Today's top business news: Goldman Sachs projects 45% drop in India's Q1 GDP, stocks slump over 3% as stimulus fails to impress, RBI may extend loan moratorium, and more

Union Finance Minister Nirmala Sitharaman addresses a press conference at the National Media Centre in New Delhi on May 17, 2020.

Union Finance Minister Nirmala Sitharaman addresses a press conference at the National Media Centre in New Delhi on May 17, 2020.   | Photo Credit: PTI

Updates from the world of economy, markets, and finance

The performance of the benchmark stock indices this morning suggests investors aren't very impressed by the Centre's economic stimulus package.

US Federal Reserve Chairman Jerome Powell has warned that the economic recovery in the US after the coronavirus pandemic will turn out to be a long one.

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

4:30 PM

India's fuel demand recovery gathers pace as lockdown eases

The gradual easing of lockdown restrictions is helping revive fuel demand.

Reuters reports: "A recovery in fuel demand in India gathered momentum in the first half of May versus April as curbs on transport and industrial activity were partly lifted in areas that have contained the spread of coronavirus, data from industry sources showed.

Demand for refined fuel is expected to get another boost from Monday as India has lifted more restrictions under its extended lockdown that runs until May 31.

Fuel demand growth in India, the world's third-biggest oil importer and consumer, plunged to historic lows in April.

State-refiners' petrol sales in the first half of May declined by 47.5% to 570,000 tonnes from a year ago but were up from 334,000 tonnes sold in first half of April. In April, petrol sales declined 61%.

Indian refiners, which had cut crude processing because of a fall in fuel demand, are now gradually raising output.

India's overall refined fuel demand includes consumption of fuel oil, bitumen and liquefied petroleum gas (LPG)."

4:00 PM

Sensex crashes 1,069 points; bank, auto stocks among worst hit

The benchmark indices continued to fall through the day, ending the day down well over 3%

PTI reports: "Benchmark Sensex crashed 1,069 points on Monday tracking massive selloffs in banking and auto stocks as government’s fiscal stimulus package failed to revive confidence in domestic investors.

The 30-share BSE index ended 1,068.75 points or 3.44 per cent lower at 30,028.98, while the broader NSE Nifty plunged 313.60 points or 3.43 per cent to 8,823.25.

IndusInd Bank was the top laggard in the Sensex pack, cracking around 10 per cent, followed by HDFC, Maruti Suzuki, Axis Bank and UltraTech Cement.

On the other hand, TCS, Infosys, ITC and HCL Tech closed with gains.

Traders and investors remained on edge as the Home Ministry extended the lockdown for another two weeks till May 31 to contain the spread of coronavirus, said Narendra Solanki, Head- Equity Research (Fundamental), Anand Rathi.

The relief package announcements appeared falling short of meeting market expectations on any demand side reforms, triggering an intense selloff in the domestic market, he noted."

3:40 PM

RBI may extend moratorium on repayment of loans for three more months

With economic activity remaining sluggish due to the lockdown, it looks like the RBI may look into extending the loan repayment moratorium.

PTI reports: "With the government extending the nationwide lockdown up to May 31, the Reserve Bank of India (RBI) is likely to extend the moratorium on repayment of loans for three more months, according to an SBI research report.

On Sunday, the National Disaster Management Authority (NDMA), the nodal department, announced lockdown 4.0 till May 31 to check the spread of the novel coronavirus.

The lockdown was first announced by Prime Minister Narendra Modi on March 24 for 21 days in a bid to combat the COVID-19 pandemic. It was first extended till May 3 and again till May 17.

In March, RBI had allowed a three-month moratorium on payment of all term loans due between March 1, 2020 and May 31, 2020.

“With the lockdown now extended up to May 31, we expect RBI to extend the moratorium by three months more,” SBI’s research report- Ecowrap said.

The report said the moratorium for three more months will imply that companies need not pay till August 31, 2020, and this means that there is almost minimal possibility of companies being able to service their interest liabilities then in September.

Failing to repay the interest liabilities will mean the account might be classified as non-performing loans as per the RBI norms.

“Thus, the RBI needs to give operational flexibility to banks for a comprehensive restructuring of the existing loans and also a reclassification of 90 day norm,” the report said."

3:20 PM

Rupee settles 33 paise lower at 75.91 against US dollar

Despite some easing of restrictions, the lockdown continued to weigh on domestic stocks and the rupee.

PTI reports: "The rupee plummeted 33 paise to close at 75.91 (provisional) against the US dollar on Monday, tracking weak domestic equities and foreign fund outflows.

Forex traders said rising crude oil prices and concerns about the effectiveness of the fiscal stimulus package also weighed on investor sentiment.

Besides, market participants said the extension of the nationwide lockdown could weigh on the economic outlook of the country.

