Stocks opened this morning with strong gains on firm global cues but gave back all gains by the end of the day.
Bond yields have risen sharply after the government's plans to increase borrowing to finance spending.
Join us as we follow the top business news through the day.
Why the economic recovery will be so difficult
Sensex ends 81 points lower; financial stocks drag
The benchmark indices that opened the day with significant gains only managed to trend down all through the day.
PTI reports: "Benchmark Sensex gave up all its early gains to end 81 points lower on Monday, dragged by losses in financial stocks as lenders beefing up provisions against COVID-19 risks stoked slippages worry.
Besides, spiking COVID-19 cases in the country and tepid cues from global markets weighed on investor sentiment.
After gyrating over 800 points during the day, the 30-share index settled 81.48 points or 0.26 per cent lower at 31,561.22. Similarly, NSE Nifty fell 12.30 points, or 0.13 per cent, to 9,239.20.
“Indian market opened on a positive note following global cues as trade-war fears receded and more countries announced plans to ease their lockdown restrictions amid hopes of global economies reopening, said Narendra Solanki, Head- Equity Research (Fundamental), Anand Rathi.
The traders also took note of Prime Minister Modi’s meeting with chief ministers of all states which is expected to discuss the plan for exit from the ongoing nationwide lockdown to prevent the spread of coronavirus.
However, the market couldn’t hold the strength during the day as selling pressure was witnessed in heavy index weighing sectors like financial and bank stocks, erasing majority of gains in afternoon session as COVID-19 related one time provision were seen undercutting the earnings on the financial companies, he added."
China April new bank loans fall less than expected, more easing on cards
Monetary easing by Chinese authorities has helped boost money supply in the economy.
Reuters reports: "New bank lending in China fell less than expected in April from the previous month while growth of broad money supply quickened, as the central bank ramped up policy support for the coronavirus-ravaged economy.
Further monetary easing steps are also expected as the central bank has pledged to keep liquidity ample and lower borrowing costs, although Beijing is likely to rely on fiscal stimulus to revive growth. Chinese banks extended 1.7 trillion yuan ($240.05 billion) in new local-currency loans in April, down from 2.85 trillion yuan in March but higher than the 1.02 trillion yuan a year earlier, according to data released by the People's Bank of China on Monday.
Analysts polled by Reuters had predicted new yuan loans would fall to 1.40 trillion yuan in April.
Household loans, mostly mortgages, fell to 666.9 billion yuan in April from 989.1 billion yuan in March, while corporate loans fell to 956.3 billion yuan from 2.05 trillion yuan.
The PBOC has rolled out a raft of easing steps since early February, including cuts in reserve requirements and lending rates and targeted lending support for virus-hit firms.
The first-quarter monetary policy implementation report from the People's Bank of China (PBOC) published on Sunday dropped a vow to refrain from “flood-like” stimulus, suggesting authorities were keen to jump start an economy grappling with its biggest slump in decades."
Petrol, diesel prices may rise again after daily price revision restarts
Here's a recap of factors likely to affect the retail price of domestic fuels once economic activity kickstarts.
IANS reports: "Amid COVID-19 disruption fuel consumers could further face the heat from rising fuel prices with public sector oil marketing companies (OMCs) bracing up to restart daily price revision of the retail price of petrol and diesel later this month.
Sources in OMCs said the daily price revision of auto fuels may start again once the lockdown is lifted or more relaxations are announced by the government later in the month. However, no decision has been taken on it now.
If this happens, petrol and diesel prices can start rising again every day as global oil market has also studied gaining more than 50 per cent over last months prices to around $ 30 a barrel now.
“Petrol and diesel prices have not been revised since March 16 (it went up in Delhi on May 5 only after state government raised VAT) and that gave cushion to the government to steeply raise excise duty on the two products without impacting their retail prices. But that cushion is no longer there now and once daily price revision plan starts, auto fuel could see steep rise over the course of few days,” said an official of a public sector OMC asking not to be named.
