worth Rs 1,237 crore in the previous trading session on Friday, according to provisional exchange data.
The dollar index, which gauges the greenback’s strength against a basket of six currencies, fell 0.31 per cent to 97.31.
Brent crude futures, the global oil benchmark, rose 0.21 per cent to USD 42.28 per barrel."
TN State Apex Co-Operative Bank disburses ₹187 crore under gold loan scheme during lockdown
The Tamil Nadu State Apex Co-Operative Bank Limited has so far disbursed ₹187 crore to 20,000 people in Chennai during the lockdown period, under its loan against gold scheme.
“We had launched the scheme with a lower interest rate during the lockdown period and a lot of people have availed of it to manage their liquidity problems,” a senior bank official said.
Under the scheme, the gold was valued at 10% more than in the usual gold schemes, or in other words the gold was valued at ₹3,300 per gram, compared to ₹3,000 per gram in regular schemes. The loan attracts an interest of 6% per annum, when compared to 9.5% in regular schemes. The minimum amount that can be borrowed is ₹25,000 and the maximum is ₹1lakh with a repayment period of three months and an additional grace period of three months.
US junk bond sales soar on Federal Reserve demand
Fitch revises outlook of SBI, 8 other banks to negative
The global ratings agency continues to turn increasingly bearish on the Indian economy and business institutions.
PTI reports: "Fitch Ratings on Monday said it has revised the outlook to negative from stable of nine Indian banks, including State Bank of India, ICICI Bank and Axis Bank, following lowering of India’s sovereign rating outlook due to impact of coronavirus pandemic on the economy.
The rating agency revised the outlook for Export-Import Bank of India (EXIM), SBI, Bank of Baroda, Bank of Baroda (New Zealand), Bank of India, Canara Bank, Punjab National Bank, ICICI Bank, Axis Bank while affirming their ratings.
At the same time, Fitch has affirmed IDBI Bank Ltd’s (IDBI) rating, while maintaining the outlook at negative.
“The rating actions follow Fitch’s revision of the outlook on the ‘BBB-’ rating on India to negative from stable on June 18, 2020 due to the impact of the escalating coronavirus pandemic on India’s economy,” it said in a statement.
Fitch said the ratings of all the nine Indian banks are support-driven and anchored to their respective sovereign country rating. “They are based on Fitch’s assessment of high to moderate probability of extraordinary state support for these banks, which takes into account our assessment of the sovereign’s ability and propensity to provide extraordinary support.”
The negative outlook on India’s sovereign rating, it said, reflects an increasing strain on the state’s ability to provide extraordinary support, due to the sovereign’s limited fiscal space and the significant deterioration in fiscal metrics due to challenges from COVID-19 pandemic.
“The rating action does not affect the banks’ Viability Ratings (VRs),” it said. “EXIM does not have a VR as its role as a policy bank makes an assessment of its standalone credit profile less meaningful.”
While EXIM is of high strategic and systemic importance due to its unique policy role, SBI is the largest Indian bank with nearly 25 per cent market share in system assets and deposits.
SBI is 57.9 per cent state-owned and has a much broader policy role than peers.
“SBI is highly likely to receive extraordinary state support, if required, due to its very high systemic importance,” it said.
For ICICI and AXIS Bank, Fitch said it expects a moderate probability of extraordinary state support for these banks, due to their systemic importance, market position and private ownership.
The other banks whose outlook was lowered too have “high systemic importance” stemming from their significant market share, majority government ownership and role in policy lending."
Biocon, DKSH collaborate to commercialise seven generic formulations in Singapore, Thailand
Biocon’s subsidiary, Biocon Pharma Limited, and DKSH Business Unit Healthcare, signed an agreement under which DKSH will sell and distribute seven of Biocon Pharma’s generic formulations in Singapore and Thailand.
DKSH will gain an exclusive licence to register and commercialise the seven generic formulations from various therapeutic areas like diabetology, cardiology, oncology and immunology, which will be sold under Biocon’s brand in Singapore and Thailand. DKSH will manage marketing and sales as well as logistics for Biocon Pharma, helping drive sales through its capabilities and strengths in the medical and pharmacy channels.
