Top business news on June 24, 2020: Stocks end four-day winning streak; Chinese firms default on overseas debt, and more

Exchanges in Shanghai, Hong Kong, Tokyo and Seoul finished up to 2% lower following a rout on Wall Street.

Exchanges in Shanghai, Hong Kong, Tokyo and Seoul finished up to 2% lower following a rout on Wall Street.   | Photo Credit: PTI

Stocks continue to rally as investors bet on an swift economic recovery despite looming uncertainties.

A global ratings agency has warned that more Indian companies could face a downgrade if economic recovery takes too long to pan out.

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

4:30 PM

Chinese firms default on overseas debt

 

4:00 PM

Sensex, Nifty snap four-day winning streak

The benchmark indices that made a decent start to the day only managed to incur heavy losses by the end of it.

PTI reports: "Snapping its four-day rising streak, equity benchmark Sensex surrendered all early gains to plunge 561 points on Wednesday, tracking a selloff in financial stocks and weak cues from global markets.

The 30-share index settled 561.45 points, or 1.58 per cent, lower at 34,868.98. It hit an intra-day high of 35,706.55 and a low of 34,794.93.

Similarly, the NSE Nifty fell 165.70 points, or 1.58 per cent, to 10,305.30. During the day, it touched a peak of 10,553.15 and a low of 10,281.95.

IndusInd Bank was the top laggard in the Sensex pack, tanking over 7 per cent, followed by ICICI Bank, PowerGrid, Axis Bank, SBI and Bharti Airtel.

On the other hand, Asian Paints, ITC, Nestle India and Reliance Industries were among the gainers.

According to traders, despite opening on a positive note, selloff in financial stocks dragged domestic equities into the negative territory.

Weak opening of European equities too weighed on investor sentiment, they said.

Stock exchanges in Paris, Frankfurt and London sank over 2 per cent in early deals.

Bourses in Hong Kong and Tokyo settled in the red, while Shanghai and Seoul ended with gains.

International oil benchmark Brent crude futures fell 1.15 per cent to USD 42.14 per barrel.

On the currency front, the rupee erased its initial gains and provisionally settled lower by 6 paise at 75.72 against the US dollar."

3:30 PM

Icra, Care cut ratings on Yes Bank’s upper tier-II bonds

The downgrade comes after yesterday's RBI ban on Yes Bank from paying interest on Tier-2 bonds .

PTI reports: "Private sector lender Yes Bank on Wednesday said two domestic rating agencies have cut their ratings on its upper tier-II bonds, following the Reserve Bank restraining it from making coupon payments on them due to lack of adequate capital levels.

Icra and Care Ratings have cut their ratings on the bonds to “D” possibly because any default in repayment by a company triggers the action.

The city-headquartered bank, which got a Rs 10,000 crore bail out led by SBI in March, asserted that it has adequate liquidity to meet all its obligations.

“The bank would like to stress that the coupon on these bonds (Basel II, upper tier-II bonds) is cumulative in nature and any unpaid sum will become payable once the bank meets minimum regulatory capital ratio subject to the required regulatory approvals, the bank informed the bourses.

Care Ratings has cut its rating on outstanding bonds of Rs 940 crore to “D” from “C” as a result of the RBI refusing to accede to the bank’s request of paying the coupon, a note from the agency shared by the bank said.

“Any delay in payment of interest/principal following invocation of the lock-in-clause, would constitute as an event of default as per Care’s definition of default and consequently the rating for the instrument has been revised,” it said.

Elaborating on the need for Yes Bank to seek RBI’s approval, it said the upper tier-II bond has lock-in clause which mandates that the issuer bank cannot pay interest/principal without RBI’s prior approval if it has reported loss for the year or the interest payment will lead to bank not meeting the capital adequacy norms."

3:00 PM

Rupee settles 6 paise lower at 75.72 against US dollar

The rupee on Wednesday erased its initial gains and provisionally settled lower by 6 paise at 75.72 against the US dollar, tracking volatile domestic equities amid strong US dollar.

Forex traders said factors like weak domestic equities, rising coronavirus cases and India-China border tension weighed on investor sentiment.

The rupee opened at 75.61 against the US dollar, but lost ground and closed at 75.72, registering a fall of 6 paise over its previous close.

It had settled at 75.66 against the greenback on Tuesday.

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2:30 PM

Gold soars to near 8-year high as fears of second virus wave grow

Even as stocks quickly recover most of their losses this year, the yellow metal indicates there may still be risk involved.

