Today's top business news: Shares bounce back, RBI Governor says India's economic recovery stronger than expected, former CEA warns against allowing business houses into banking, and more

Traders looks at the giant screen (not in picture) at the entrance of Bombay Stock Exchange in Mumbai. File   | Photo Credit: Prashant Nakwe

The benchmark stock indices have bounced back with gains this morning after yesterday's sharp fall.

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

4:30 PM

Recovery after Covid-19 crisis faster than one after 2008 crisis

4:00 PM

Sensex rallies 432 pts on F&O expiry; financial stocks shine

A strong comeback for stocks after yesterday's fall.

PTI reports: "Equity benchmark Sensex rallied 432 points on Thursday, tracking gains in banking and financial stocks as the November series derivatives expired amid largely positive cues from global markets.

After a volatile session, the 30-share BSE index ended 431.64 points or 0.98 per cent higher at 44,259.74.

Similarly, the broader NSE Nifty surged 128.60 points or 1 per cent to 12,987.

Tata Steel was the top gainer in the Sensex pack, rising around 5 per cent, followed by Bajaj Finance, Bajaj Auto, HDFC, HCL Tech and Titan.

On the other hand, Maruti, ONGC, IndusInd Bank and Tech Mahindra were among the laggards.

Domestic equities witnessed sharp recovery led by sharp rebound in banking, financial services and insurance (BFSI) stocks and metals.

BFSIs continued to be a key driving force for the market, said Binod Modi, Head- Strategy at Reliance Securities.

“Improved prospects of earnings recovery in the backdrop of improvement in collection efficiencies, better outlook for credit costs and possibility of reversal of provisions due to resolution of select large accounts along with better valuations attracted investors in BFSIs,” he noted.

Heavy buying sentiment was also seen as November derivative contracts expired, traders said.

Elsewhere in Asia, bourses in Shanghai, Tokyo, Hong Kong and Seoul ended with significant gains.

Stock exchanges in Europe, however, began of a tepid note.

Meanwhile, Brent crude futures, the global oil benchmark, was trading 1.32 per cent higher at USD 47.89 per barrel."

3:30 PM

Capital account convertibility will continue to be a process, rather than an event: RBI Guv

The RBI Governor on a long-pending reform.

PTI reports: "India will continue to approach capital account convertibility as a process rather an event , Reserve Bank of India (RBI) Governor Shaktikanta Das said on Thursday.

The central bank chief said the capital account is convertible to a great extent at present and enumerated the specifics on both inward and outward flows which are allowed.

It can be noted that capital account convertibility is a very sensitive subject as it deals with liberalisation of capital transactions into and out of a country. India, which started opening up on this front with the reforms of the early 1990s, is partially convertible right now with caps and other restrictions.

Capital account convertibility will continue to be approached as a process rather than an event, taking cognisance of prevalent macroeconomic conditions, Das said, speaking at an event organised by the Foreign Exchange Dealers’ Association of India (FEDAI).

He added that a long-term vision with short- and medium-term goals is the way ahead on this.

Das said foreign portfolio investment (FPI) in Indian debt markets has been expanded within calibrated macro-prudential norms and added that limits under the medium-term framework for investment by FPIs have been gradually increased and procedures rationalised.

At present, inward foreign direct investment (FDI) is allowed in most sectors and outbound FDI by Indian incorporated entities is allowed as a multiple of their net worth, he said, pointing out that there has been a liberalisation in the external commercial borrowing framework as well to include expanding eligible borrowers.

Internationalisation of financial markets can lower transaction costs with efficiency gains, he said.

Over the last three decades, India has undergone a transformation from being a virtually closed economy to one that is globally connected and open to a much larger volume of international transactions and capital flows than before, he added.

Das said allowing banks in India to deal in the offshore rupee derivative markets was a major milestone towards opening up of the markets and added that the move is expected to achieve the objectives of reducing the segmentation between onshore and offshore markets and also reducing volatility."