However, government sources indicated that the retail price of petrol and diesel may not be allowed to increase beyond a point even if the daily price revision restarts. This would mean that the petroleum products could increase marginally every day by 30-50 paisa or even lower till the oil companies are able to eliminate the gap between cost and sales."
Rupee settles 19 paise lower at 75.73 against US dollar
PTI reports: "The rupee slipped 19 paise to close at 75.73 against the US dollar on Monday as strengthening American currency overseas and rising coronavirus cases in the country weighed on investor sentiment.
Forex traders said while positive domestic equities supported the local unit, market participants were concerned about the impact of spiking coronavirus cases on the economy.
The local unit opened at 75.55, then lost further ground and finally settled at 75.73 against the greenback, down 19 paise over its previous close.
It had settled at 75.54 against the US dollar on Friday.
During the day, the local unit saw an intra-day high of 75.55 and a low of 75.77."
Lockdown, weak investor sentiment impact mutual funds’ NFO
Poor market sentiment is making it harder for mutual funds to attract investors, leading to a drop in new fund offerings.
PTI reports: "The number of proposals for new fund offers (NFOs) filed by mutual fund houses with markets regulator Sebi has been dwindling since past few months largely due to the nationwide lockdown and its impact on overall investor sentiment.
Fund houses approached Sebi for as many as 11 NFOs in January, the number fell to six in February and further dropped to just one in March and nil in April. In May so far, the figure stands at two, according to the markets regulator.
Since March, draft documents for only three new schemes have been filed. This comprises one by Nippon India MF in March and two by SBI MF in May and interestingly, all the three are passive funds.
“The slowdown in March/April is largely related to the lockdown and its impact on overall investor sentiment,” said Kaustubh Belapurkar, Director — Manager Research, Morningstar India.
Jimmy Patel, MD and CEO, Quantum Mutual Fund said the industry is grappling with fixed income funds facing redemption pressure last month and the prevailing market conditions are not so encouraging either, which resulted in slowdown in NFO filing.
“In COVID-19 era, there seems to be uncertainty on the survival and continuity of a lot of industries and business models. At this point in time, it is not a liquidity crisis but a crisis of confidence,” Ashika Wealth Advisors Co-Founder and CEO Amit Jain said."
‘Let salons open, 70 lakh livelihoods depend on it’
Representatives of beauty and wellness segment have urged Union Minister (MSME and Transport) Nitin Gadkari to allow opening of salons, spas, barbershops and clinics under strict health and hygiene norms to ensure livelihood for 70 lakh people.
Segment leaders said they were committed to go through stringent safety and hygiene tests instituted by B&WSSC and the qualifying outlets should be eligible for an accreditation.
They, however, ruled out providing home services as it would be difficult to assure the same level of safety for customers.
Pushkaraj Shenai, CEO, Lakme Salon said, “We believe that customers will have a safe service experience in the controlled environment of our salon with stringent hygiene measures and detailed checks in place. Since it is difficult to ensure strict safety standards when travelling from home to home, we will not provide home services.”
Oil prices fall on supply glut, fears of 2nd virus wave
Uncertainty continues to grip the oil market as both supply and demand concerns keep investors on the edge.
Reuters reports: "Oil prices slipped more than 1% on Monday as concern over a persistent glut and economic gloom caused by the coronavirus pandemic cancelled out support from supply cuts at some of the world's top producers.
Brent crude futures were down 51 cents, or 1.7%, at $30.46 a barrel by 0624 GMT, while U.S. West Texas Intermediate crude futures fell 49 cents, or 2.0%, to $24.25 a barrel.
Both benchmarks have notched up gains over the past two weeks as countries have eased business and social lockdowns imposed to cope with the coronavirus and fuel demand has rebounded modestly. Oil production worldwide is also declining.
But possible signs of a second wave of coronavirus infections in northeast China and South Korea worried investors even as more countries started to pivot towards easing pandemic restrictions in moves that could support oil demand.