Reuters reports: "Gold climbed to its highest level in nearly eight years on Wednesday, as safe-haven demand was boosted by worries over a surge in coronavirus infections and hopes of more stimulus measures to combat the economic blow.

Spot gold was up 0.1% at $1,767.93 per ounce as of 0645 GMT after touching $1,773, its highest level since October 2012, in early Asian trade. U.S. gold futures rose 0.2% to $1,785.80.

“The fears of second wave cases, particularly in the U.S., and also in Latin America, are driving concerns about sustained weakness in the economic recovery and that's certainly supporting safe-haven assets like gold,” said ANZ analyst Daniel Hynes.

“Continued support that central banks are likely to provide to the market with bond purchasing programmes and monetary easing will clearly keep the rates low for the foreseeable future.”

Central banks worldwide have adopted aggressive stimulus measures and kept interest rates low, helping gold prices surge more than 16% this year, as the precious metal is widely seen as a hedge against inflation and currency debasement."

 

2:00 PM

India’s GDP to contract by 5.3% in FY21, bounce back in FY22: Ind-Ra

Ind-Ra's outlook for the economy comes with some criticism of the government's stimulus measures.

PTI reports: "India’s economy is likely to shrink by 5.3 per cent this fiscal, the lowest GDP growth in the Indian history and the sixth instance of economic contraction, India Ratings and Research said on Wednesday.

“The disorder caused by the COVID-19 pandemic unfolded with such a speed and scale that the disruption in production, breakdown of supply chains/trade channels and total wash out of activities in aviation (some activities have started now), tourism, hotels and hospitality sectors will not allow the economic activity to return to normalcy throughout FY21,” the rating agency said in a report.

As a result, besides contracting for the whole year, GDP will contract in each quarter in FY21 (April 2020 to March 2021).

However, the agency believes the GDP growth would bounce back in the range of 5-6 per cent in FY22 (April 2021 to March 2022), aided by base effect and return of gradual normalcy in the domestic as well as global economy.

India Ratings (Ind-Ra) said India’s gross domestic product (GDP) will contract 5.3 per cent in FY21.

“This will be the lowest GDP growth in the Indian history (Indian GDP data is available from FY51) and sixth instance of economic contraction, others being in FY58, FY66, FY67, FY73 and FY80; the previous low was negative 5.2 per cent in FY80,” it said.

The government had announced an economic package of Rs 20.97 lakh crore (10 per cent of GDP) on May 12, 2020 to mitigate the adverse impact of COVID-19 and related lockdown. However, Ind-Ra’s calculations, excluding the monetary measures and existing proposals in the union budget, show that the direct fiscal impact is only Rs 2.145 lakh crore (1.1 per cent of GDP).

“The credit and liquidity enhancing measures announced in the economic package in combination with some of the earlier steps announced by the Reserve Bank of India (RBI) will certainly address the supply-side issues of the economy,” it said.

The Indian economy even before the COVID-19 related lockdown was suffering on the demand side, as all the demand drivers, except government final consumption expenditure (GFCE), namely private final consumption expenditure (PFCE), gross fixed capital formation (GFCF) and net exports were floundering.

The lockdown and its impact on the economy and livelihoods only aggravated the sagging consumption demand.

“Ind-Ra believes the government is aware of it; but, the near absence of demand-side measures in the economic package indicates the hard budget constraint facing the government,” the report said."

1:45 PM

Hinduja brothers in U.K. High Court over letter dispute

The U.K.-based Hinduja brothers are locked in a legal dispute in the High Court in England over their billionaire family assets, it emerged in a ruling in London.

The case has been brought by Srichand Parmanand Hinduja, 84, described as the “patriarch” of the family, against brothers G.P. Hinduja, 80, P.P. Hinduja, 75, and A.P. Hinduja, 69, and revolves around the “validity and effect” of a letter dated July 2, 2014.

The letter includes statements to the effect that the brothers appoint each other as their executors, and that assets held in any single brother’s name belong to all four. A related second letter, dated July 1, 2014, is also linked to the dispute.

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1:00 PM

Govt relaxes manufacturing norms for PPE makers

In a move to ramp up production, the government has relaxed rules impeding production.

PTI reports: "The government has relaxed norms of having in-house testing for three kinds of Personal Protective Equipments (PPEs) to promote the supply of quality gears during the ongoing COVID-19 pandemic, according to an official order.

The norms have been relaxed for filter half masks, surgical face masks and eye protectors by the Bureau of Indian Standards (BIS).

Earlier, license to manufacture these products was given to those having in-house testing facilities.

