The benchmark stock indices have opened the day on a negative note after the steep correction witnessed yesterday but have since recovered to clock gains.
Join us as we follow the top business news through the day.
Why blue states' economies are under-performing
Sensex rallies 377 points; Kotak Bank zooms 12%
A great day for stocks after yesterday's steep correction.
PTI reports: "Equity benchmark Sensex rallied 377 points on Tuesday, tracking massive buying in Kotak Mahindra Bank after the lender posted strong quarterly earnings.
The 30-share BSE index ended 376.60 points or 0.94 per cent higher at 40,522.10. Similarly, the broader NSE Nifty surged 121.65 points or 1.03 per cent to 11,889.40.
Shares of Kotak Mahindra Bank soared around 12 per cent after the lender reported a 22 per cent growth in consolidated net profit at Rs 2,947 crore for the July-September quarter.
Without denying speculations about a merger with smaller rival IndusInd Bank, the private sector lender said the objectives of its recent Rs 7,000-crore capital raising exercise included acquisitions but added that it will be using the money judiciously.
According to Emkay Global Financial Services, despite subdued credit growth, Kotak Bank reported a strong profit, mainly due to high treasury gains (including equity) and contained provisions as the bank believes that it is well guarded for the incoming asset quality stress.
Other gainers included Nestle India, Asian Paints, Bajaj Finance, NTPC, L&T, Axis Bank and Bajaj Auto.
On the other hand, TCS, ONGC, Infosys, HDFC and SBI were among the laggards.
Bulls took centre stage as Kotak Bank led the financial pack’s rally. Afternoon trade witnessed FMCG taking control supported by cement stocks. Broader markets also saw participation across select counters, said S Ranganathan, Head of Research at LKP Securities.
On the global front, bourses in Hong Kong, Seoul and Tokyo ended on a negative note, while Shanghai was in the positive territory.
Stock exchanges in Europe were also trading in the red in early deals amid restrictions imposed on economic activities in countries like Spain and Italy.
Meanwhile, international oil benchmark Brent crude was trading 0.76 per cent higher at USD 41.12 per barrel.
In the forex market, the rupee settled 13 paise higher at 73.71 against the US dollar."
Oil edges up on U.S. Gulf shutdowns, outlook weak
Some temporary relief for the oil market which has been plagued this year by low demand.
Reuters reports: "Oil rose on Tuesday towards $41 a barrel as oil companies shut down some U.S. Gulf of Mexico oil output due to a hurricane, although surging coronavirus infections and rising Libyan supply limited gains.
Companies including BP, Chevron and Equinor ASA evacuated rigs, and so far producers have shut 16%, or 293,656 barrels per day (bpd) of oil output due to Hurricane Zeta.
Brent crude was up 13 cents, or 0.3%, at $40.59 a barrel by 0915 GMT. U.S. oil gained 27 cents, or 0.7%, to $38.83. Both contracts fell more than 3% on Monday.
“Whilst Hurricane Zeta could provide a price relief under the current circumstances, it will be very brief,” said Tamas Varga of oil broker PVM. “The mood is, indeed, souring.”
Oil has declined because of rising coronavirus infections globally and a lack of progress on agreeing a U.S. coronavirus relief package. Still, U.S. House of Representatives Speaker Nancy Pelosi is hopeful a deal can be reached before the Nov. 3 election.
“The outlook for road fuels demand is souring on rising COVID-19 infections,” said analysts at JBC Energy.
Libyan production is expected to reach 1 million bpd in coming weeks, the country's national oil company said on Friday, a quicker return than many analysts had predicted, complicating efforts by other OPEC members and allies to restrict output.
The Organization of the Petroleum Exporting Countries and allies, known as OPEC+, are planning to increase production by 2 million bpd from January after record output cuts this year.
But Russian President Vladimir Putin, speaking last Thursday, did not rule out extending the cuts for longer.
The latest round of U.S. inventory figures due later on Tuesday and on Wednesday are expected to show rising supplies. Analysts expect crude stocks to rise by about 1.1 million barrels."
Rupee settles 13 paise higher at 73.71 against US dollar
The rupee managed to stage a strong recovery today after opening the day with losses.
