The Nifty and the Sensex opened the day on a negative note, witnessing a decent correction after a long winning streak.
Join us as we follow the top business news through the day.
The human cost of the lockdown
Indian shares hammered as UK shuts after new COVID-19 strain
A terrible day for stock longs.
Reuters reports: "Indian shares suffered their worst day in seven months on Monday in a broad sell-off after fresh lockdowns in the United Kingdom to curb the spread of a new strain of coronavirus hit investor sentiment.
The NSE Nifty 50 index ended 3.14% lower at 13,328.40, wiping out six straight sessions of gains up to Friday.
The benchmark S&P BSE Sensex fell 3% to 45,553.96.
European shares opened lower at 0800 GMT as investors worried about the economic impact of a new coronavirus strain which has seen several European countries shut their borders to the UK.
"Collective wisdom of the market does fear that the UK situation could snowball into something bigger," said Umesh Mehta, head of research at Samco Securities in Mumbai.
"Everyone was greedy, everyone wanted to ride the momentum, but it is going to trip at some point and we will see a correction."
However, both indexes are still up over 2% this month, boosted by record inflows from foreign institutional investors (FIIs), progress on COVID-19 vaccines globally and signs of a domestic economic recovery.
All the main nifty sub-indexes ended down between 6.9% and 1.7%.
The Nifty Midcap 100 Index and the Nifty Smallcap 100 Index closed lower 4.81% and 5.03%, respectively.
All 50 stocks on the main index closed in the red. Oil and Natural Gas Corp Ltd fell 9.2% and Tata Motors Ltd shed 8.86%.
The Nifty Public Sector Enterprise, which tracks state-run firms, settled 6.6% lower and the Nifty PSU Bank index fell 7%.
India announced suspension of all flights from UK to the country until the end of the year. Airlines Interglobe Aviation and SpiceJet Ltd slid 8.7% and 10% respectively.
The Nifty IT index fell the least among the sub-sectors, finishing the session 1.7% lower."
Gaurav Trehan to head KKR India’s Private Equity business
KKR, the global investment firm has announced that Sanjay Nayar, CEO of KKR India, will take up a new role as chairman of KKR India, effective 31, December 2020 and Gaurav Trehan will head its Private Equity business in India.
“As Chairman, Mr. Nayar will advise and assist KKR’s India business by leveraging his connectivity and experience across the country,” KKR said in a statement.
“We are grateful to Sanjay for his role in establishing our business in India, partnering with and empowering local entrepreneurs to build their businesses into local and global champions, making KKR a leading investor in India and helping to grow our Asia Pacific business. We look forward to Sanjay’s continued support in his new role,” said Joseph Bae, co-president and co-chief operating officer, KKR.
Earlier this year Gaurav Trehan had joined KKR from TPG Capital Asia, where he spent more than 15 years and was most recently a partner in its India office. He has evaluated and executed private equity transactions across a diverse range of sectors in India.
No significant impact on company, says Wistron on iPhone manufacturing plant violence in Karnataka
Taiwanese contract manufacturer for Apple Inc., Wistron Corp. has said that the recent violence at its facility in Karnataka will not cause significant impact to the company.
Workers at the Wistron's iPhone manufacturing plant at Narsapura in Kolar district, had gone on the rampage on December 12 over the alleged delay in payment of salary and overtime wages.
"Regarding the event at our Narsapura facility in India, the investigation which includes collaboration with related government authorities is ongoing, as well as related insurance claims. The company will work with our customer in terms of correcting issues and operation recovery," the firm has informed the Taiwan Stock Exchange.
“As the Narsapura facility is a new operation and the shipment quantity is still small, the incident will not cause significant impact to Wistron," it said.
Edelweiss Financial announces ₹200 crore NCDs issue
Edelweiss Financial Services Ltd. (EFSL), the parent arm of Edelweiss Group, has announced public issue of Secured Redeemable Non-Convertible Debentures (NCDs) of a face value of ₹1,000 each, amounting to ₹100 crore, with an option to retain over-subscription up to ₹100 crore aggregating to a total of ₹200 crore.
The NCDs offer an effective yield (cumulative) of 9.95% per annum for 120 months tenure, 9.35% per annum for 36 months tenure and up to 9.80% per annum for 60 months tenure.
“75% of the funds raised through this Issue will be used for the purpose of repayment /prepayment of interest and principal of existing borrowings of the company and the balance is proposed to be utilized for general corporate purposes, subject to such utilisation not exceeding 25% of the amount raised in the Issue, in compliance with SEBI regulations,” the firm said in a statement.
Gold scales 1-1/2-month high on U.S. stimulus deal boost
Gold is rallying again over inflation fears.
Reuters reports: "Gold prices jumped as much as 1% on Monday to a near one-and-a-half-month high, driven by news that an agreement on a long-awaited U.S. fiscal stimulus deal had been reached.