This norm has been relaxed and manufacturers are now required to test the samples for specified requirements in labs of BIS licensees who have in-house testing facilities, or in BIS recognised or empanelled private or government labs, it added.

“This has been done to enable more manufacturers to be brought in the ambit of BIS product certification scheme, which will in turn result in greater quantity of BIS certified PPEs being made available to the users,” the BIS said.

BIS is a national standards body that functions under the Consumer Affairs Ministry. It has framed more than 25,000 quality standards for different products/services.

Based on the data obtained from 81 mask manufacturers, BIS said it has been found that their current installed annual 2ply/3ply surgical masks production capacities are 295 crore.

Currently, masks and hand sanitizers have been declared as essential items till June. Its prices are fixed by the government."

12:40 PM

In a first, diesel costlier than petrol in Delhi after 18 hikes in a row

Increase in tax rates is skewing the traditional pricing structure of domestic fuels.

PTI reports: "Diesel price for the first time in living memory crossed the rate of petrol in the national capital on Wednesday when prices were raised for a record 18th day in a row.

According to a price notification of state oil marketing companies, petrol price was unchanged after 17 consecutive increases, while diesel rates were increased by 48 paise per litre across the country.

Diesel now costs Rs 79.88 per litre in Delhi as compared to petrol price of Rs 79.76 a litre.

Rates differ from state to state depending on the incidence of VAT.

However, diesel is costlier than petrol only in the national capital where the state government had raised local sales tax or VAT on the fuel sharply last month.

Petrol costs Rs 86.54 a litre in Mumbai and diesel is priced at Rs 78.22. In Chennai, a litre of petrol comes for Rs 83.04 and diesel for Rs 77.17.

In Kolkata, petrol is priced at Rs 81.45 per litre and diesel costs Rs 75.06. In Bengaluru, petrol comes for Rs 82.35 a litre and diesel for Rs 75.96. In Hyderabad, petrol is priced at Rs 82.79 a litre and diesel at Rs 78.06.

Traditionally, diesel was priced Rs 18-20 a litre lower than petrol due to lesser taxation. But over the years, the taxes have increased, narrowing the gap.

The Delhi government had on May 5 hiked Value Added Tax (VAT) on diesel from 16.75 per cent to 30 per cent and on petrol from 27 per cent to 30 per cent. Since the levy is ad valorem, the actual incidence has gone up every single time oil companies raised retail selling price in the last 18 day.

The 18th daily increase in rates since oil companies on June 7 restarted revising prices in line with costs after ending an 82-day hiatus in rate revision, has taken diesel prices to fresh highs. In 18 days, diesel price has gone up by Rs 10.49 per litre. Petrol price had risen in the past 17 days by Rs 8.5 a litre.

The increase in rates since June 7 is the highest in any fortnight."

12:20 PM

Indian shares rise as upbeat earnings lift sentiment

An update on the morning session in stocks.

Reuters reports: "Indian stocks rose in a choppy trading session on Wednesday as investors parsed corporate earnings, evaluated an anti-dumping duty and weighed the benefits of reopening the economy even as coronavirus cases rise.

The NSE Nifty 50 index rose 0.2% to 10,490, while the benchmark S&P BSE Sensex was also up 0.2% at 35,508.33 at 0541 GMT.

The Nifty metals index gained 1.4% after India imposed an anti-dumping duty on some steel imports from China, Vietnam and South Korea.

“We have some cautious views in the near-term as the rally has been on the back of opening up of economy, while actual improvements in ground level is yet to happen,” said Vinod Nair, head of research, Geojit Financial Services Ltd.

“Even though foreign investors have come back into markets, an extension of this rally is looking difficult and we are asking clients to book profits.”

The Nifty has risen more than 9% so far this month, partly helped by foreign institutional investors, who have been pouring surplus money into Indian equities, which is currently seen as an attractive bet as markets are down about 13% this year.

On Wednesday, the Nifty public sector bank index rose 3.07%, led by gains in Bank of Baroda Ltd. The state-run lender surged 8.5% after it reported March quarter profit of 5.07 billion rupees against a loss of 9.91 billion rupees year ago.

Strong quarterly margins sent shares of Asian Paints Ltd up 6.2%, making it the top gainer on the Nifty 50 index."

 

12:00 PM

India's oil imports in May sink to lowest in over 8 years

All thanks to the huge hit to demand caused by the coronavirus-induced lockdown.

Reuters reports: "India's oil imports in May hit the lowest since Oct 2011 as refiners with brimming storage cut purchases after a continuous decline in fuel demand, preliminary data obtained from industry sources showed.

