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Today's top business news: Stocks recover after sharp sell-off, S&P says India needs to push reforms for recovery, 395 million people pushed into extreme poverty, and more

Updates from the world of economy, markets, and finance

June 12, 2020 09:20 am | Updated 04:21 pm IST

Foreign portfolio investors bought equities worth ₹2,905.04 crore on Thursday

Foreign portfolio investors bought equities worth ₹2,905.04 crore on Thursday

Volatility is back in the global financial markets as stocks tank and investors rush towards safe haven assets amid the coronavirus pandemic.

Join us as we follow the top business news through the day.

4:30 PM

Credit quality matters

4:20 PM

FM says no fee for late filing of GST returns for entities with nil liability

Finance Minister Nirmala Sitharaman on Friday said no late fee will be levied for delayed filing of GST returns by registered entities with nil liability between July 2017 to January 2020.

Briefing reporters after GST Council meeting, she said late fee for non-filing of monthly sales return for others has been reduced to a maximum of ₹ 500 for July 2017 to January 2020 period.

 

4:00 PM

Markets recoup early losses; Sensex jumps 243 points, Nifty tops 9,950

The benchmark indices posted a strong comeback after sharp losses in the morning.

PTI reports: "Equity benchmark Sensex rebounded from a sharp selloff in early trade to finish 243 points higher on Friday, led by strong gains in Reliance Industries and a rebound in European markets.

After plunging 1,190.27 points to hit a low of 32,348.10 in opening trade, the 30-share index settled 242.52 points, or 0.72 per cent, higher at 33,780.89.

Similarly, the NSE Nifty rose 70.90 points, or 0.72 per cent, to end at 9,972.90. It hit an intra-day low of 9,544.35.

M&M was the top gainer in the Sensex pack, rallying around 7 per cent, followed by Bajaj Finance, Hero MotoCorp, Reliance Industries (RIL), Titan and Bajaj Auto.

On the other hand, ONGC, Tech Mahindra, PowerGrid, Infosys and Kotak Bank were among the laggards.

According to analysts, market witnessed a gap-down opening on negative cues from Wall Street and Asian peers, foreign fund outflows and concerns over rising coronavirus cases.

However, recovery in RIL and strong opening of European stocks lifted domestic investor sentiment."

3:30 PM

India’s growth potential at 6.5-7%, needs to push reforms for recovery: S&P

A global rating agency has once again emphasized the need for structural reforms for India to maintain its credit profile.

PTI reports: "India’s economic growth potential in medium and long-term is 6.5-7 per cent but reforms are critical for the country to get back to recovery after deep shock this year, S&P Global said on Friday.

Days after keeping India’s rating at lowest investment grade for 13th year in a row, the rating agency in a webinar said despite the contraction in GDP this year, the country continues to be an outperformer among the peer groups.

“Economy around the world are facing a very difficult situation,” Andrew Wood, S&P Director & Lead Analyst Sovereign & IPF Ratings APAC, said. “India, despite a contraction this year, continues to be an outperformer among the peer group.”

The rating agency has forecast a 5 per cent contraction in the fiscal year starting April, and the growth to recover to 8.5 per cent next fiscal.

But, this will not stop the rating agency to downgrade India if COVID-19 pandemic had done more structural damage to the economy.

“We will consider a downgrade if we see that the pandemic has done more structural damage to India. India is not alone getting affected by the crisis. We are in unprecedented times and pace and strength of the recovery will be paramount (in deciding future rating action),” he said.

“India’s economic potential and trend growth rate in the medium and long term is 6.5-7 per cent. This high growth rate would be essential for credit profile to remain sustainable,” Wood said. “Reforms are critical for India to get back to recovery and despite deep shock this year India remains solid outperformer compared to peers.”

The recovery in the labour market will be the key, and the recovery in informal sector will take time, he noted.

“Weak fiscal position will be the key constraint in reacting to the crisis,” Wood said.

Stating that although India’s weak fiscal position will increase on account of the pandemic, he said the rating agency expects general government deficit to be 11 per cent this year, and decline to 10 per cent next year.

The government, he said, has been conservative in its fiscal stimulus measure."

3:00 PM

Mahindra reports net loss of Rs 3,255 crore in Q4

A glimpse into the impact of the lockdown on the performance of a member of India Inc.