3:00 PM

Govt. allots ₹2,000-cr. for infra funding

The Cabinet on Wednesday approved the infusion of ₹6,000 crore as equity into a new debt platform to raise up to ₹1.1 lakh crore for financing infrastructure projects by 2025.

Of the ₹6,000-crore equity to be injected by 2021-22, the Cabinet has approved ₹2,000 crore for disbursal this year subject to the funds being required.

Finance Minister Nirmala Sitharaman had announced the plan to provide equity capital to the debt platform sponsored by the National Investment and Infrastructure Fund (NIIF), as part of the last round of stimulus measures announced on November 12.

“In view of the unprecedented financial situation and availability of limited fiscal space due to the prevailing COVID-19, the proposed amount may be disbursed only if there is readiness and demand for debt raising,” the government said in an official statement detailing the Cabinet’s decision.

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2:30 PM

Power sector employees protest against privatization of discoms

Vested interests continue to oppose privatization.

PTI reports: "Power sector employees on Thursday held nationwide protests against the government’s decision to privatize discoms, the All India Power Engineers Federation (AIPEF) said.

They also demanded withdrawal of Electricity (Amendment) Bill 2020 and scrapping of the standard bidding document (SBD).

“Lakhs of power sector employees including engineers, today held nationwide protests seeking the withdrawal of Electricity (Amendment) Bill 2020, scrapping of SBD and opposed the privatization of power distribution companies (discoms) in states and union territories,” AIPEF spokesperson V K Gupta said in a statement.

Gupta said protest meetings were held in all the states and union territories, including Uttar Pradesh, Punjab, Haryana, Jammu & Kashmir, Maharashtra, Telangana, Tamil Nadu, West Bengal, Gujarat, Madhya Pradesh, Assam, among others.

He noted that the power engineers did not join Thursday’s strike called by ten central trade unions and just staged a simple protest to highlight their issues.

Gupta claimed that the government is hell-bent on creating private monopolies in the power sector with the sole motive of helping corporate houses.

The SBD document proposes that discoms in all the states and union territories undertake privatization.

The state government will provide subsidised bulk power for the successor entity for making it an independently financially viable entity. The assets of discoms will be leased on a token payment.

The federation opposes the proposed transfer of public assets to the private sector as this will result in a high tariff for the consumers, he said.

The AIPEF also demanded withdrawal of the process of privatization of electricity in states and union territories and cancel all existing privatization and franchises in the power sector.

He claimed that the Centre is grossly misleading the public by saying that the electricity will be cheaper after privatization.

The private discoms are allowed to take a minimum of 16 per cent profit, which would increase the power tariff to almost Rs 10 per unit for consumers.

The central government was looking at abolishing the subsidy and cross-subsidy in the supply of electricity, which would make the commodity more expensive for the general consumer categories and cheaper for industrial consumers, the statement said.

The provisions in the draft Electricity Amendment Bill to allow private franchisees or sub-licensee will only lead to cherry-picking of remunerative areas affecting the financial viability of the discoms, it added.

Gupta noted that the privatization and urban distribution franchisee model have miserably failed in all the places.

Regarding direct benefit transfer of the subsidy to consumers, the state governments must have the freedom to adopt payment of subsidy as per their requirements, AIPEF said.

Privatization of electricity discom in Chandigarh has been opposed by the consumers and resident welfare associations as well as political parties.

Puducherry government has also strongly opposed privatization of electricity, it added."

2:00 PM

Proposal to allow business houses into banking a ‘good-looking’ step in ‘bad direction’:Kaushik Basu

More opposition towards the RBI's latest banking proposal.

PTI reports: "The RBI working group’s proposal to allow corporate houses to set up banks is a ‘good-looking’ step in a ‘bad direction’ and may lead to crony capitalism and eventual financial instability, former chief economist of World Bank Kaushik Basu said on Thursday.