In May, India imported 3.18 million barrels per day (bpd) of oil, a decline of about 31% from April and about 26% from a year ago, the data showed.

Hit by an unexpected fall in demand due to lockdown measures to contain the novel coronavirus, Indian refiners in April filled tanks with cheaper oil, sold extra cargoes to the federal government for strategic reserves and declared force majeure on crude imports.

The refiners, which normally book cargoes one-to-two months in advance, also deferred some term cargoes scheduled for lifting in April.

In May, Saudi Arabia was the top oil supplier to India for a second consecutive month, although supplies from the kingdom declined by nearly 28% from April, the data showed.

India's oil imports from Iraq fell by 43% to about 554,000 bpd, the lowest since Oct 2016, the data compiled by Reuters showed.

The intake of Venezuelan oil in May fell to the lowest since June 2011. Reliance Industries, operator of the world's biggest refining complex, received 2 million barrels of oil from Venezuela.

Another private refiner Nayara Energy, part-owned by Russian oil major Rosneft, did not import from the Latin American nation in May, under pressure from the U.S. sanctions against Venezuelan national oil company PDVSA."

11:30 AM

Trading gains help BoB post ₹507-crore profit in Q4

Bank of Baroda (BoB) reported a profit of ₹507 crore for the January-March quarter on the back of healthy trading gains compared with the ₹991 crore loss in the year-earlier period.

The numbers are not exactly comparable as the lender merged with Vijaya Bank and Dena Bank in April 2019. Trading profit in the fourth quarter of FY20 was ₹875 crore (₹502 crore). Fresh slippages for the quarter stood at ₹3,050 crore. Bad loan provisions stood at ₹3,190 crore (₹5,550 crore).

Asset quality improved sequentially with gross NPAs declining to ₹69,381 crore as on March 31, 2020 (9.4% of gross advances) compared with the ₹73,140 crore (10.43%) as on December 31, 2019. Net NPA ratio was 3.13% as on March 31, 2020, down from the 4.05% as on December 31, 2019.

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11:10 AM

The perils of day trading

11:00 AM

Rupee rises 5 paise to 75.61 against U.S. Dollar in early trade

The Rupee appreciated 5 paise to 75.61 against the U.S. Dollar in early trade on Wednesday tracking weakness in the U.S. Dollar and gains in the domestic equity market.

Forex traders said Rupee was trading in a narrow range as positive domestic equities and weak U.S. currency supported the local unit, while rising coronavirus cases weighed on investor sentiment.

The Rupee opened at 75.61 against the U.S. Dollar, registering a rise of 5 paise over its previous close. It had settled at 75.66 against the greenback on Tuesday.

Traders said investor sentiments strengthened after top Chinese and Indian military commanders arrived at a consensus on the outstanding issues and agreed to take necessary measures to “cool down” the situation at their borders.

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10:40 AM

India says it may allow some foreign flights to resume after U.S. criticism

Repatriation flights being operated mainly by Air India isn't going well with other foreign airlines.

Reuters reports: "India's ministry of civil aviation said on Tuesday it was considering allowing some international carrier flights to resume after Washington accused India of “unfair and discriminatory practices.”

The Indian ministry said in a statement posted on Twitter that as “we move from controlled and managed aviation evacuation of our citizens in different parts of the world and foreign nationals from India, we are now looking at the possibility of establishing bilateral arrangements.”

The U.S. Transportation Department issued an order Monday to require Indian air carriers to apply for authorization prior to conducting charter flights beginning in 30 days.

The department sought “to restore a level playing field for U.S. airlines” under the U.S.-India Air Transport Agreement. The Indian government, citing the coronavirus, has banned all scheduled services and failed to approve U.S. carriers for charter operations, it added.

The Indian ministry added it is considering the “prospect of establishing individual bilateral bubbles, India-US, India-France, India-Germany, India-UK.” It added that “final decisions pursuant to negotiations are expected to be taken soon.”

The U.S. government said Air India has been operating what it calls “repatriation” charter flights between India and the United States in both directions since May 7.

Air India is advertising flights “that would constitute a rate of 53% of the scheduled services it operated before the onset of the current public health emergency,” the department said. “The charters go beyond true repatriations, and it appears that Air India may be using repatriation charters as a way of circumventing the GoI-imposed prohibition of scheduled services,” the department said, declining to comment on Tuesday on the statement from the Indian government.

The Indian ministry said U.S., French and German authorities and others had sought permission for their carriers to participate “in the transportation of passengers along the lines being conducted by Air India.”