Inflation dog may finally bark, investors bet
Looks like all the monetary and fiscal stimulus by government may, after all, finally lead to higher prices.
Reuters reports: "Gold, forests, property stocks, inflation-linked bonds - these are just some of the assets investors are pouring money into on the view that the recent explosion of government spending and central bank stimulus may finally rouse inflation from its decade-long slumber.
With the world economy forecast to shrink 6% this year, it may seem like a strange time to fret about inflation.
And sure enough, market-based gauges suggest an uptrend in prices may not trouble investors for years. U.S. and euro zone inflation gauges indicate that annual price growth will be running at barely over 1% even a decade from now. .
So if inflation really is, as the IMF put it in 2013, “the dog that didn't bark”, failing to respond to all the central bank money-printing unleashed in the wake of the 2008-09 crisis, why should investors prepare for it now, especially as demographics and technology are also conspiring to tamp down inflation across the developed world?
The answer is that some think the dog really will bark this time, partly because - unlike in the post-2008 years - governments around the world have also been rolling out massive spending packages, in a bid to limit the impact of the coronavirus pandemic.
“We will be pushing, pushing, pushing on the string and dropping our guard, then 3-5 years from now...that's when the (inflation) dog will start barking,” said PineBridge Investments' head of multi-asset Mike Kelly, who has been buying gold on that view.
“Gold worries about such things long in advance. It has risen through this coronavirus with that down-the-road-risk top of mind,” he added.
Even typically frugal governments such as Germany have joined central banks with trillions of dollars in stimulus programmes. Investors say even the long taboo topic of debt monetisation, where central banks directly fund government spending, may be on the cards.
“What worries me is that at the moment it seems that there is no limit to fiscal stimulus,” said Klaus Kaldemorgen, a portfolio manager at asset manager DWS, who said he was investing in inflation hedges far more now than he was after 2008.
Inflation hawks also cite a trend of de-globalisation, where shrinking international trade and Western companies bringing production back to their own countries leads to higher prices.
This view that inflation could pick up ahead is reflected in forward swaps and in Citi's inflation surprise indexes, which show that the extent that U.S. inflation readings are surprising against market expectations has been at a record high and has ticked higher in the euro zone, too."
Glenmark Pharmaceuticals shares soar 20% after COVID-19 drug launch
Some surprisingly good news for investors in an Indian pharmaceutical comany.
PTI reports: "Shares of Glenmark Pharmaceuticals on Monday rallied 20 per cent after the company said it has launched antiviral drug Favipiravir, under the brand name FabiFlu, for the treatment of patients with mild to moderate COVID-19.
The scrip jumped 19.99 per cent to Rs 490.90 -- its upper circuit limit -- on the BSE.
On the NSE, it zoomed 19.99 per cent to Rs 491.20 -- its highest permissible trading limit for the day.
The drug firm on Saturday said it has launched antiviral drug FabiFlu for the treatment of patients with mild to moderate COVID-19 at a price of about Rs 103 per tablet.
The drug will be available as a 200 mg tablet at a maximum retail price (MRP)of Rs 3,500 for a strip of 34 tablets, Glenmark Pharmaceuticals said.
FabiFlu is the first oral favipiravir-approved medication in India for the treatment of COVID-19, it said in a statement.
The Mumbai-based firm had on Friday received the manufacturing and marketing approval from the Drugs Controller General of India."
Reliance Industries becomes first Indian firm to hit USD 150 billion market cap
Another milestone for the index heavyweight which has been in the news a lot off late.
PTI reports: "Reliance Industries on Monday became the first Indian firm to hit a market valuation of USD 150 billion helped by a continuous rally in its share price.
In morning trade, the company’s market valuation jumped Rs 28,248.97 crore to Rs 11,43,667 crore (USD 150 billion) on the BSE.
The heavyweight stock surged 2.53 per cent to a record high of Rs 1,804.10 on the BSE.