Basu further said that there is a good reason why all successful economies have a clear dividing line between industries and corporations on the one hand, and banks and lending organizations on the other.

“The proposal from the recently set up Internal Working Group of the Reserve Bank of India, allowing Indian corporate houses to own and run banks is a good-looking step in a bad direction,” he told PTI.

Basu, who was also chief economic adviser during the UPA period, said at first sight, this may look good because the close connection between industrial corporations wanting to borrow and banks wanting to lend speeds up lending activities and makes the banking sector look more efficient.

“But such connected lending is almost invariably a step towards crony capitalism, where a few big corporations capture the business space in the country, slowly edging out the smaller players.

“Also, connected lending can lead to eventual financial instability,” he argued.

Last week, an Internal Working Group (IWG) set up by the Reserve Bank of India (RBI) made various recommendations, including that large corporates may be permitted to promote banks only after necessary amendments to the Banking Regulation Act.

“There is a lot of evidence that connected lending was the biggest cause of the build-up of bad loans in 1997 in Asia, which resulted in the East Asian Crisis that began in Thailand and turned out to be one of the biggest financial crashes in the world,” he pointed out.

India’s Banking Regulation Act, 1949, which was originally the Banking Companies Act, 1949 is a very well-crafted law, the eminent economist said adding it reflects the sophistication of the founders of modern India. Basu, however, noted that times have changed and there are reasons to amend some parts of it.

“I think creating avenues for some Non-Banking Financial Companies (NBFCs), which are not controlled by industrial houses, into proper banks is worth considering seriously.

“But the change in law that will allow industrial houses to own and run banks is a completely wrong move and a recipe for two possible outcomes -- crony capitalism and financial crash,” he opined.

Recently, former RBI Governor Raghuram Rajan and ex-Deputy Governor Viral Acharya in a joint article had said that the RBI working group’s proposal to allow corporate houses to set up banks is a “bombshell” and at this juncture, it is more important to stick to the tried and tested limits on involvement of business houses in the banking sector."

1:30 PM

SC dismisses Skoda Volkswagen’s plea to quash FIR for alleged use of cheat device in car

The Supreme Court on Thursday dismissed a plea by German car maker Skoda Auto Volkswagen India challenging an FIR registered in Uttar Pradesh by a customer over the alleged use of cheat device in its diesel car.

A Bench of Chief Justice S.A. Bobde and Justices A.S. Bopanna and V. Ramasubtramanian pronounced the verdict and dismissed the plea by the automobile maker.

On November 4, the top court had reserved the verdict on the plea saying as to why should not the investigation go on in the case.

During the hearing the automobile maker argued that in December 2015 the complaint was made in the National Green Tribunal and in March 2019 a penalty was imposed on it which was stayed by the apex court.

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1:00 PM

Economic recovery stronger than expected, need to be watchful of demand sustainability: Das

More kudos for the economic recovery even as doubts appear over its sustainability.

PTI reports: "Reserve Bank of India (RBI) Governor Shaktikanta Das on Thursday said the country’s economy has recovered stronger than expected from the initial impact of the COVID-19 pandemic, but there is a need to be watchful of demand sustainability after the end of festivities.

Speaking at the annual day event of Foreign Exchange Dealers’ Association of India (FEDAI), Das said there are downside risks to growth across the world and also in India.

It can be noted that the Indian economy contracted by 23.9 per cent in the first quarter of the fiscal year, and the RBI expects the economy to shrink by 9.5 per cent in FY21. However, there has been recovery after the opening up of the lockdown restrictions, especially during the festive season.

After witnessing a sharp contraction in the economy by 23.9 per cent in Q1 and a multi-speed normalisation of activity in Q2, the Indian economy has exhibited stronger than expected pick-up in momentum of recovery, Das said.

Even as growth outlook has improved, downside risks to growth continue due to recent surge in infections in parts of Europe and also in parts of India, he said.

We need to be watchful about the sustainability of demand after the festivals and a possible reassessment of market expectations surrounding the vaccine, he said.