The ministry noted the Air India flights are “increasingly carrying Indians and citizens of other countries outbound to countries where they are normally resident.”

Airlines for America, a group representing major U.S. carriers including Delta Air Lines, United Airlines and American Airlines, said in a statement it supported “the Department of Transportation's actions to ensure U.S. airlines have a fair and equal opportunity to compete in the U.S.-Indian market.”"

10:20 AM

Money supply surge signals uncertainty amid pandemic

Heightened uncertainty caused by the COVID-19 pandemic has led to a surge in currency in circulation as people hoard cash or park money in accessible deposits to safeguard themselves against salary cuts or job losses.

According to RBI data, M3 money supply rose 6.7% in the first five months compared with the same period last year, the highest growth in seven years.

Currency in circulation, which measures money with the public and in banks, has also surged.

A rise in money supply usually is seen as a leading indicator of growth in consumption and business investments, but the rise this time is unlikely to bolster either, analysts said.

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10:00 AM

Sensex jumps over 200 points in early trade; Nifty tops 10,500

The benchmark stock indices have made a strong start to the day.

PTI reports: "Equity benchmark Sensex advanced over 200 points in early trade on Wednesday tracking gains in index-heavyweights Reliance Industries and ITC amid sustained foreign fund inflows.

After touching a high of 35,679.74, the 30-share index was trading 220.35 points, or 0.62 per cent, up at 35,650.78.

Similarly, NSE Nifty rose 56.45 points, or 0.54 per cent, to 10,527.45.

Asian Paints was the top gainer in the Sensex pack, rallying around 4 per cent, followed by ITC, Bajaj Auto, Bajaj Finance, NTPC and Titan.

On the other hand, HCL Tech, IndusInd Bank, PowerGrid and Infosys were among the laggards.

In the previous session, the BSE barometer rallied 519.11 points, or 1.49 per cent, to close at 35,430.43; while the NSE Nifty soared 159.80 points, or 1.55 per cent, to end at 10,471.

On a net basis, foreign institutional investors bought equities worth Rs 168.96 crore in the capital market on Tuesday, provisional exchange data showed.

According to analysts, news of disengagement between India and China has relieved participants, after days of heated arguments.

Further, positive sentiment in global markets and unabated foreign fund inflows also supported domestic equities, they said.

On the global front, bourses in Shanghai and Seoul were trading with gains in early deals, while those in Hong Kong and Tokyo were in the red.

Stock exchanges on Wall Street ended on a positive note in overnight session.

International oil benchmark Brent crude futures fell 0.52 per cent to USD 42.41 per barrel."

 

9:40 AM

Companies in India face further rating downside in case of prolonged downturn: S&P Global

More bad news for Indian companies amid an extremely uncertain economic recovery scenario.

PTI reports: "Ratings agency S&P Global Ratings on Wednesday said companies in India face further potential rating downside if the recovery in corporate earnings is prolonged beyond 18 months.

About 35 per cent of credit ratings on Indian corporates have either a negative outlook or are on “CreditWatch” with negative implications, S&P Global ratings said in a statement.

“That increases to one-in-two ratings if we exclude debt-free companies in the IT sector,” it added.

Commenting on scenario, S&P Global Ratings credit analyst Neel Gopalakrishnan said, “for most of our ratings, we assume corporate earnings will recover over the next 12-18 months. There is downside risk to ratings if the downturn becomes more prolonged than we had expected.”

All but two out of seven companies with negative outlooks or on CreditWatch negative have speculative-grade ratings. Since these companies are more sensitive to earnings volatility, the downside risk increases even further, Gopalakrishnan added.

The ratings agency said corporates in India, especially the speculative-grade ones, were not well positioned for a downturn because of their debt-funded capital expenditure and acquisitions over the past two to three years.

“This had already led to lower ratings. The number of single ‘B’ ratings, for example, increased to about 33 per cent of total ratings at the end of 2019, from 13 per cent in 2016. However, most India companies had limited rating headroom for a downturn, especially one as sudden and sharp as the COVID-19 pandemic,” it said.

Given the weakened operating environment, S&P Global Ratings said it expects EBITDA for companies in sectors sensitive to the economy, such as automobiles and commodities, to drop as much as 25-30 per cent year-on-year this fiscal.

“We therefore, expect credit metrics to weaken in fiscal 2021 before recovering in fiscal 2022 with an earnings rebound. The credit metrics at the end of fiscal 2022 are still likely to be weaker than we had previously expected, resulting in lower ratings than prior to the pandemic,” it said."

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