The local unit opened sharply lower at 75.85, then lost further ground to finally settle at 75.91 against the US dollar, down 33 paise over its previous close.

It had settled at 75.58 against the US dollar on Friday.

The government on Sunday extended the coronavirus lockdown for two more weeks with the fourth phase providing more relaxations outside the containment zones.

Though some restrictions were eased, “but the extension could further worsen the economic outlook for the current fiscal year, which could weigh on the currency further,” Reliance Securities said in a research note."

2:45 PM

Now, Swiggy to lay off 1,100 employees

Online food delivery platform Swiggy on Monday said it would lay off 1,100 employees over the next few days due to the impact of COVID-19 on business.

Only last week, its rival, Zomato, announced the reduction of its workforce by 13%, while implementing a temporary pay cut of up to 50% for the remaining employees.

Swiggy will also “scale down or shut down” adjacent businesses that are either going to be highly volatile or will not be highly relevant for the next 18 months. The biggest impact here is on the cloud kitchens business, with many unknowns about volumes through the year.

Read more
 

2:10 PM

India to see annualised contraction of 45% in April to June

The nation-wide lockdown imposed to stop the spread of the coronavirus pandemic may prove to be too expensive for the economy.

Reuters reports: "Goldman Sachs expects India's economy to shrink 45% on an annualised basis in the quarter to the end of June, and by 5% in the whole of the 2021 fiscal year running till next March, showing the economy contracting far more than previously expected.

“The deeper trough in our second quarter forecasts reflects the extremely poor economic data we have received so far for March and April, and the continued lockdown measures, which are among the most stringent across the world,” the investment bank said in a note dated May 17.

Goldman had earlier projected the country's GDP to contract 20% in the second quarter and 0.4% for the financial year ended 2021.

The investment bank said it expects an annualised rebound of 20% in the third quarter, but a gradual recovery of 14% and 6.5% respectively for the fourth quarter and first quarter of the next financial year.

Restarting the country's economy has continued to pose challenges, Goldman said, especially in containment “red zones”, which account for about 45% of GDP.

Supply chains are improving, but are still operating at low levels, along with missing logistics and weak end-demand, according to the note."

 

1:50 PM

Coronavirus package | Traders unhappy with stimulus plan

Expressing “deep disappointment” with the government’s ₹20 lakh crore economic package, the Confederation of All India Traders (CAIT) on May 17 said it would now seek the immediate intervention of Prime Minister Narendra Modi for support.

The organisation, which represents about seven crore traders across the country, said they had been completely sidelined by the government while preparing the much-awaited economic package.

The CAIT, which has been a fairly vocal supporter of the BJP-government, expressed its “deep disappointment” and “resentment” against the government for the “step-motherly treatment”.

Read more

1:40 PM

Stocks lose close to 3%

Ashish Rukhaiyar reports from Mumbai:

Indian benchmarks lost heavy ground on Monday with the benchmarks shedding over 3% during intra-day trades as investors seemed largely disappointed by the stimulus package by the government over the weekend and the lockdown getting extended till the end of the month.

At 1:40pm, the 30-share Sensex, which lost 1,071 points to touch a low of 30,027, was trading at 30,202.85, down 894.88 points or 2.88%.

As many as 26 constituents in the Sensex pack were in the red with stocks like HDFC, Bajaj Finance, Bajaj Auto, Maruti Suzuki India, Axis Bank, ICICI Bank and IndusInd Bank all shedding over 6% each.

The overall market breadth was extremely weak as more than 1,600 stocks lost ground as against only around 500 gainers.  The broader Nifty was at 8873.25, down 263.60 points or 2.89%.

The India VIX index surged over 8% after laying low for some days.

1:30 PM

Gold jumps to highest since Oct 2012 on dismal U.S. data

Increasing economic uncertainty is adding to the attraction of the traditional safe haven asset.

Reuters reports: "Gold rose 1% on Monday to its highest in more than seven years as dismal U.S. data underscored how badly the COVID-19 pandemic has damaged the world's top economy, while palladium soared over 9% on better-than-expected demand outlook.

Spot gold was up 1% at $1,759.13 per ounce by 0708 GMT, after rising to its highest since Oct. 12, 2012 at $1,764.46 earlier. U.S. gold futures gained 0.9% to $1,772.70.

“Markets are pricing in that the (economic) recovery is going to be a little slower than previously expected, and that's probably going to require an environment of lower rates,” said IG Markets analyst Kyle Rodda, adding that Friday's “really poor” U.S. economic data was the big catalyst.

Data out on Friday showed U.S. retail sales and industrial production both plunged in April, putting the economy on track for its deepest contraction since the Great Depression. Federal Reserve Chairman Jerome Powell said a U.S. economic recovery may stretch deep into next year and a full comeback may depend on a coronavirus vaccine."

