Stocks have opened the day with modest gains after suffering a minor loss yesterday even as coronavirus cases in the country continue to surge.
Credit growth in India continues to be lackluster as the pandemic-hit economy struggled to find its feet.
Join us as we follow the top business news through the day.
Americans may soon run out of unemployment benefits
Sensex rallies 499 points; Nifty reclaims 10,400 level
It was a good day for stocks that managed to build on initial momentum in the morning.
PTI reports: "Equity benchmark Sensex rallied 499 points on Wednesday, tracking gains in index-heavyweights HDFC twins, Reliance Industries and ITC amid a positive trend in the global markets.
After hitting a high of 35,467.23, the 30-share BSE index settled 498.65 points, or 1.43 per cent, higher at 35,414.45.
The NSE Nifty surged 127.95 points, or 1.24 per cent, to 10,430.05.
Axis Bank was the top gainer in the Sensex pack, soaring over 6 per cent, followed by Bajaj Finserv, HDFC, Bajaj Finance, ITC, IndusInd Bank, SBI, ICICI Bank and Reliance Industries.
On the other hand, NTPC, Nestle India, L&T, M&M and ONGC were among the laggards.
According to traders, besides stock-specific action, local indices followed gains in global benchmarks which were largely positive on encouraging macroeconomic numbers indicating recovery in world economies.
Bourses in Shanghai and Hong Kong ended with gains, while Tokyo and Seoul closed in the red.
Stock exchanges in Europe were trading on a positive note in early deals.
International oil benchmark Brent crude futures rose 2.67 per cent to USD 42.37 per barrel.
On the currency front, the rupee settled 9 paise lower at 75.60 against the US dollar."
India to ban Chinese cos from highway projects, says Gadkari
The economic war between India and China continue to get worse.
PTI reports: "India will not allow Chinese companies to participate in highway projects, including those through joint ventures, Union Minister Nitin Gadkari said on Wednesday amid border standoff with China.
Gadakri also said the government will ensure that Chinese investors are not entertained in various sectors like Micro, Small and Medium Enterprises (MSMEs).
The senior minister’s assertions assume significance against the backdrop of border standoff between India and China in Ladakh that also saw the death of 20 Indian Army personnel last month.
Amid escalating tensions, the government on Monday banned 59 apps, mostly having Chinese links, citing threats to national security.
“We will not give permission to joint ventures that have Chinese partners for road construction. We have taken a firm stand that if they (Chinese companies) come via joint venture in our country, we will not allow it,” Gadkari told PTI in an interview.
The Road Transport, Highways and MSME minister said a policy will be out soon banning Chinese firms and relaxing norms for Indian companies to expand their eligibility criteria for participation in highway projects.
Currently only a few projects which were undertaken much earlier involve some Chinese partners. When asked about this, the Minister said that the new decision will be implemented in current and future tenders.
With respect to existing tenders and future bids, Gadkari said rebidding would be done if there are any Chinese joint ventures."
Long road ahead for export recovery: Report
Some bleak news for Indian exporters.
PTI reports: "Any prolonged disruption due to COVID-19 could materially impact credit and liquidity profiles of companies in export-dependent sectors such as textiles, gems and jewellery, and auto ancillaries, a report on Wednesday said.
Export recovery, which may begin from the second quarter, could get further delayed if the border standoff with China lingers on, an India Ratings report said, adding ability of export-oriented manufacturers to keep up supply will remain key to navigating the path to recovery.
“While domestic exporters are facing vulnerability in form of geography and commodity concentration, the overall demand prospects for merchandise goods from importing countries can improve, creating a potential demand-supply mismatch for domestic exporters,” the report said.
Since January, the agency has taken 25 negative rating actions and 13 positive rating actions, as well as revised the rating outlook down for another 16 issuers exposed to exports.