“That's definitely a cause for concern as the last thing people want is for lockdowns to happen again across multiple cities, but I think authorities should be much more prepared right now to cope with a second wave,” said OCBC economist Howie Lee in Singapore.
“Overall, the risk environment looks quite conducive for further upside,” he said, adding that Brent could stay supported at $30 a barrel.
Global oil demand has plummeted by about 30% as the coronavirus pandemic curtailed movement across the world, building up inventories globally."
Most currencies gain as more countries ease lockdown measures
As more signs of normalcy emerge, traders are now more willing to bet on emerging market currencies.
Reuters reports: "Most emerging Asian currencies firmed on Monday, with the Taiwan dollar leading the pack, as more countries moved towards easing coronavirus-related restrictions even though the threat of a new wave of infections loomed.
South Korea, which was lauded for its quick action on the pandemic, reported 69 cases over the weekend, most linked to an outbreak at a number of Seoul nightclubs and bars which authorities fear could turn into another major cluster of infections. The won, however, shrugged off the news and firmed as much as 0.5% to a four-week high, in tandem with its peers.
“With lockdowns being eased across Europe and Australasia, as well as the U.S., and the rate of people dying falling in many countries, markets will likely ignore the threat of COVID-19 part two, staying with the momentum of the peak-virus trade,” wrote Jeffery Halley, senior market analyst, Asia Pacific at OANDA.
Despite a stronger greenback, regional currencies like the Taiwan dollar advanced 0.3%, while the Philippine peso and the Thai baht gained 0.2% each. Also boosting investor sentiment were the Chinese central bank's lowering of short-term loan interest rates for April and promise on Sunday to unleash measures to support the economy. However, the yuan eased 0.1% against the dollar."
FM meeting with heads of public sector banks deferred
The review meeting of Finance Minister Nirmala Sitharaman with CEOs of public sector banks (PSBs) scheduled for May 11 has been postponed.
According to sources, the meeting has been deferred and the new date will be informed shortly.
The meeting, to be held via video conferencing, was to discuss various issues, including credit off take, as part of efforts to prop up the economy hit by the COVID-19 crisis.
The agenda also included taking stock of interest rate transmission to borrowers by banks and progress on moratorium on loan repayments.
IRCTC shares climb 5% as select passenger train services to resume from May 12
Shares of the railway ticket-booking site hit limit up today after the government's decision to partially resume the operation of passenger trains.
PTI reports: "Shares of Indian Railway Catering And Tourism Corporation (IRCTC) jumped 5 per cent in early trade on Monday after the Indian Railways said it will gradually resume passenger train services from May 12.
The company’s shares gained 5 per cent to Rs 1,302.85 -- its highest trading permissible limit for the day -- on the BSE.
At the National Stock Exchange (NSE), it rose 5 per cent to Rs 1,303.55 -- its upper circuit limit.
Booking for reservation in these trains will start at 4 pm on May 11 and will be available only on the IRCTC website.
The Indian Railways will gradually resume passenger train services from May 12 and will ask passengers to arrive at the station at least an hour before departure, the national transporter said on Sunday."
US high frequency economic data witness historic fall
Rupee slips 16 paise to 75.70 against US dollar in early trade
Weakness in domestic equities and uncertainty regarding the lockdown have weighed on the rupee this morning.
PTI reports: "The rupee slipped 16 paise to 75.70 against the US dollar in opening trade on Monday as rising coronavirus cases in the country weighed on investor sentiment.
Forex traders said rupee was trading in a narrow range as positive opening in domestic equities supported the local unit, but market participants were concerned about the impact of spiking coronavirus cases on the economy.
The local unit opened at 75.55, then lost further ground and fell to 75.70 against the greenback, down 16 paise over its previous close.
It had settled at 75.54 against the US dollar on Friday.
Prime Minister Narendra Modi is meeting chief ministers of states for the fifth time in 51 days on Monday. Any cues of removal or extension of lockdown will be keenly awaited, Reliance Securities said in a note."