Das said regulatory reforms have moved the financial markets to the next trajectory amid the pandemic and affirmed RBI’s commitment to ensure an orderly conduct in the markets.

He also said that India will continue to approach capital account convertibility as a process, rather than as an event within a broad macroeconomic framework."

12:30 PM

France orders tech giants to pay digital tax

The French Finance Ministry has sent out notices to big tech companies liable for its digital service tax to pay the levy as planned in December, the ministry said on Wednesday.

France suspended collection of the tax, which will hit companies like Facebook and Amazon, early this year while negotiations were underway at the Organisation for Economic Cooperation and Development on an overhaul of international tax rules.

The Finance Ministry has long said it would collect the tax in December as planned if the talks proved unfruitful by then, which is what happened when the nearly 140 countries involved agreed last month to keep negotiating until mid 2021.

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12:00 PM

Operations at PSU banks partially hit due to trade union strike

An update on today's bank union strike.

PTI reports: "Banking operations in public sector banks across the country were partially affected on Thursday as some bank unions joined the one-day nationwide strike called by central trade unions.

Cash transaction including deposits and withdrawal at branches, forex and government transactions have been impacted in many public sector banks where participating unions are strong.

However, State Bank of India and private sector banks are functional.

Ten central trade unions, except Bharatiya Mazdoor Sangh, are observing the nationwide general strike to protest against various policies of the central government.

Many lenders including Bank of Maharashtra had informed customers in advance that normal working could be affected at the branches and offices due to the strike.

The All India Bank Employees’ Association (AIBEA), All India Bank Officers Association (AIBOA) and Bank Employees Federation of India (BEFI) are participating in the strike.

Besides, All India Bank Officers’ Confederation (AIBOC) has extended fraternal support to strike.

The strike by unions is against anti-labour policy of the government and bank employees are protesting against the privatisation of banks, outsourcing and contract system in jobs in the sector, AIBEA general secretary C H Venkatachalam said.

“Lok Sabha in its recently held session has passed three new labour enactments by dismantling existing 27 enactments in the name of ‘Ease of Business’, which are purely in the interest of corporates.

“In the process, 75 per cent of workers are being pushed out of the orbits of labour laws since they will have no legal protection under the new enactment,” he said.

Ten central unions - Indian National Trade Union Congress (INTUC), All India Trade Union Congress (AITUC), Hind Mazdoor Sabha (HMS), Centre of Indian Trade Unions (CITU), All India United Trade Union Centre (AIUTUC), Trade Union Co-ordination Centre (TUCC) and Self-Employed Women’s Association (SEWA) have called for the general strike."

11:30 AM

Amazon fined for not displaying mandatory information about products

The government has imposed a penalty on e-commerce major Amazon for not displaying mandatory information, including the country of origin, of products sold on its platform, according to an official order.

Last month, the consumer affairs ministry had issued notices to e-commerce majors Flipkart and Amazon for not displaying such information.

The ministry has imposed a fine of ₹25,000 on Bengaluru-based Amazon Seller Services as well as each of its directors as per the provisions of the Legal Metrology Act, 2009 and the Legal Metrology (Package Commodities) Rules, 2011.

In case of Flipkart, a senior ministry official told PTI, “Upon examination, no contravention was noticed and hence no action has been initiated.”

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11:00 AM

European banks suffer a blow

 

10:40 AM

Rupee rises 7 paise to 73.84 against US dollar in early trade

The Indian currency has bounced back along with stocks.

PTI reports: "The rupee appreciated 7 paise to 73.84 against the US dollar in the opening session on Thursday on sustained foreign fund inflows and weak American currency.

At the interbank forex market, the domestic unit opened at 73.85 against the US dollar, and gained ground to touch 73.84 against the greenback, registering a rise of 7 paise over its previous close.

On Wednesday, the rupee appreciated by 10 paise to close at nearly a one-month-high of 73.91 against the US dollar.

Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was down 0.07 per cent to 91.93.

“Foreign fund inflows into the domestic equity markets could also help the local unit. However, these flows are being continuously mopped up by the central bank and could cap gains in the currency,” Reliance Securities said in a research note.

“The major trigger point for the currency markets could come on Friday as investors awaited economic growth data for the second quarter,” the note added.

Traders said lack any major cues from the US could keep the currency in a small trading range as US markets are shut on Thursday on account of Thanksgiving holiday.

Foreign institutional investors were net buyers in the capital market as they purchased shares worth Rs 24.20 crore on a net basis on Wednesday, according to exchange data.

On the domestic equity market front, the 30-share BSE benchmark Sensex was trading 53.35 points lower at 43,774.75, and the broader NSE Nifty fell 14.05 points to 12,844.35.

Brent crude futures, the global oil benchmark, rose 0.43 per cent to USD 48.82 per barrel."

10:20 AM

Cabinet okays merger of LVB with DBS Bank India

The Cabinet on Wednesday gave the green light to the merger of troubled Lakshmi Vilas Bank (LVB) with DBS Bank India Ltd. (DBIL), paving the way for lifting of restrictions placed on withdrawals from the bank.

Union Information and Broadcasting Minister Prakash Javadekar said that the merger would secure the interests of LVB’s depositors as well as protect the jobs of its employees.

“20 lakh depositors and ₹20,000 crore of deposits are secure. The Reserve Bank of India (RBI) has been told to act against those who brought the bank to the brink of closure,” the Minister said, briefing reporters after the Cabinet meeting chaired by Prime Minister Narendra Modi. “Liability will be fixed and those who have made mistakes will be punished,” he added.

LVB had been placed under moratorium on November 17 and withdrawals were restricted to ₹25,000 a month for each account holder, based on an application by the RBI to protect depositors’ interests. The central bank, in consultation with government, had also superseded LVB’s board and appointed an administrator.

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10:00 AM

Shares bounce as auto, drug stocks gain

A bounceback in the stock indices after yesterday's sharp correction.

Reuters reports: "Indian shares rose on Thursday after a sharp drop in the last session, as drug and automotive stocks advanced against a backdrop of improving economic outlook for the year ahead.

The NSE Nifty 50 index was up 0.32% at 12,899.50 by 0400 GMT, while the S&P BSE Sensex was 0.33% higher at 43,973.27. Both indexes had hit record highs on Wednesday before settling more than 1.5% lower.

Construction group Larsen & Toubro and automaker Mahindra and Mahindra were among the top boosts to the Nifty 50. The Nifty pharmaceuticals index climbed 1% and was among the top sectoral gainers.

India's economy is expected to recover early next year from recession, but at a modest pace, according to a majority of economists in a Reuters poll who said their upgraded growth predictions were based on the progress of COVID-19 vaccines.

Other Asian stock markets were also trading higher on vaccine optimism and prospects of more economic stimulus under the incoming Biden administration in the United States."

9:30 AM

NSE warned Future Retail of action in Amazon row

The National Stock Exchange (NSE) privately warned Future Retail it risked regulatory action for not making timely market disclosures about efforts by Amazon.com to block a disputed asset sale, according to e-mails reviewed by Reuters.

Previously unreported e-mails exchanged between the NSE and Future show the stock exchange repeatedly requested the company to submit more details of the arbitration order, seeking details of possible impact on financials, lenders and the Reliance deal.

On October 27, NSE asked Future why it had not disclosed the commencement of the arbitration proceedings and not shared the impact of the order. Future in response said it believed a disclosure wasn’t required.

NSE’s listing compliance division rejected that argument. It demanded a series of disclosures be made within hours, “failing which appropriate actions may be initiated”, the emails showed.

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Printable version | Jan 19, 2021 2:20:48 PM | https://www.thehindu.com/business/businesslive-26-november-2020/article33182242.ece

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