Spot gold rose 0.8% to $1,896.39 per ounce by 0308 GMT, having earlier hit its highest since Nov. 9 at $1,899.29. U.S. gold futures gained 0.7% to $1,902.70. U.S. congressional leaders reached an agreement on a $900 billion COVID-19 stimulus package on Sunday, with votes likely on Monday.
"Now that we've got fiscal stimulus behind us, gold has enough momentum to close above $1,900 by year-end and it could even climb up to $1,925, said Stephen Innes, chief global market strategist at financial services firm Axi.
"If you coalesce the stimulus package with optimism for the Federal Reserve to cap longer-dated yields given it signalled a continuation to its bond buying programme last week, we could see gold remain supported on dips until at least March 2021".
The Fed last week vowed to keep funnelling cash into financial markets and keep rates low until a U.S. economic recovery is secure. Gold's advance came despite a stronger dollar, which firmed on tightening of lockdowns globally.
"The worsening pandemic is curbing global economic growth and is forcing global central banks to remain highly dovish, which is bullish for gold as a store of value," Avtar Sandu, senior commodities manager at Phillip Futures, said in a note.
Lower interest rates reduce the opportunity cost of holding gold. Speculators upped their bullish positions in COMEX gold and silver contracts in the week to Dec. 15, data showed on Friday. Silver rose 3.3% to $26.61 an ounce, having hit its highest since Sept. 21 at $26.71 earlier in the session. Platinum rose 0.6% to $1,042.74 and palladium gained 0.5% to $2,371.76."
U.S. government hack: espionage or act of war?
The suspected Russian hack of U.S. government agencies has led to heated rhetoric from lawmakers, with U.S. Senator Dick Durbin calling it “virtually a declaration of war” and U.S. Senator Marco Rubio saying that ”America must retaliate, and not just with sanctions.”
But cybersecurity and legal experts said the hack would not be considered an act of war under international law and will likely go down in history as an act of espionage.
Here's why.
What do we know about the hack?
The hack, first reported by Reuters, hijacked software made by Texas-based SolarWinds Corp. By inserting malicious code into updates pushed to SolarWinds customers, the hackers were for months able to explore the computer networks of private companies, think tanks, and government agencies.
Pine Labs gets funding from Lone Pine Capital
More backing for Pine Labs.
PTI reports: "Merchant commerce platform Pine Labs on Monday said it has raised a fresh round of funding from Lone Pine Capital, valuing it at over USD 2 billion (about Rs 14,700 crore).
Pine Labs did not disclose the amount of funding raised.
Lone Pine's investment follows the strategic investment made by Mastercard in January 2020, when it attained unicorn status, a statement said.
Incorporated in Singapore, Pine Labs' key investors include Sequoia India, Mastercard, Actis Capital, Temasek and PayPal.
Small businesses and consumers are fast adopting to digital commerce and contactless checkout, Pine Labs CEO B Amrish Rau said.
"We are also seeing tremendous uptake in Pay Later services and have now enabled nearly 1,50,000 outlets for this. It's time to invest heavily in offline and online commerce across India and South East Asia," he added.
Mala Gaonkar, Portfolio Manager and Managing Director at Lone Pine, said the Pine Labs team is leveraging key structural changes taking place across payments and fintech globally, including the integration of software and payments at the point-of-sale, the digitisation of small-to-medium enterprises, and the rapid adoption of buy-now-pay-later offerings.
"We are excited to partner with Pine Labs as they innovate at scale in the payments and merchant commerce space, benefiting consumers, merchants and financial institutions...We look forward to the road ahead," she added.
Pine Labs currently serves more than 1.5 lakh merchants in 3,700 cities across Asia and the Middle East. In July 2020, the company made a strategic investment in Fave. Together, the companies now provide cashless payment solutions to over 50,000 merchants across Malaysia, Singapore and other South-East Asian countries.
Earlier this month, Pine Labs and Mastercard jointly announced that they will expand their integrated 'pay later' solution to five South-East Asian markets early next year."
Why equity is risky, real estate is not
Real estate is perceived as a safe investment. This is not because land prices have risen sharply over the years. The stock market, too, has climbed sharply. Yet, most believe (and rightly so) that equity investments are not safe. The reason, perhaps, has to do with price visibility. You can observe stock prices and, therefore, perceive the associated volatility. Real estate could be perceived as safe because prices are invisible. Can you draw such comfort from equity investments by distancing yourself from the market? Here, we show why the return-characteristics of equity investments and the current tax structure could hinder any strategy to make equity prices ‘invisible.’
Real estate is lumpy and illiquid. Also, it generates supplementary cash flows in the form of rental income. For these reasons, you can look at the realty market only when you want to sell property, not otherwise.