Noting that domestic exports have dual concentration in terms of geography as well as the category of goods -- though the former is common for many exporting countries, it says top 10 export partner countries constitute over 50 per cent of the total merchandise exports and a substantial portion of which comprises discretionary goods like gems and jewellery, textiles, automobiles and parts.
The report notes that exports are largely concentrated in the red zone countries (over 500 COVID-19 cases per million people) which could inherently a take longer time to return to normalcy, delaying domestic exports.
On the evolving geopolitical risks, the report said China saw a revival of exports in April as its operations resumed and pending orders were cleared. Additionally, stable or increasing Chinese exports would suggest a smoothening of exports environment globally and may also place domestic exports in a favourable spot in the second quarter if geopolitical condition remains conducive.
The supply-side issues, it noted that domestic companies are likely to face supply-side challenges, ranging from issues related to factors of production such as capital and labour to nuanced operational issues like physical distancing and logistic related hurdles."
Rupee settles 9 paise lower at 75.60 against US dollar
The strength in the stock market didn't come of much use to the rupee today.
PTI reports: "The rupee on Wednesday settled 9 paise lower at 75.60 (provisional) against the US dollar as concerns over rising COVID-19 cases weighed on investor sentiment even as the domestic equity market was trading in the positive territory.
At the interbank forex market, the rupee opened at 75.49 against the US dollar, but lost ground and ended the day at 75.60 against the US dollar, down 9 paise over its last close.
It had settled at 75.51 against the US dollar on Tuesday.
During the four-hour trading session, the rupee witnessed an intra-day high of 75.48 and a low of 75.60 against the US dollar.
Forex traders said firm domestic equities supported the local unit, while foreign fund outflows and rising COVID-19 cases weighed on investor sentiments.
“The mixed risk sentiments are leading to a very lacklustre trading in the forex market. Traders are unaware of which direction will the USD/INR spot trade and are looking for more cues,” said Rahul Gupta, Head of Research- Currency, Emkay Global Financial Services.
Gupta further added that “the good news of economic recovery has been factored in so any disappointment over coronavirus or US-China trade war will hamper the market sentiments.”
Meanwhile, the number of cases around the world linked to the disease has crossed 1.04 crore and the death toll has topped 5.11 lakh.
In India, the death toll due to COVID-19 rose to 17,400 and the number of infections rose to 5,85,493, according to the health ministry.
Brent crude futures, the global oil benchmark, rose 2.64 per cent to USD 42.36 per barrel.
The dollar index, which gauges the greenback’s strength against a basket of six currencies, fell by 0.14 per cent to 97.25."
GST revenue collections in June at ₹90,917 crore
GST revenue collection in June stood at ₹90,917 crore, up from ₹62,009 crore mopped up in May and ₹32,294 crore in April.
“The gross GST revenue collected in the month of June, 2020 is ₹90,917 crore of which CGST is ₹18,980 crore, SGST is ₹23,970 crore, IGST is ₹40,302 crore (including ₹15,709 crore collected on import of goods) and Cess is ₹7,665 crore,” an official statement said.
The government had allowed a relaxed time schedule for filing of Goods and Services Tax (GST) returns. Returns of the month of April, March as well as February got filed during June 2020.
India gold prices hit all-time high as virus spike lifts safe-haven demand
Investors are rushing to the precious metal amid overall economic uncertainty.
Reuters reports: "Gold prices in India hit an all-time high on Wednesday, tracking a global rally, as surging coronavirus cases in many countries raised the metal's safe-haven appeal.
Local gold futures hit an all-time high of 48,871 rupees ($646.66) per 10 grams in early trade, taking their gains to 25% in 2020 so far. The contract had gained nearly 25% in 2019.
However, this dampened the retail demand for gold in India, the world's second largest consumer of the precious metal.
“Retail demand is negligible. Buyers are postponing purchases anticipating a correction in prices,” said a Mumbai-based bank dealer with a bullion importing bank.