PTI reports: "Mahindra & Mahindra (M&M) on Friday reported a consolidated net loss of Rs 3,255.02 crore for the quarter ended on March 31, 2020.

The company along with Mahindra Vehicle Manufacturers Ltd (MVML) had posted a net profit of Rs 969.25 crore for the January-March period of 2018-19.

Revenue from operations declined to Rs 9,004.72 crore during the fourth quarter compared with Rs 13,807.88 crore in the same period of corresponding fiscal, M&M said in a regulatory filing.

The company said it sold 86,351 vehicles in the fourth quarter, down 47 per cent from 1,63,937 units sales in the fourth quarter of 2018-19.

For 2019-20 fiscal, the company reported a net profit of Rs 739.71 crore against Rs 5,401.18 crore in 2018-19.

“The results were affected due to the lower industry volumes in both automotive and tractor segments, transition to BS VI and the abrupt lockdown due to the COVID situation,” M&M said.

On the outlook, the company said that with easing of restrictions there will be a ramp up in production, supply chain and distribution from June onwards, which will aid economic activity."

2:45 PM

Rupee settles 5 paise lower at 75.84 against US dollar

In line with stocks, the rupee managed to stage a recovery since opening the day with sharp losses.

PTI reports: "The rupee settled 5 paise lower at 75.84 (provisional) against the US dollar on Friday as volatile domestic equities and sustained foreign fund outflows weighed on investor sentiment.

Forex traders said risk appetite has waned and there is growing concern about a resurgence of COVID-19 infections.

The rupee opened weak at 76.10 at the interbank forex market, but recouped most of the losses and finally ended the day at 75.84 against the US dollar, down 5 paise over its last close.

It had settled at 75.79 against the US dollar on Thursday.

During the four-hour trading session, the local unit witnessed an intra-day high of 75.84 and a low of 76.10.

“The stock market was taking the reopening extremely well, but now there’s a possibility of a second wave of infections. This has soured market sentiment. Also US Fed provided a weaker assessment of the US economy on Thursday,” said Rahul Gupta, Head of Research- Currency, Emkay Global Financial Services.

Gupta further said that “the uncertainty over coronavirus won’t completely fade away unless there’s a vaccine. So until then the appreciation in rupee will be limited, and we expect it to remain volatile“."

2:00 PM

U.K. economy shrinks 20.4% during April lockdown

Official figures show that the British economy shrank by a colossal 20.4% in April, the first full month that the country was in its coronavirus lockdown .

The Office for National Statistics said Friday that all areas of the economy were hit, in particular pubs, education, health and car sales.

Jonathan Athow, deputy national statistician for economic statistics, said April’s fall is the biggest the U.K. has ever seen, and almost 10 times larger than the steepest pre- COVID-19 fall. April’s decline follows a 5.8% contraction in March.

 

1:30 PM

Netflix in talks to source Indian content from Reliance affiliate Viacom18

Reliance continues to be in the news, this time with its media wing entering into a content-sharing partnership with Netflix.

Reuters reports: "U.S. video streaming company Netflix is in talks with Viacom18, part of the Indian conglomerate Reliance Industries' media unit Network18, about a multi-year partnership to source content, three sources told Reuters, in a move that would expand a relationship between the two sides.

Under the partnership, Network18 affiliates - which include its joint venture with ViacomCBS, Viacom18 - would create shows for Netflix to help the U.S. firm expand offerings in India, where it competes against the video streaming services of Amazon.com Inc and Walt Disney Co.

A Netflix spokesman in India denied the company was in talks with Network18 or Viacom18, but did not elaborate. A spokeswoman for Viacom18 declined to comment on whether any talks were under way.

Shares in Network18 Media & Investments surged 5% after the Reuters article.

The financial terms of any potential partnership were not immediately clear and negotiations are still in the early stages, the sources said, who spoke on condition of anonymity because the talks are private.

While the new shows will be used only by Netflix, that does not mean Network18 and its affiliates will stop creating shows for other platforms, said two of the three sources.

Viacom18 licences content to several platforms, including Amazon. In 2019, its digital unit Tipping Point partnered with Netflix for three Hindi-language shows, but two of the sources said the current discussions were about a much bigger tie-up over several years.

“This is a bigger version of the 2019 deal in essence,” said the first source.

The second source described the ongoing discussions as one of Netflix's “biggest moves to create local content in India.”"