In contrast, you need to closely monitor equity investments even if those are meant to achieve a life goal 10-15 years later. This is because of the return-characteristic of growth productsdiscussed previously in this column.
Wall Street banks resume stock buybacks
The science behind saving for retirement
Retirement planning takes place in two stages. The first stage is characterised by a strategy to build a corpus which is as large as possible. The larger the corpus, the better it will be for the retiree. So, we must keep an eye on ‘My EPS — My Enough Past Savings.’
The word ‘enough’ is highly subjective. The reason I call it subjective is because its quantum differs from person to person. It is dependent on our lifestyle. The simpler the lifestyle, the lesser will be the need for funds. Some individuals can manage their life on a few thousand rupees a month, with some needing up to a few lakhs.
The second phase of retirement is actually using the savings accumulated over the first phase. An important term to be kept in mind while planning for the second phase of retirement is ‘My PE — My Present Expenses.’
Often times, the first phase is automated. There are mandatory provident fund and other contributions towards the accumulation typically deducted from our earnings. There are tax benefits for most of them. It is the second phase that needs careful planning, strategy and implementation.
Rupee slips 17 paise to 73.73 against US dollar in early trade
The rupee's performance this morning mirrored that of stocks.
PTI reports: "The rupee declined 17 paise to 73.73 against the US dollar in opening trade on Monday amid weak domestic equities and strengthening American currency in the overseas market.
However, unabated foreign fund inflows and lower crude prices supported the rupee and restricted the fall, forex traders said.
At the interbank forex market, the local unit opened sharply lower at 73.74 against the greenback. It was trading 17 paise down at 73.73 in early deals. In the previous session, the rupee strengthened by 3 paise to close at 73.56 against the US dollar.
Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading up 0.46 per cent at 90.37.
On the domestic equity market front, the 30-share BSE benchmark Sensex was trading points 7.69 lower at 46,953, and the broader NSE Nifty fell 9.05 points to 13,751.50 in opening session.
Foreign institutional investors were net buyers in the capital market as they purchased shares worth Rs 2,720.95 crore on a net basis on Friday, according to exchange data.
Brent crude futures, the global oil benchmark, fell 3.02 per cent to USD 50.68 per barrel."
India needs multiple bad banks to clean balance sheets of lenders, get credit growth back: CII
Industry body CII on Sunday said it has urged the government to consider creation of multiple bad banks to address the adverse impact of non-performing assets (NPAs) accumulated by public sector banks in the recent past, that got further accentuated during the pandemic.
The Confederation of Indian Industry (CII) in its pre-budget memorandum recommended that the government consider enabling Foreign Portfolio Investors (FPIs) and Alternative Investment Funds (AIFs) to purchase NPAs.
“In the aftermath of Covid, it is important to find a resolution mechanism through a market determined price discovery. With huge liquidity both globally and domestically, multiple bad banks can address this issue in a transparent manner and get the credit cycle back in action,” CII President Uday Kotak said.
A robust market-based mechanism will encourage public sector banks (PSBs) to sell their bad loans without fear of questions being raised later.
Indian shares set to snap six sessions of gains as banks decline
A long overdue correction.
Reuters reports: "Indian shares slipped in early trade on Monday and were set to snap six sessions of gains as banking stocks declined, although losses were capped by a rise in Reliance Industries Ltd.
The NSE Nifty 50 index fell 0.49% to 13,692.40 by 0348 GMT, while the benchmark S&P BSE Sensex was down 0.43% at 46,766.44.
Both the indexes have posted seven straight weekly gains, driven by progress on COVID-19 vaccines and signs of global economic recovery.
Dragging the market on Monday, the Nifty PSU Bank index fell as much as 2.07%, with Canara Bank Ltd falling 3%.
However, shares of India's most valuable company, Reliance Industries Ltd, rose as much as 1.27% after it announced on Friday with BP Plc the start of production from the R Cluster - an ultra-deepwater gas field in the KG D6 block off the east coast of India.
Broader Asian shares inched lower as fresh lockdowns in the UK to curb the spread of a new coronavirus strain and lack of a Brexit deal dampened investor sentiment."
Finance Ministry permits 5 States to borrow extra ₹16,728 crore
The Finance Ministry on Sunday said five States, including Tamil Nadu and Telangana, have been permitted to borrow an additional ₹16,728 crore following completion of stipulated reforms for 'Ease of Doing Business'.
Andhra Pradesh, Karnataka and Madhya Pradesh are the other States which have been permitted to borrow the extra amount.
The government had in May decided to link grant of additional borrowing permission to States with reforms undertaken by them to facilitate ease of doing business.
The reforms stipulated in the category include completion of first assessment of 'District Level Business Reform Action Plan'.
Besides, elimination of requirements of renewal of registration certificates/approvals/licences obtained by businesses for various activities, at least under certain Acts specified by the Centre, was also part of the reforms.
