Stocks opened the day positively but soon gave up all gains to trade slightly in the red.
The IMF and the World Bank, concerned about rising international trade barriers, have urged countries to keep trade lines open.
Join us as we follow the top business news through the day.
Over 80% of the world's workforce affected by the 'Great Lockdown'
NBFCs face more trouble as banks stop lending
The shadow banking sector, which is already facing pressure due to confusion regarding the applicability of the RBI's 3-month loan moratorium, is facing more trouble as banks stop lending to them.
Reuters reports: "India's banks are freezing credit lines to shadow lenders as the coronavirus crisis shuts down commerce in Asia's third-largest economy, but leaving this sector in the lurch risks wider financial contagion.
All major state-owned and private banks have stopped lending to non-banking financial companies (NBFCs) due to concerns about their financial health as businesses they lend to reel from the impact of the pandemic, four industry executives, who asked not to be named due to the sensitivity of the situation, told Reuters.
This has led to a working capital squeeze for many NBFCs who account for nearly a fifth of overall lending as they struggle to meet operating costs. Their debt collections have dried up amid a 40-day nationwide lockdown to rein in the respiratory illness that has claimed over 500 lives.
Adding to the squeeze on NBFCs, the Reserve Bank of India (RBI) last month allowed banks and finance companies to offer their borrowers a moratorium on loans for three months to tide over the current crisis.
Most NBFCs have not been able to benefit from this as the final decision on which borrowers can delay loan repayments rests with banks, but they have extended debt moratoriums to their borrowers who mainly fall in the self-employed category and have seen their businesses affected by the lockdown."
Stocks close flat
The benchmark stock indices have closed the day flat after hours of choppy trading.
The Sensex gained around 60 points during the session while the Nifty settled a little above the 9,250 mark.
China says India's new FDI rules violate WTO principles, hopes for revision
China has raised concern over India's new FDI rules that are seen by many as targeting Chinese investment in cheap Indian assets.
Reuters reports: "India's new rules for foreign investment violate WTO principles of non-discrimination and are against free and fair trade, a Chinese embassy spokesperson in New Delhi said on Monday.
On Saturday, India stepped up scrutiny of investments from companies based in neighbouring countries, in what is widely seen as a move to stave off takeovers by Chinese firms during the coronavirus outbreak.
“The impact of the policy on Chinese investors is clear,” spokesperson of the Chinese embassy Ji Rong said in a statement.
India's trade ministry said in a notification dated April 17 the changes to federal rules on investment were meant to curb ”opportunistic takeovers/acquisitions”. It did not mention China.
China hopes India will revise 'discriminatory practices', treat investments from different countries equally, the spokesperson said."
Flight restrictions to be lifted when COVID-19 is controlled
The restrictions on domestic and international flight operations will be lifted when the government is confident that spread of the novel coronavirus has been controlled, and poses no danger to Indians, Civil Aviation Minister Hardeep Singh Puri said on Monday, amidst reports of some airlines doing open bookings.
In a series of tweets, the Minister also said a directive was issued on Sunday to airlines , restraining them from doing open bookings since they did not heed to government’s advice in the matter.
“I want to once again say that flight restrictions that are in place as a result of India’s fight against COVID-19 will be lifted once we are confident that spread of the virus has been controlled and it poses no danger to our country and people,” he tweeted.
Oil prices fall further, WTI hits $15 barrel on low demand
It seems like production cuts by major oil producers is having little effect on oil prices, which continue their freefall.
IANS reports: "Crude oil prices plunged on Monday with the West Texas intermediate (WTI) crude in the US falling below the $15 per barrel mark, the lowest level in 21 years.
The fall in oil prices comes on the back of weak demand amid the coronavirus crisis. The pandemic has almost brought the global travel industry to a halt, limiting demand for the commodity which has fallen by almost a third this year. Further, concerns regarding storage have also weighed on the markets as global storage is nearly full.
Currently, WTI crude is trading at $14.78 per barrel, lower by 19.5 per cent from its previous close.
Brent crude was at $27.66, lower by 1.5 per cent from the previous close.
The decline comes despite the recent output cut agreement between the Organization of Petroleum Exporting Countries (OPEC) and its allies. There were hopes that agreement would stabilise oil prices, but with Covid—19 pandemic continuing, there has been a large slip in demand that is not letting a pick up in oil prices.