1:00 PM

Extreme poverty could rise to over one billion people globally due to COVID-19 crisis

An unintended consequence of the lockdowns imposed worldwide to tackle the coronavirus pandemic may be more people pushed into extreme poverty.

PTI reports: "Global poverty could rise to over one billion people due to the COVID-19 pandemic and more than half of the 395 million additional extreme poor would be located in South Asia, which would be the hardest-hit region in the world, according to a new report.

Researchers from King’s College London and Australian National University published the new paper with the United Nations University World Institute for Development Economics Research (UNU-WIDER) which said the COVID-19 pandemic could drive global poverty back over one billion people as the world’s poorest face up to USD 500 million per day in lost income.

The paper, ‘Precarity and the Pandemic: COVID-19 and Poverty Incidence, Intensity and Severity in Developing Countries,’ finds that extreme poverty could rise to over one billion people globally as a result of the COVID-19 crisis.

The cost of the crisis in lost income could reach USD 500 million per day for the world’s poorest people, and the intensity and severity of poverty are likely to be exacerbated dramatically.

The report also noted that poverty is likely to increase dramatically in middle-income developing countries and there could be a significant change in the distribution of global poverty. The location of global poverty could shift back towards developing countries in South Asia and East Asia.

The report said that based on the USD 1.90 a day poverty line and a 20 per cent contraction, more than half of the 395 million additional extreme poor would be located in South Asia, which would become the hardest hit region in the word mainly driven by the weight of populous India followed by sub-Saharan Africa which would comprise 30 per cent, or 119 million, of the additional poor."

 

12:40 PM

Microsoft joins Amazon in banning face-recognition technology sales to police

Microsoft Corp said on Thursday it would await federal regulation before selling facial recognition technology to police, making it the latest big firm to back away from the business following protests against law enforcement brutality and bias.

The announcement came shortly after rival Amazon.com Inc declared it was pausing police use of its “Rekognition" service for a year and International Business Machines Corp said it no longer offers the software generally.

In a statement, Microsoft said it has worked on enacting principles and legislation for the software's use.

“We do not sell our facial recognition technology to U.S. police departments today, and until there is a strong national law grounded in human rights, we will not sell this technology to police,” the company said. The Washington Post first reported the news.

 

12:20 PM

HDFC cuts lending rate by 20 basis points

The RBI's aggressive rate cutting exercise may be helping commercial banks lower their lending rates.

PTI reports: "Leading mortgage lender HDFC on Friday slashed its lending rate by 20 basis points amid a gradual decline in cost of borrowing across the system.

The move is in line with rate cuts by lenders like State Bank of India.

“HDFC reduces its retail prime lending rate (RPLR) on housing loans, on which its adjustable rate home loans (ARHL) are benchmarked, by 20 basis points (bps), with effect from June 12, 2020,” the company said in a statement.

The change will benefit all existing HDFC retail home loan and non-home loan customers, it said.

New rates will now range between 7.65-7.95 per cent for existing salaried home loan customers.

Rates across the banking system have headed south in the last few months, as the Reserve Bank of India (RBI) and the government work in tandem to propel the slowing economy.

The RBI last month cut the policy rate by 40 basis points to a historical low of 4 per cent to spur growth amid the COVID-19 crisis."

12:00 PM

US Fed policy pushes investors to reach for yield

 

11:40 AM

No action against employers who failed to pay full wages during lockdown

Highlights from what the Supreme Court had to say today:

* No coercive action be taken against private firms, which have failed to pay full wages during lockdown period

* Industries and labourers need each other and efforts should be made to resolve dispute over wage payments, says SC

* SC asks states to facilitate settlement between firms and employees over wage payment, submit reports before labour commissioners.

*  SC asks Centre to file affidavit within 4 weeks on legality of March 29 circular that mandated payment of full wages during lockdown

11:20 AM

RBI bars People’s Co-operative Bank from granting fresh loans, accepting deposits for six months

The Reserve Bank of India (RBI) on Thursday said it has barred Kanpur-based People’s Co-operative Bank from granting fresh loans and accepting deposits for six months, due to its weak financial position.

The RBI also said no withdrawal of amount of a depositor will be allowed from the co-operative bank.