PTI reports: "The rupee pared early losses and settled 13 paise higher at 73.71 against the US dollar on Tuesday, tracking positive domestic equities.
At the interbank forex market, the domestic unit opened on a weak note at 73.94 against the greenback, but soon recovered the lost ground and finally closed at 73.71, registering a gain of 13 paise over its previous close of 73.84 against the US currency.
During the session, the domestic unit witnessed an intra-day high of 73.71 and a low of 73.94 against the greenback.
Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, rose 0.07 per cent to 93.11.
On the equity market front, BSE index Sensex was trading 230.14 points higher at 40,375.64, and the broader NSE Nifty advanced 77.20 points to 11,844.95.
Foreign institutional investors were net sellers in the capital market as they offloaded shares worth Rs 119.42 crore on a net basis on Monday, according to exchange data.
Brent crude futures, the global oil benchmark, increased 0.52 per cent to USD 40.67 per barrel."
Gold prices gain as coronavirus cases surge
The second wave in coronavirus cases is turning out to be bullish for gold.
Reuters reports: "Gold prices rose on Tuesday after a fresh wave of coronavirus infections raised concerns over a global economic recovery and bolstered the precious metal's safe-haven appeal. Spot gold gained 0.3% to $1,908.02 per ounce by 0321 GMT. U.S. gold futures were up 0.3% at $1,911.20.
“With rising virus cases globally, especially in the west, gold's appeal as a safe haven is coming to the fore,” said Howie Lee, economist at OCBC Bank. However, gold is likely to stay close to the $1,900 level until the U.S. presidential election outcome becomes clearer, Lee added.
Many countries, including the United States, Russia and France, are setting records for COVID-19 infections and forcing some of them to impose new restrictions. Uncertainty over fresh U.S. stimulus has kept gold trading in a range over the past few weeks, with the metal now about 8% away from a record high of $2,072.50 hit in August.
While U.S. House Speaker Nancy Pelosi expressed hope that an agreement can be reached on the coronavirus relief package before the elections, White House economic adviser Larry Kudlow told reporters on Monday that talks have slowed. Gold, widely viewed as a hedge against inflation and currency debasement, has gained about 26% this year boosted by unprecedented stimulus measures from central banks and governments globally to blunt the economic hit of the pandemic.
“Gold is still looking for that elusive inflationary spark,” Stephen Innes, chief global market strategist at Axi said in a note. Also supporting gold, the U.S. dollar dipped 0.1% against a basket of currencies. On the technical front, spot gold may end its bounce around a resistance at $1,912 per ounce and then retest a support at $1,887, according to Reuters technical analyst Wang Tao. Silver climbed 0.7% to $24.48 per ounce. Platinum rose 0.7% to $876.05 and palladium gained 0.3% at $2,358.77."
Govt. to seek Parliament nod for ₹37,000-crore spending on infra development
The government will seek Parliament’s approval for ₹37,000-crore additional spending on infrastructure development in the second batch of supplementary demands for grant.
Earlier this month, Finance Minister Nirmala Sitharaman had announced additional budget of ₹25,000 crore as capital expenditure (capex) on roads, defence, water supply, urban development and domestically produced capital equipment.
Besides, the central government approved issuance of a special interest-free 50-year loan to states of ₹12,000 crore for infrastructure development.
Approval for this additional spending will be sought through second supplementary demands for grants, sources said.
Asia's crude demand ex-China shows tentative recovery signs: Russell
Signs of recovery in global fuel demand.
Reuters reports: "There are emerging signs that crude oil demand is gradually recovering in major Asian countries outside China, a key pre-condition to sustaining any bullish view of the market.
While China's crude imports have been record-breaking, with the five highest months being the May to September period, the rest of Asia has struggled amid weaker demand caused by lockdowns aimed at curbing the spread of the novel coronavirus.
But China's run of strong imports is set to end as the last of the cheap crude bought during April's brief price war between top exporters Saudi Arabia and Russia is finally unloaded. That means it's vital for any optimistic view of the crude market that the rest of Asia shows signs of life.