The current market is oversupplied on shrinking demand creating a situation of free fall for crude."
PE investment in real estate falls 89% to USD 222 million in January-March
More gloom and doom may await the Indian real estate sector as investments witness a drastic fall in the quarter just gone by.
PTI reports: "Private equity (PE) investment in Indian real estate plunged 89 per cent to USD 222 million (Rs 1,640 crore) during the January-March period this year on global economic slowdown caused by the coronavirus outbreak, according to a report by Colliers International.
PE inflows in real estate had stood at USD 2,023 million in the corresponding period a year ago.
The consultant projected that total PE investment in real estate could drop to USD 3.5 billion in the calendar year 2020 from USD 6.4 billion last year.
Out of USD 222 million inflow in the first three months of this year, the office market attracted an investment of USD 143 million while the hospitality sector USD 79 million.
During the January-March period of 2019, inflows in the office market stood at USD 1,419 million, housing USD 300 million, logistic USD 150 million, mixed-use projects USD 102 million and retail USD 52 million, the data showed."
Business optimism for April-June quarter falls to record low, worse than 2009 financial crisis
A certain gauge of business confidence in India has dropped sharply after the nation-wide lockdown to prevent the spread of the coronavirus pandemic.
PTI reports: "Business optimism for the ongoing April-June quarter has slumped to its record low level, reflecting the plunge in business sentiment owing to the heightened uncertainty around the impact of Covid-19, according to a report.
The Dun & Bradstreet Composite Business Optimism Index stood at 49.40 per cent for Q2 2020 (April-June), a record low and worse than during the 2009 financial crisis. The index registered a decrease of 37 per cent as compared to the year-ago period.
“The index has dropped 7 per cent more than it did during the 2009 financial crisis. The near halt in almost all non-essential activities in the industrial and services sectors due to the nation-wide lockdown has led to a fall in the optimism levels for net sales and new orders to the lowest level in 18 years,” Dun & Bradstreet Chief Economist Arun Singh said.
The survey noted that the optimism for net profits stood at 48 per cent - a decrease of 21 percentage points as compared to same period last year, while optimism for new orders stood at 24 per cent - a decrease of 39 percentage points as compared to April-June 2019.
Singh further noted that the impact of Covid-19 started as a supply shock but has also triggered strong demand shocks and has led to the collapse of confidence levels."
China doubled crude oil storage inflows during coronavirus demand hit
China has been quietly using the historic fall in global crude oil prices to massively up its oil purchases.
Reuters reports: "Rather than cutting back on imports, China pushed crude oil into storage tanks at almost double the rate in the first quarter of this year than it did in the same period in 2019 as the new coronavirus hit domestic consumption.
China doesn't release official data on flows into strategic and commercial stockpiles, but an estimate can be made by subtracting the amount of crude processed by refineries from the total volume of oil available from both imports and domestic output.
China's crude oil imports were 10.2 million barrels per day (bpd) in the first three months of the year, according to customs data.
Domestic output was 3.74 million bpd, giving a total of available crude for the quarter of 13.94 million bpd.
Refinery throughput for the first quarter was the equivalent of 11.96 million bpd, meaning of the total available crude 1.98 million bpd wasn't processed by refineries.
Doing the same calculations for the first quarter of last year shows imports of 9.83 million bpd, domestic production of 3.84 million bpd, and refinery processing of 12.6 million bpd, leaving a gap of 1.07 million bpd.
The numbers suggest that China almost doubled the rate at which it put oil into storage in the first quarter of 2020, in order to deal with the loss of consumption as the coronavirus caused much of the country to be placed in some form of lockdown."
Fitch Solution cuts India’s FY21 GDP growth forecast to 1.8%
Yet another estimate sharply downgrading India's growth, flagging the added risk from the delay in announcing fiscal stimulus measures.
PTI reports: "Fitch Solutions on Monday cut India’s economic growth forecast for the financial year 2020-21 to 1.8 per cent saying private consumption is likely to contract due to large-scale loss of income in the face of worsening domestic outbreak of COVID-19.
“Over the past week, we have continued to adjust down our country-specific real GDP growth forecasts on the back of persistent low oil prices and the widening spread of COVID-19. Our forecasts remain fluid and, even despite the recent downward revisions, we believe that the risks remain skewed to the downside,” the rating agency said.