 

12:50 PM

Oppo suspends Noida factory operations, to screen 3,000 employees for coronavirus

Chinese handset maker Oppo on Sunday suspended operations at its Noida factory till the time it completes coronavirus screening of all 3,000 employees at the plant.

The company had resumed the operations on Friday after it got permission from the Uttar Pradesh government for it with around 30% of employees. The company has send sample of all employees who have to join work for coronavirus testing.

“As an organisation that places the safety of all employees and citizens at the forefront, we have suspended all operations at our manufacturing facility in Greater Noida and initiated the COVID 19 testing for over 3,000 employees, for which results are awaited,” Oppo said in a late night statement on Sunday.

Read more
 

12:30 PM

SoftBank posts record $13 billion operating loss as tech bets slide

Many of SoftBank's tech investments have gone sour this year, leading to record losses.

Reuters reports: "SoftBank Group Corp on Monday reported a record 1.4 trillion yen ($13 billion) operating loss in the April-March financial year as the value of its tech bets via the $100 billion Vision Fund crumbled.

The tech and telecoms conglomerate's disastrous result, caused by a 1.9 trillion yen loss at the Saudi Arabian-backed fund, compared with a group operating profit of 2 trillion yen in the same period a year earlier.

The fund's portfolio is underwater, with a $75 billion investment in 88 startups worth $69.6 billion at the end of March. It booked losses of almost $10 billion on office space sharing firm WeWork and ride hailing firm Uber Technologies Inc alone.

Chief Executive Masayoshi Son's strategy of fronting huge sums of cash and pushing for breakneck growth had already delivered two consecutive quarters of losses at the fund before being upended by the coronavirus outbreak.

SoftBank booked a $7.5 billion loss on other tech investments, which it attributed primarily to the economic shock caused by the virus. The outbreak has exacerbated underlying problems at many of its bets on unproven startups.

The heavily indebted SoftBank has leveraged its bets to supply further funds to its investing juggernaut - a strategy that is coming under growing strain as valuations tumble."

 

11:50 AM

Defence stocks in limelight; zoom upto 10%

The changes to the Centre's defence sector policy has enthused investors despite the sharp drop in the benchmark indices.

PTI reports: "Shares of companies related to the defence sector zoomed upto 10 per cent in early trade on Monday after the government said it will relax foreign direct investment norms in defence manufacturing by allowing 74 per cent FDI under the automatic route.

Bucking the overall weak broader market trend, shares of Hindustan Aeronautics jumped 10 per cent, Bharat Electronics rose 5.53 per cent, BEML advanced 5.31 per cent, Astra Microwave Products surged 4.93 per cent and Bharat Dynamics was trading up 4.71 per cent on the BSE.

The government on Saturday said it will relax foreign direct investment norms in defence manufacturing by allowing 74 per cent FDI under the automatic route with a view to attracting overseas players in the sector.

As per the current FDI policy, 100 per cent overseas investments are permitted in the defence industry -- 49 per cent under the automatic route, while beyond that government approval is required.

Finance Minister Nirmala Sitharaman said the FDI limit for the sector under automatic route will be raised from 49 per cent to 74 per cent."

11:20 AM

Shareholders to pay 25% for subscribing to RIL’s ₹53,125-cr right issue now, balance next year

Reliance Industries shareholders will have to pay only 25% for subscribing to the company’s mega ₹53,125-crore rights issue, and the balance will have to be paid in two installments in May and November next year, the company said.

Oil-to-telecom conglomerate’s rights issue will open for subscription of shareholders on May 20 and will close on June 3. One share will be offered for every 15 shares held at ₹1,257.

Of the ₹1,257 per share price, only 25% is to be paid at the time of subscription. A similar amount will be due for payment in May 2021 and the balance 50% has to be paid in November 2021, the company said in a regulatory filing.

Read more
 

11:00 AM

Rupee slips 31 paise to 75.89 against US dollar in early trade

The negative sentiment in domestic equities has weighed on the rupee this morning.

PTI reports: "The rupee depreciated 31 paise to 75.89 against the US dollar in opening trade on Monday tracking weak opening of domestic equities and sustained foreign fund outflows.

Forex traders said market participants are concerned about the effectiveness of the fiscal stimulus package and the impact of extended nationwide lockdown amid a significant rise in COVID-19 cases on the domestic economy.

The local unit opened at 75.85, then lost further ground and fell to 75.89 against the US dollar, down 31 paise over its previous close.

It had settled at 75.58 against the US dollar on Friday.

The government on Sunday extended the coronavirus lockdown for two more weeks with the fourth phase providing more relaxations outside the containment zones.

Though some restrictions were eased, “but the extension could further worsen the economic outlook for the current fiscal year, which could weigh on the currency further,” Reliance Securities said in a research note.