India, the second-biggest importer in Asia behind China, is perhaps the best case for optimism, with imports and refinery utilisation recovering, although not quite to pre-pandemic levels.
Refinery throughput reached the highest in six months in September, gaining 13.4% from the prior month to 4.33 million barrels per day (bpd), according to government data released on Oct. 23.
While this was the best figure since March - the month when India's first lockdowns were imposed - the September throughput was still 8.7% below the same month last year.
India's crude imports may also have turned the corner. Industry data showed September's arrivals of 3.48 million bpd were 11.9% lower than August's 3.95 million bpd, but in year-on-year terms the drop was the slowest rate of decline since May, the data showed.
India's crude imports may also post a stronger October, with Refinitiv Oil Research estimating that arrivals will reach 3.91 million bpd, which would be the highest since April.
Fuel demand in India also appears to be recovering, with preliminary data showing diesel sales are likely to have risen in October for the first time since coronavirus restrictions were put in place in March.
Diesel sales by India's three state fuel retailers rose 8.8% year on year in the first half of October, according to provisional data compiled by Indian Oil Corp, the country's biggest refiner and fuel retailer.
RECOVERY SIGNS?
Japan, Asia's third-largest crude importer, presents a more mixed picture, with Refinitiv data estimating October imports at 2.05 million bpd, down from 2.42 million bpd in September and 2.36 million bpd in August.
However, the soft imports come as several refineries take units off line for scheduled maintenance, suggesting that once these return to service, imports will pick up again.
South Korea, which may overtake Japan this year as Asia's biggest crude importer after China and India, is showing some recovery signs: according to Refinitiv estimates October will see 2.95 million bpd being discharged, up from 2.6 million bpd in September and 2.5 million bpd in August.
If October's imports are in line with Refinitiv's forecast, it would put South Korea back to levels similar to those that prevailed prior to the coronavirus pandemic.
There are also indications that crude imports by other Asian countries are recovering somewhat, with Refinitiv estimating that 2.91 million bpd will be imported by countries outside the top six in October, up from 2.34 million bpd in September.
Still, it's worth noting that even the recovery in import demand in the rest of Asia may only be enough to compensate for the slowing of China's imports after their record run, not expand the region's overall imports.
It's still too early to switch to a bullish view of Asian crude demand, but there are signs of recovery across the region."
RBI asks lending institutions to implement waiver of interest on interest scheme
Banks get a push from the RBI to implement the government's interest-on-interest waiver programme.
PTI reports: "The Reserve Bank on Tuesday asked all lending institutions, including non-banking financial companies, to implement the waiver of interest on interest for loans up to Rs 2 crore for the six months moratorium period beginning March 1, 2020.
On October 23, the government had announced the scheme for grant of ex-gratia payment of difference between compound interest and simple interest for six months to borrowers in specified loan accounts.
The scheme mandates ex-gratia payment to certain categories of borrowers by way of crediting the difference between simple interest and compound interest for the period between March 1, 2020 to August 31, 2020 by respective lending institutions.
The government had asked the lending institutions to complete the exercise of crediting the amount in the accounts of borrowers by November 5.
“All lending institutions are advised to be guided by the provisions of the Scheme and take necessary action within the stipulated timeline,” the RBI said in a notification.
The finance ministry had issued the operational guidelines in the backdrop of the Supreme Court’s direction to implement the interest waiver scheme.
The apex court on October 14, directed the Centre to implement “as soon as possible” interest waiver on loans of up to Rs 2 crore under the RBI moratorium scheme in view of the COVID-19 pandemic saying the common man’s Diwali is in the government’s hands.
Housing loans, education loans, credit card dues, auto loans, MSME loans, consumer durable loans and consumption loans are covered under the scheme.
As per the scheme, the lending institutions shall credit the difference between compound interest and simple interest with regard to the eligible borrowers in respective accounts for the said period irrespective of whether the borrower fully or partially availed the moratorium on repayment of loan announced by the RBI on March 27, 2020.
The scheme is also applicable on those who have not availed the moratorium scheme and continued with the repayment of loans.
The lending institutions after crediting the amount will claim the reimbursement from the central government.