India's benchmark bond yield rises sharply after govt hikes borrowing
With lenders increasingly worried about the sustainability of the government's debt load, yields have risen on signs of further borrowing.
Reuters reports: "India's benchmark 10-year bond yield rose sharply on Monday morning following the government's decision to increase market borrowing on the back of the coronavirus outbreak.
The Indian government plans to borrow 12 trillion rupees ($160 billion) in the fiscal year to March 2021, up from the previously budgeted 7.8 trillion rupees, to cushion the blow from the pandemic, it said on Friday.
The benchmark 10-year bond yield rose as much as 27 basis points to 6.24% and was last trading at 6.21% at 0437 GMT.
Traders said yields could rise further in the absence of any immediate support from the central bank in the form of an open market calendar."
US Fed official says worst is yet to come on job front
The humongous economic cost of the global lockdown is only set to get worse, according to an official at the US central bank.
PTI reports: "A US Federal Reserve official said that the worst was yet to come on the employment front after a staggering 20.5 million jobs were slashed in April amid the COVID-19 pandemic.
“I mean the worst is yet to come on the job front, unfortunately. And that it really is going to be, you know, as these states start to reopen and as businesses start to reopen, obviously we need them to reopen safely,” Xinhua news agency quoted Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, as saying on ABC News on Sunday
“We may be in an environment of gradual relaxing and then having to clamp back down again around the country as the virus continues to spread,” he said.
“To solve the economy, we must solve the virus. Let’s never lose sight of that fact.”
“What I’ve learned in the last few months, unfortunately, this is more likely to be a slow, more gradual recovery,” Kashkari said, throwing cold water on White House officials’ optimistic expectation about a very strong second half of 2020 and a roaring 2021.
“When we look around the world, there’s evidence that when countries relax their economic controls, the virus tends to flare back up again. And the longer this goes on, unfortunately, the more gradual the recovery is likely to be,” he said.
The Fed official noted that a “robust economy” would require a breakthrough in vaccines, widespread testing and therapies to give people confidence that it is safe to go back.
“I don’t know when we’re going to have that confidence,” he said.
Kashkari’s remarks came after Treasury Secretary Steven Mnuchin told Fox News earlier on Sunday that the unemployment numbers were probably “going to get worse before they get better”, acknowledging that the current jobless rate may have already hit 25 per cent."
Must you keep off debt mutual funds?
The Franklin Templeton crisis has brought to light many instances of mis-selling and mis-buying in debt mutual funds (MFs), where many folks seem to have signed up for these products without understanding their true nature.
Here are specific situations in which you should avoid investing in debt funds.
Securing the principal
If the top attribute you look for in a debt investment is your principal remaining intact, then debt MFs aren’t for you. Unlike deposits or small savings schemes, debt MFs are market-linked vehicles that pass on not just interest receipts, but also capital gains or losses on the bonds they own, to you.
Some categories of debt funds are highly prone to capital losses. Funds which invest in longer-dated government securities or bonds fall in this category.
Sensex rallies over 500 points; Reliance jumps 3%
The benchmark indices have opened strong this morning on firm global cues.
PTI reports: "Equity benchmark Sensex surged over 500 points in opening session on Monday as strong gains in index-heavyweights Reliance Industries, HDFC, Infosys and positive cues from global markets boosted market sentiment.
After touching a high of 32,182.36, the 30-share index was trading 531.55 points or 1.68 per cent higher at 32,174.25.
Similarly, NSE Nifty surged 148.65 points, or 1.61 per cent, to 9,400.15.
Reliance Industries was the top gainer in the Sensex pack, soaring over 3 per cent, followed by UltraTech Cement, Maruti, Bajaj Auto, IndusInd Bank and ITC.
In the midst of all the coronavirus-driven chaos, Reliance Industries seems to have created its own bull market territory through a V-Shaped recovery by concerted efforts to bring quality investors, reduce its net debt and streamline its balance sheet, said Jimeet Modi, Founder and CEO, Samco Securities."