In thin trade, dealers were offering a discount of up to $22 an ounce over official domestic prices on Wednesday afternoon, up from the last week's $18. The domestic price includes a 12.5% import tax and 3% sales tax.
The country's gold imports in May plunged 99% from a year earlier as international air travel was banned and jewellery shops were closed amid a nationwide lockdown to curb the spread of coronavirus.
In overseas market, spot gold firmed near an eight-year peak on Wednesday, as a spike in coronavirus cases in the United and States and many other countries has cast a shadow on hopes for a quicker global economic recovery, driving inflows into safe-haven assets.
According to a latest Reuters tally, the coronavirus has infected more than 10.48 million people worldwide so far."
Maruti Suzuki sales down by 53.8%, sells over 51,000 cars in June
The country’s largest car maker Maruti Suzuki on Wednesday said it sold 51,274 passenger vehicles in the domestic market amid gradual re-opening of the country after two-month nationwide lockdown.
On an year on year basis, the company’s wholesale sales were 53.8% lower from 1,11,014 vehicles dispatched to dealers in June 2019. However, it is much higher than sales of about 13,800 vehicles in the month of May this year and zero sales in April due to the lockdown.
“With this, the Company closed the first quarter of FY20-21 with total sales of 76,599 units (66,165 units domestic, 862 units to other OEM and 9,572 units exported.) The sales performance during June 2020 and Q1 FY 20-21 should be seen in the context of the ongoing COVID-19 pandemic, lockdowns and restrictions required for safety,” the company said in a statement.
World Bank approves $750 mln loan for India small businesses hit by pandemic
Enterprises in India may receive a helping hand from an unexpected source amid the lockdown.
Reuters reports: "The World Bank has approved a $750 million loan to India for extending lending to micro, small and medium enterprises (MSMEs) severely hit by the pandemic, a top official of the bank said on Wednesday.
“The MSME sector is central to Indias growth and job creation and will be key to the pace of Indias economic recovery, post COVID-19,” Junaid Ahmad, World Bank's director for India, told reporters at a virtual conference.
The loan from the International Bank for Reconstruction and Development (IBRD), private arm of the World Bank, will have a maturity of 19 years, including a 5-year grace period, the bank said in a statement."
Commercial real estate developers have to pay GST, even if rent is not realised, experts say
Commercial real estate developers have to pay Goods and Services Tax (GST) of 18% on rent, even if it is not realised during the current COVID-19 lockdown, as per norms.
Commercial malls have not been functioning in the State, since the lockdown was imposed towards the end of March. While “If the invoice is raised for rent, then GST has to be paid, even if the rent is not realised. What the commercial developers can do in the current situation, is that if their contract permits, they can re-negotiate the rents and pay the GST on lower rent,” according to Abhishek Jain, tax partner at EY, an auditing firm.
“In a situation where the rental obligations remain unchanged and it is only a case of the tenant refusing to pay or simply being in default, it would not be possible for the landowner to contend that GST is not payable,” K. Vaitheeswaran, advocate and tax consultant said. He pointed out that it is also a matter of irony that when the rentals are not realized, GST is still payable.
ATF price hiked by 7.5%; petrol, diesel rates unchanged
Jet fuel or ATF price on Wednesday was hiked by 7.5 per cent, the third increase in a month, while petrol and diesel rates were unchanged for the second day in a row.
Aviation turbine fuel (ATF) price was hiked by ₹2,922.94 per kilolitre (kl), or 7.48 per cent, to ₹41,992.81 per kl in the national capital, according to a price notification by state-owned oil marketing companies.
This is the third straight increase in ATF prices in a month. Rates were hiked by a record 56.6 per cent (₹12,126.75 per kl) on June 1, followed by ₹5,494.5 per kl (16.3 per cent) increase on June 16.
Vodafone Idea posts highest-ever loss by an Indian firm at Rs 73,878 crore in FY20
Provisioning for AGR dues has caused Vodafone India's bottom-line figures to plunge.