Meanwhile, domestic bourses were trading on a negative note with the benchmark Sensex plunging 712.19 points at 30,385.54 and the broader Nifty down 204.85 points to 8,932.00."

 

10:45 AM

Alibaba's Jack Ma resigns from SoftBank board

SoftBank Group Corp said on Monday that Alibaba co-founder Jack Ma will resign from its board, in the latest departure by a high-profile ally of CEO Masayoshi Son.

SoftBank said it will propose three new appointments to the board, including group CFO Yoshimoto Goto, at its annual general meeting on June 25.

The departure of Ma, who retired as Alibaba's executive chairman in September, comes as he pulls back from formal business roles to focus on philanthropy.

Read more
 

10:30 AM

E-commerce companies may resume full services from Monday

The wait may be over for e-commerce companies whose operations have been hit hard by the lockdown.

PTI reports: "E-commerce companies are likely to resume full services across most parts of the country from Monday under the fourth phase of the lockdown that allows greater relaxations, although industry watchers say they are waiting for states’ decision on the matter.

According to the latest Union Home Ministry’s order, “all other activities will be permitted, except those which are specifically prohibited” under the fourth phase of the lockdown that ends on May 31.

However, in containment zones, only essential activities will be allowed. States and union territories - based on their assessment of the situation - may prohibit certain other activities in various zones or impose such restrictions as deemed necessary, the order added.

Emails sent to Flipkart and Amazon India did not elicit a response.

Srinivas Mothey, Senior Vice President of Paytm Mall, said the move will help the company deliver to most of the metro cities which were in the red zones."

10:00 AM

Sensex plunges over 800 points in early trade; bank stocks crack

The final tranches of the economic stimulus package announced over the weekend did not impress investors.

PTI reports: "Equity benchmark Sensex plunged over 800 points in opening session on Monday dragged by losses in banking stocks as the government’s fiscal stimulus package failed to revive confidence in domestic investors.

After hitting a low of 30,265.67, the 30-share index was trading 731.91 points or 2.35 per cent lower at 30,365.82.

Similarly, NSE Nifty slumped 226.90 points, or 2.48 per cent, to 8,909.95.

ICICI Bank was the top laggard in the Sensex pack, cracking around 6 per cent, followed by Axis Bank, SBI, Bajaj Finance, Titan, Maruti, IndusInd Bank, PowerGrid and ONGC.

On the other hand, Infosys and TCS were trading with gains.

In the previous session, the BSE barometer settled 25.16 points or 0.08 per cent lower at 31,097.73, and the broader Nifty slipped 5.90 points, or 0.06 per cent, to close at 9,136.85.

Foreign portfolio investors offloaded equities worth Rs 2,388.04 crore in the capital market on Friday, provisional exchange data showed.

Doubts over the effectiveness of the fiscal stimulus package, extension of the nationwide lockdown and spike in COVID-19 cases in the country weighed on investor sentiment, traders said."

 

9:45 AM

Paying off loans, investing in SIPs will equip one to deal with financial turbulence

Credit card as a payment mechanism is not bad if the full bill is settled. However, if the bill is only paid in part, with the rest to be settled over a period of time, the demon will celebrate as it will make one’s life miserable.

All kinds of loans cause obstacles in wealth creation. This does not mean we should not borrow. Instead of staying in a rented house and paying rent, it is better to go for a home loan and pay monthly instalments in the form of EMIs. Similarly, if someone is ill in our family and there isn’t sufficient health cover, we have to borrow.

Borrowing for funding daughter or son’s education is also justifiable, but having borrowed, pay off the loan at the earliest.

Read more
 

9:30 AM

US economy will recover, could stretch through end of next year

The US Federal Reserve Chairman thinks the road to recovery after the coronavirus pandemic will be a long one.

PTI reports: "The US economy, the world’s largest, which has been thrown into a recession due to the coronavirus pandemic, will rebound but the recovery could stretch through the end of next year, Federal Reserve Chairman Jerome Powell has said.

His statement came days after a top economic advisor to President Donald Trump favoured giving tax incentives to American companies to move their manufacturing units from China to the US, amidst a new rift in the bilateral relationship over Beijing’s handling of the coronavirus crisis.

The US has expressed disappointment over China’s handling of the COVID-19 which has claimed nearly 90,000 lives in America.

China, which is the world’s second largest economy, in the beginning of the year signed the Phase-1 of a trade deal with the US, ending a bitter two-year tariff war that had rattled the global economy.

Federal Reserve Chairman Powell, during a 60 Minutes programme on CBS News on Sunday, said that in the long run and even in the medium run, one would not want to bet against the American economy."

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Printable version | Jun 3, 2020 6:05:32 PM | https://www.thehindu.com/business/businesslive-18-may-2020/article31611952.ece

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