On the NSE, it rose by 2.54 per cent to an all-time high of Rs 1,804.20.
Reliance Industries on Friday became the first Indian company to cross the Rs 11 lakh crore market valuation mark.
Its market valuation crossed Rs 11 lakh crore in the previous session as its share price rallying over 6 per cent after chairman Mukesh Ambani announced that his oil-to-telecom conglomerate had become net debt-free.
Ambani announced that Reliance Industries had become net debt-free after raising a record Rs 1.69 lakh crore from global investors and a rights issue in under two months.
Reliance Industries raised Rs 1.15 lakh crore from global tech investors by selling a little less than a quarter of the firm’s digital arm, Jio Platforms, and another Rs 53,124.20 crore through a rights issue in the past 58 days.
Taken together with last year’s sale of 49 per cent stake in fuel retailing venture to BP Plc of UK for Rs 7,000 crore, the total fund raised is in excess of Rs 1.75 lakh crore, the company said.
Reliance Industries had a net debt of Rs 1,61,035 crore as on March 31, 2020.
“With these investments, RIL has become net debt-free,” it said.
On Thursday, Reliance Industries said it has sold a 2.32 per cent stake in its digital unit to Saudi Arabia’s Public Investment Fund (PIF) for Rs 11,367 crore.
So far this year, the company’s stock has gained over 19 per cent."
S&P 500 in terms of gold price
Petrol nears Rs 80 mark, diesel at new high after 16th price hike in a row
The government continues to raise domestic fuel prices as it tries to plug revenue losses from other sources.
PTI reports: "Petrol price on Monday was hiked by 33 paise per litre and diesel by 58 paise to take retail rates to record high as the oil companies increased prices for the 16th day in a row.
In 16 days, petrol price has been hiked by Rs 8.3 per litre and diesel by Rs 9.46 - a record increase in rates of the fuel in any fortnight since pricing was deregulated in April 2002.
Petrol price in Delhi was hiked to Rs 79.56 per litre from Rs 79.23 while diesel rates were increased to Rs 78.55 a litre from Rs 78.27, according to a price notification of state oil marketing companies.
Rates have been increased across the country and vary from state to state depending on the incidence of local sales tax or value added tax (VAT).
The increase in rates since June 7 is the highest in any fortnight. When petrol and diesel pricing was deregulated in April 2002, oil companies revised rates every fortnight in line with the cost. They switched to daily price revision in May 2017 to allow cost to reflect instantaneously in retail rates.
According to pricing data, the maximum rates have increased in any fortnight was Rs 4-5 per litre.
The 16th daily increase in rates, since oil companies on June 7 restarted revising prices in line with costs after ending an 82-day hiatus in rate revision, has taken diesel prices to fresh highs. Petrol price too is at a two-year high.
Prior to the current rally, the peak diesel rates had touched was on October 16, 2018, when prices had climbed to Rs 75.69 per litre in Delhi. The highest-ever petrol price was on October 4, 2018, when rates soared to Rs 84 a litre in Delhi."
‘Consumer demand needs a financing fix’
Two years ago, when the going seemed good,Srivats Ram, MD, Wheels India Ltd., had said his industry was cyclical and that what goes up typically comes down. In the midst of a pandemic, he takes a tempered view, suggesting that things could look up soon. Excerpts from an interview:
This slowdown seems to have hit the industry pretty hard. Did you expect the downturn to be this severe?
I can’t profess to have predicted that the downturn would have been as bad as it was in FY20. But it is the nature of the industry to be cyclical and it was anticipated at some point, although the extent of the slowdown is much more than what I expected. I do not think that companies who have been in existence for 50 years and more have ever experienced a month of zero sales. To that extent, iIt is totally unprecedented.
When we have found a new normal in the post COVID phase later this year, volumes are likely to be a lot less than what it was last year. While this year will be a wash [out] compared to last year, if you look at FY22, you are probably going to have at least a month and a half of gain as compared to this year (that saw a lockdown in April and May) and thus there will be some kind of positive base effect next year.