PTI reports: "Vodafone Idea, the country’s third largest telecom operator, on Wednesday reported a staggering Rs 73,878 crore of net loss in fiscal ended March 2020 - the highest ever by any Indian firm - after it provisioned for Supreme Court mandated statutory dues.
The firm, which has to pay Rs 51,400 crore dues after the apex court ordered the non-telecom revenues to be included in calculating statutory dues, said the liability has “cast significant doubt on the company’s ability to continue as a going concern“.
In a regulatory filing, Vodafone Idea (VIL) reported widening of March quarter net loss to Rs 11,643.5 crore. Its losses stood at Rs 4,881.9 crore in the same period a year ago and Rs 6,438.8 crore in previous October-December quarter.
The Department of Telecom (DoT) estimates the firm’s adjusted gross revenue (AGR) dues at Rs 58,254 crore for period up to FY 2016-17, but the company put the dues at Rs 46,000 crore “after adjustment of certain computational errors and payments made in the past not considered in the DoT demand.”
Of the total dues, it has made a payment of Rs 6,854.4 crore.
The company took a hit of Rs 1,783.6 crore on account of AGR-related liabilities, and Rs 3,887 crore on account of one-time spectrum charges (OTSC), both of which were recognised as exceptional items during the quarter ended March 2019.
Revenue from operations for the just-ended quarter came in at Rs 11,754.2 crore.
For the full year FY20, losses ballooned to Rs 73,878.1 crore. Vodafone Idea’s losses stood at Rs 14,603.9 crore in FY19.
The company said that the financial results for the year ended March 31, 2020, are not comparable to those reported for the same period of the preceding year (merger between Vodafone India and Idea Cellular had taken effect in August 2018).
The revenue from operations for full year FY20 stood at Rs 44,957.5 crore. The same was Rs 37,092.5 crore in FY19."
India's factory activity contracts for 3rd straight month in June
The gradual unlocking of the economy doesn't seem to be doing much good for the manufacturing sector.
Reuters reports: "India's manufacturing activity contracted for a third straight month in June, albeit at a much shallower pace, as demand and output continued to suffer from three months of lockdowns to quell the spread of the coronavirus, a private survey showed.
The virus has infected over half a million people in the world's second-most populous nation, stalling economic activity, but Wednesday's survey suggested the worst may be over for the economy, at least for now.
While the Nikkei Manufacturing Purchasing Managers' Index , compiled by IHS Markit, increased to 47.2 last month from 30.8 in May it was still below the 50-mark separating growth from contraction. Analysts polled by Reuters had expected 37.5.
“India's manufacturing sector moved towards stabilisation in June, with both output and new orders contracting at much softer rates than seen in April and May. However, the recent spike in new coronavirus cases and the resulting lockdown extensions have seen demand continue to weaken,” noted Eliot Kerr, an economist at IHS Markit.
The April-June period was the worst quarterly performance since the PMI survey began in March 2005, in line with a Reuters poll predicting Asia's third-largest economy contracted last quarter for the first time since the mid-1990s.
Input and output prices declined for a third consecutive month in June, and manufacturers continued to cut staff."
China's trade ties with Europe
Ola enables in-app ‘tipping’ globally
Ola, the mobility platform and a ride-hailing company, has rolled out a global feature for customers to reward drivers for going the extra mile to deliver a safe and high-quality ride experience.
Through Ola’s new in-app ‘tipping’ functionality, customers can now include a tip as a token of appreciation for their drivers’ for providing a great ride experience. The feature has been rolled out to all Ola users across India, Australia, New Zealand and the United Kingdom.
As restrictions eased, the driver-partners on the Ola platform have had to follow a comprehensive safety protocol and sanitising cars after every trip, drivers have taken extra steps personally to keep themselves and their families safe. In this scenario, the in-app tipping feature serves as an opportunity for customers to reward drivers for going the extra mile, and contribute to increasing their earning potential. Customers can choose to voluntarily tip their drivers and the amount will be credited to the drivers’ account in its entirety as part of the regular earnings cycle, as per a company statement.