“As from the close of business on June 10, 2020, the bank shall not, without prior approval of RBI in writing grant or renew any loans and advances, make any investment, incur any liability including borrowal of funds and acceptance of fresh deposits, disburse or agree to disburse any payment whether in discharge of its liabilities and obligations or otherwise,” the RBI said in a release.

 

10:50 AM

Rupee tanks 31 paise, slips below 76 per dollar level in early trade

With domestic equities getting hammered this morning as foreign investors sell, the rupee has fallen sharply against the US dollar.

PTI reports: "The rupee depreciated 31 paise to 76.10 against the US dollar in opening trade on Friday as strengthening US dollar, weak domestic equities and sustained foreign fund outflows weighed on investor sentiment.

Forex traders said risk appetite has waned and there is growing concern about a resurgence of COVID-19 infections.

The rupee opened weak at 76.10 at the interbank forex market, down 31 paise over its last close.

It had settled at 75.79 against the US dollar on Thursday.

Traders said, market participants are keenly awaiting Consumer Price Index (CPI) and Index of Industrial Production (IIP) data scheduled to be released later in the day for further cues.

Meanwhile, the 30-share BSE benchmark Sensex was trading 795.59 points lower at 32,742.78 and broader NSE Nifty fell 221.80 points to 9,680.20.

Foreign institutional investors were net sellers in the capital market as they sold shares worth Rs 805.14 crore on Thursday, according to provisional exchange data."

 

10:30 AM

Stock limit on perishable food items only when retail price rises by 100% over year-ago rate: Paswan

More clarity emerging on the recent amendments by the Centre to the Essential Commodities Act.

PTI reports: "Food and Consumer Affairs Minister Ram Vilas Paswan said the government will impose the stock limit on perishable (horticulture) food items only if retail prices surge by 100 per cent, compared with the year-ago rate or an average price of the last five years.

With the amendments in the Essential Commodities Act, 1955, he said the stock limit on non-perishable food items will be imposed if prices rise by 50 per cent.

The Union Cabinet on June 3 approved amendments to the six-and-a-half-decade old Essential Commodities Act to deregulate food items, including cereals, pulses and onion. An ordinance was issued on June 5 to make these amendments effective.

“Amended EC Act will make stock limits orders more transparent & accountable & it will be imposed only on increase of retail price by 100% (perishable) & 50% (non-perishable) foodstuffs compared with price immediately preceding 12 months or average retail price of last 5 years,” Paswan tweeted.

With the amendment to the EC Act, commodities like cereals, pulses, oilseeds, edible oils, onion and potatoes will be removed from the list of essential commodities, the government had said.

The amendment in the EC Act provides for the regulation of food items only under exceptional circumstances like national calamities, famine with a surge in prices.

Processors and value chain participants will also be exempted from the stock limit, apart from traders and wholesalers."

10:15 AM

Petrol price up by 57 paise/litre, diesel 59 paise

Petrol price on Friday was hiked by 57 paise per litre and diesel by 59 paise a litre as oil companies adjusted retail rates — the sixth straight day of increase in rates since oil firms ended an 82-day hiatus of rate revision.

Petrol price in Delhi was hiked to ₹74.57 per litre from ₹74, while diesel rates were increased to ₹72.81 a litre from ₹ 72.22, according to a price notification of state oil marketing companies.

Rates have been increased across the country and vary in each state depending on the incidence of local sales tax or value added tax.

 

10:00 AM

Escalating new COVID-19 cases pose further downside risk to economy: IHS

More gloomy news this morning as the rapid rise in coronavirus cases has led to worries of a protracted lockdown.

PTI reports: "With the protracted lockdown pushing the Indian economy into deep recession in the current fiscal, the escalating new COVID-19 cases after easing of restrictions poses further downside risks to the economic outlook, IHS Markit said on Friday.

A national lockdown began on March 25 and has continued in various phases into the month of June, albeit with significant easing of restrictions since early May.

“This protracted lockdown has resulted in the severe disruption of industrial production and consumer spending, with GDP growth forecast to contract sharply during Q2 2020 (April-June), pushing Indian GDP growth for the 2020-21 financial year into a deep recession,” it said in a commentary on assessing the impact of COVID-19 on the Asia Pacific region.

April Purchasing Managers’ Index (PMI) data, reflecting the full impact of the lockdown measures, indicated a collapse of business activity, with the Composite Output Index plummeting to 7.2 in the month - a record low in the 14.5-year survey history and one that was extreme overall.