For India, it said the real GDP growth rate for 2020-21 (April 2020 to March 2021) has been revised down to 1.8 per cent from 4.6 per cent, previously.
“We now expect private consumption to contract, versus a weak expansion previously, due to large scale loss of income across the economy in the face of a worsening domestic outbreak of COVID-19,” it said.
Fitch Solutions also anticipated a deeper contraction in fixed investments as businesses choose to cut back on capital expenditure to conserve cash amid elevated economic uncertainty.
“The slow roll-out of fiscal stimulus by the central government will only exacerbate India’s economic woes,” it added."
Heavy bidding in government bonds points to RBI hand
Rupee slips 11 paise to 76.50 against US dollar in early trade
The rising dollar, helped by investors' rush towards safety, has weighed against the rupee this morning.
PTI reports: "The Indian rupee fell 11 paise to 76.50 against the US dollar in opening trade on Monday, amid strengthening of the American currency overseas and sharp rise in coronavirus cases in the country.
Forex traders said rupee is trading in a narrow range as positive domestic equities is supporting the local unit, while strengthening of the US dollar is weighing on the rupee.
The rupee opened weak at 76.43 at the interbank forex market and then fell further to 76.50, down 11 paise over its last close.
The rupee had settled at 76.39 against the US dollar on Friday.
Forex traders said market participants are concerned that the sharp rise in coronavirus cases, could weigh on the economy."
New FDI rules may have unintended effects
The Ministry of Commerce press note amending the FDI policy to make investments from countries which ‘share a land border’ with India can only be construed as being aimed at Chinese investors. Such restrictions were already applicable to Pakistan and Bangladesh, while Myanmar, Bhutan, Nepal and Sri Lanka are not major investors in India.
The note makes clear its objective is to curb opportunistic takeovers or acquisitions due to the current COVID-19 pandemic. This is a likely reference to the possibility of Chinese investors purchasing undervalued shares of Indian-listed companies. This is indeed a risk that has also been identified by other countries. On April 12, news of an incremental purchase of shares in HDFC made by the People’s Bank of China made the headlines.
This press note, however, does not restrict its application to such cases.
COVID 19: IMF, World Bank urge countries to keep trade open
International trade and movement of people across borders has been severely affected by the coronavirus pandemic. This has left international policymakers with the difficult task of getting things back on track.
IANS reports: "The International Monetary Fund (IMF) and the World Bank Group (WBG) have called on countries to keep trade open as the world battles the COVID-19 pandemic, warning that export controls on medical supplies and other essentials could backfire.
At a virtual press conference during the just-concluded spring meetings of the two multilateral institutions, IMF Chief Economist Gita Gopinath said that this is not a time to restrict the trade of medical supplies and essential equipment around the world, Xinhua reported.
“It is very important that this does not become a future where we reverse all the gains that we’ve got from globalization,” said Gopinath, in response to a question from Xinhua.
Echoing her remarks, Kenneth Kang, deputy director of the Asia and Pacific Department at the IMF, told Xinhua in a recent written interview that countries should avoid trade restrictions on medical and health products to ensure that they go to where they are most needed.
The IMF official said that countries should cooperate to reduce tariff and non-tariff barriers that impede cross-border trade and investment and to strengthen global supply chains as the recovery takes hold."
Pharma units still not able to operate freely
A week after the Department of Pharmaceuticals warned of an impending shortage of drugs if pharmaceutical units are not able to operate freely during the lockdown , there has only been a marginal improvement in their functioning, with employee movement, transport and raw material supplies still hampered, and courier services remaining non-functional.
Most domestic pharmaceutical producers are operating at 30%-50% of capacity, while larger research-driven players say they have hit 40%-50%.
On April 11, the Department of Pharmaceuticals told the Home Ministry that the industry was operating at just 20%-30% of capacity and called for immediate measures to bring the output back to the pre-lockdown level.
Stocks open day with gains
The benchmark indices have opened the day positively with gains of around 0.8%
The Sensex is up over 200 points while the Nifty is trading over the 9,300 mark.
On Friday, the Dow Jones closed the day with gains of nearly 3%. strengthening by over 700 points.