External debt rises $15.4 billion to $558.5 billion in March
India’s external debt stood at $558.5 billion in March, an increase of $15.4 billion compared with the year-ago period, according to RBI data.
Commercial borrowings remained the largest component of the external debt, with a share of 39.4%, followed by non-resident deposits at 23.4% and short-term trade credit at 18.2%.
The data showed valuation gains due to the appreciation of the U.S. dollar against the Indian rupee and other major currencies were at $16.6 billion. “Excluding the valuation effect, the increase in external debt would have been $32 billion instead of $15.4 billion at end-March 2020 over end-March 2019,” it said.
Indian shares edge higher even as coronavirus cases surge
It looks like equity investors have priced in the surge in India's coronavirus cases.
PTI reports: "Indian shares inched higher on Wednesday as investor optimism was boosted by strong factory data out of China, offsetting fears of rising coronavirus cases, with Bharti Airtel Ltd leading small gains after a deal with Carlyle.
The NSE Nifty 50 index rose 0.25% to 10,327.65 by 0350 GMT, while the benchmark S&P BSE Sensex was up 0.3% at 35,019.67.
Broader Asian stocks struggled for traction as better than expected Chinese factory activity could not soothe persistent worries that a surge in coronavirus cases in the United States could hinder an economic recovery.
Cases in India jumped by more than 18,000 to 585,493 as of Wednesday morning, including 17,400 deaths, according to federal health ministry data.
Bharti Airtel topped gains in Mumbai, rising as much as 2.7% after Carlyle said it will buy a 25% stake in Bharti's data centre arm for $235 million."
Non-food credit growth slows to 6.8% in May
The ongoing economic contraction is now being confirmed by credit indicators.
PTI reports: "The non-food credit growth decelerated to 6.8 per cent year-on-year in May from 11.4 per cent in the same period of last year, RBI data showed.
The outstanding incremental non-food credit stood at Rs 90.3 lakh crore as of May 22, 2020, as against Rs 84.51 lakh crore on May 24, 2019.
In April, non-food credit growth decelerated to 7.3 per cent on a year-on-year basis from 11.9 per cent in the same month last year.
Bank loan growth to industry decelerated to 1.7 per cent in May from 6.4 per cent in the same month last year.
Within industry, credit growth to beverage and tobacco, petroleum, coal products and nuclear fuels, and paper and paper products accelerated, according to the RBI’s release on Sectoral Deployment of Bank Credit — May 2020.
However, credit growth to chemicals and chemical products construction, infrastructure, food processing, textiles, and all engineering decelerated/contracted.
Credit growth to agriculture and allied activities decelerated to 3.5 per cent during the reporting month from 7.8 per cent in May 2019, as per RBI data.
Loans growth to the services sector slowed down to 11.2 per cent from 14.8 per cent in the same month of last year.
Personal loans growth decelerated to 10.6 per cent in May 2020 from 16.9 per cent in May 2019, RBI said."
Carlyle to acquire about 25% stake in Airtel’s Nxtra Data
The Carlyle Group will acquire about 25% stake in Airtel’s data centre business, Nxtra Data, for USD 235 million (about ₹1,780 crore), the company said in a statement on Wednesday.
This will peg the enterprise valuation of Nxtra at USD 1.2 billion which is over ₹9,084 crore.
On completion of the deal, Carlyle will hold about 25%in the business with Airtel continuing to hold the remaining stake of about 75 per cent.
“Bharti Airtel and Comfort Investments II, an affiliated entity of CAP V Mauritius Limited, an investment fund managed and advised by affiliated entities of the Carlyle Group, today announced an agreement under which Comfort Investments II will invest USD 235 million in Nxtra Data Limited, a wholly owned subsidiary of Airtel engaged in the data centre business,” a Bharti Airtel statement said.