“While both manufacturing and service sectors were severely battered by the COVID-19 responses, the latter posted sharper reduction of business activity,” it said.

IHS said, unlike many other countries which have eased lockdown measures, India has faced continued escalation in the number of daily new COVID-19 cases.

“Consequently, the future path of lockdown measures remains highly uncertain, particularly if new daily cases continue to escalate,” it said."

9:50 AM

Sensex plummets over 1,100 points in early trade on global sell-off

The sell-off in global equities hasn't spared Indian equities.

PTI reports: "Witnessing a gap-down opening, equity benchmark Sensex plummeted 1,100 points in early trade on Friday tracking massive global sell-off fuelled by concerns over economic recovery and a second coronavirus wave in the US.

After starting at 32,436.69, the 30-share index pared some losses to trade 813.26 points, or 2.42 per cent, lower at 32,725.11.

Similarly, NSE Nifty plunged 228.15 points, or 2.30 per cent, to 9,673.85.

IndusInd Bank was the top laggard in the Sensex pack, tumbling around 6 per cent, followed by ONGC, Kotak Bank, Axis Bank, NTPC, Bajaj Finance and HDFC.

On the other hand, Sun Pharma was the sole gainer.

In the previous session, the BSE barometer tumbled 708.68 points, or 2.07 per cent, to close at 33,538.37, while the broader Nifty tanked 214.15 points, or 2.12 per cent, to 9,902.

On a net basis, foreign institutional investors sold equities worth Rs 805.14 crore in the capital market on Thursday, provisional exchange data showed.

According to analysts, negative cues from global markets, foreign fund outflow and rising coronavirus cases continued to hit domestic investor sentiment.

Stock exchanges on Wall Street sank up to 6 per cent in overnight trade as coronavirus cases in the US increased again, deflating recent optimism for a quick economic recovery."

 

9:40 AM

Wall Street’s ‘fear gauge’ jumps on fears of coronavirus resurgence

The Cboe Volatility Index , known as Wall Street's “fear gauge,” jumped to its highest level in more than a month on June 11 as concerns over a resurgence of the COVID-19 pandemic felled U.S. stocks.

The VIX rose to 40.79, its highest closing level since April 23. It registered its biggest daily point gain since March 16, in the midst of the plunge that signaled the end of the nearly 11-year bull run in U.S. stocks.

The S&P 500 ended 5.9% lower on June 11.

Some investors said they believed such a pullback was long overdue given expectations for a slow recovery, which Federal Reserve Chair Jerome Powell reinforced in remarks on June 10.

 

9:30 AM

Stocks tumble, safe-haven assets rally on downbeat Fed outlook

The rally in global stocks over the last couple of months has been met by a sharp crash.

Reuters reports: "Global equity markets fell sharply on Thursday in their worst sell-off since markets crashed in mid-March, while safe-haven assets rose after the Federal Reserve's sobering outlook cast doubt on hopes for a V-shaped recovery from the coronavirus pandemic.

All three major U.S. stock indexes fell by more than 5%, Asia's 10-day winning streak ended and major European bourses declined roughly 4%. The decline ended a recent rally that had recouped much of the market's deep losses and pushed the Nasdaq to record highs earlier this week.

U.S. Treasury and euro zone government bonds rallied after the Fed signaled it plans years of extraordinary support to counter the economic fallout from a still spreading pandemic.

U.S. gold futures settled more than 1% higher, and the dollar, yen and Swiss franc all benefited from safe-haven flows as Wall Street slumped.

Matt Miskin, co-chief investment strategist at John Hancock Investments, said investors, particularly those who had bought into risky assets, were anticipating an “optimistic and speedy economic recovery.”

“The Fed gave the markets a reality check yesterday forecasting economic growth to not return to pre-COVID-19 levels until the end of 2021,” Miskin said.

The Fed predicted Wednesday that the U.S. economy would shrink 6.5% in 2020 and unemployment would still be at 9.3% at year's end.

While the number of Americans seeking jobless benefits fell last week, millions laid off due to COVID-19 continue to receive unemployment checks, suggesting the U.S. labor market could take years to heal even as hiring resumes.

MSCI's all-country world index, which tracks shares in 49 nations, fell 4.61% to 514.89, its biggest slide since March 18. Europe's broad FTSEurofirst 300 index closed down 4.11% at 1,378.16."

 

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