Don’t assign risk weight on credit under ECLGS: RBI to lending institutions
In a big to nudge banks to lend under the emergency credit line scheme announced by the government, the RBI has brought in some crucial rule changes.
PTI reports: "The RBI on Sunday said lending institutions should assign zero per cent risk weight on the credit facilities extended under the Emergency Credit Line Guarantee Scheme to MSME borrowers announced by the government in the wake of COVID-19 pandemic.
The government in May introduced the Emergency Credit Line Guarantee Scheme (ECLGS) for providing 100 per cent guarantee coverage for additional working capital term loans (in case of banks and financial institutions) and additional term loans (in case of NBFCs) up to 20 per cent of their entire outstanding credit up to Rs 25 crore as on February 29, 2020.
The credit facility is guaranteed by the National Credit Guarantee Trustee Company (NCGTC).
“As credit facilities extended under the scheme guaranteed by NCGTC are backed by an unconditional and irrevocable guarantee provided by Government of India, it has been decided that Member Lending Institutions shall assign zero percent risk weight on the credit facilities extended under this scheme to the extent of guarantee coverage,” the RBI said in a notification.
Lending institutions include, banks, eligible NBFCs and HFCs, and All India Financial Institutions (SIDBI, NHB, NABARD, EXIM Bank).
In a separate release, the RBI said the central government has re-nominated Natarajan Chandrasekaran as a part-time non-official Director on the Central Board of Reserve Bank of India, for a further period of two years beyond March 3, 2020, or until further orders."
Sensex surges over 400 points in early trade; RIL hits fresh peak
A great start to the day for the benchmark stock indices.
PTI reports: "Equity benchmark Sensex jumped over 400 points in early trade on Monday led by gains in index-heavyweights Reliance Industries, ICICI Bank and HDFC, amid positive global cues and foreign fund inflow.
After touching a high of 35,170.08 in early trade, the 30-share index was trading 421.66 points, or 1.21 per cent, higher at 35,153.39.
Similarly, NSE Nifty surged 122.95 points, or 1.20 per cent, to 10,367.35.
Bajaj Finserv was the top gainer in the pack, rising around 7 per cent, followed by Bajaj Finance, Bajaj Auto, IndusInd Bank and ICICI Bank.
Reliance Industries jumped over 2 per cent, trading at its record high of Rs 1,804.10.
On the other hand, TCS, ONGC, M&M and Infosys were among the laggards.
In the previous session, the BSE barometer settled 523.68 points, or 1.53 per cent, higher at 34,731.73, and the broader Nifty surged 152.75 points, or 1.51 per cent, to 10,244.40.
On a net basis, foreign institutional investors bought equities worth Rs 1,237 crore in the capital market on Friday, provisional exchange data showed.
According to analysts, besides stock-specific action, fresh foreign fund inflows buoyed market sentiment here.
On the global front, bourses in Shanghai, Seoul and Tokyo were trading with gains in early deals, while those in Hong Kong were in the red.
International oil benchmark Brent crude futures rose 0.02 per cent to USD 42.20 per barrel."
Are stock specific SIPs better, or SIPs in MFs?
With the Systematic Investment Plan (SIP) route taking off for mutual funds, stock brokers are now offering SIPs for direct equity investments as well that allow you to dribble equal monthly sums into a stock of your choosing over several years. This strategy, many folks believe, helps retail investors build up sizeable positions in quality stocks that can turn huge wealth creators in future. But stock SIPs, for retail investors, are not as hot an idea as mutual fund SIPs. Before you sign up for them, here are some things to be aware of.
When plugging stock SIPs as a wealth creation tool, you are often provided examples of X or Y stock that transformed an investment of a few thousands into a few lakhs over a relatively short time frame. For instance, had you done a SIP of just ₹5,000 a month in the Hindustan Unilever stock over the last five years, you’d be sitting on shares worth ₹5.1 lakh today, against an investment of ₹3 lakh. But such examples tend to be coloured by survivorship bias. When showcasing the SIP route for stocks, intermediaries often pick companies that survived and delivered a hefty return over the last 5 or 10 years.