The RBI had announced a moratorium on repayment of debt for six months beginning March 1, 2020 to help businesses and individuals tide over the financial problems on account of disruption in normal business activities."
Kotak Mahindra Bank shares continue to gain; zoom nearly 10%
News of acquisition of its rival IndusInd Bank is boosting Kotak shares.
PTI reports: "Shares of Kotak Mahindra Bank further gained nearly 10 per cent in early trade on Tuesday after the company reported a 22 per cent growth in consolidated net profit for the July-September quarter.
The stock jumped 9.75 per cent to Rs 1,553.90 on the BSE.
At the NSE, it zoomed 9.67 per cent to Rs 1,554.
On Monday, the shares of Kotak Mahindra Bank gained over 2 per cent.
Despite a marginal dip in loan book, reliance on credit substitutes in a market impacted by slowing economic growth helped Kotak Mahindra Bank report a 22 per cent growth in consolidated net profit at Rs 2,947 crore for the July-September quarter.
Without denying the speculation about a merger with smaller rival IndusInd Bank, the private sector lender said the objectives of a recent, Rs 7,000-crore capital raising exercise included acquisitions but added that it will be using the money judiciously.
On a standalone basis, it reported a profit after tax of Rs 2,184 crore for the July-September quarter, up 27 per cent compared to the year-ago period. Total income (standalone) rose to Rs 8,288.08 crore in the July-September period as against Rs 7,986.01 crore in the year-ago period.
The core net interest income grew by 17 per cent to Rs 3,913 crore despite a nearly 4 per cent decrease in loan book and the net interest margin coming down to 4.52 per cent from 4.60 per cent.
Its joint managing director Dipak Gupta said that for the last few months, the bank has been depending more on credit substitutes like certificate of deposits, commercial paper, non-convertible debentures for its earnings by deploying its deposits."
Future shrugs off Amazon challenge
A day after Amazon.com Inc. secured an interim order from Singapore International Arbitration Centre (SIAC) restraining Future Retail Ltd. (FRL) and Reliance Retail Ventures Ltd. (RRVL) to go ahead with their ₹24,713 crore assets acquisition deal, Future Retail said it was not party to the agreement under which Amazon has invoked arbitration proceedings and it would proceed with the proposed transaction ‘unhindered’ without any delay.
RRVL has also said that it would enforce its rights without delay. “The company has received a communication from the SIAC, enclosing an interim order of the Emergency Arbitrator in the arbitration proceedings under shareholders’ agreement between Amazon, Future Coupons Private Ltd. and the promoter group,” Future Retail informed the BSE.
“The company is examining the communication and the order. It may be noted that the company is not a party to the agreement under which Amazon has invoked arbitration proceedings,” it said.
Netflix sees slowdown as lockdown eases
Rupee falls 10 paise to 73.94 against US dollar in early trade
The rupee's performance did not reflect the recovery in stocks this morning.
PTI reports: "The rupee slipped 10 paise to 73.94 against the US dollar in opening trade on Tuesday, tracking muted domestic equities.
At the interbank forex market, the domestic unit opened weak at 73.94 against the greenback, showing a fall of 10 paise over its previous close.
On Monday, the rupee had settled at 73.84 against the US currency.
“Market participants continue to re-adjust their positions ahead of the US presidential elections. Risky bets are being taken off the table. Overall mood is that of caution,” said Abhishek Goenka, Founder and CEO, IFA Global.
Goenka further added that markets are unnerved by lack of progress on fiscal stimulus, rising corona cases in Europe and the US and the latest escalation in US-China tensions.
“China’s plan to sanction Boeing Defense, Lockheed Martin over arms sales to China has also spooked investors. Turkish lira depreciating past the 8 mark against the US dollar has skewed sentiment against EM currencies,” he said.
Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, fell 0.10 per cent to 92.95.
On the equity market front, BSE index Sensex was trading 11.80 points higher at 40,157.30, and the broader NSE Nifty advanced 20.55 points to 11,788.30.
Foreign institutional investors were net sellers in the capital market as they offloaded shares worth Rs 119.42 crore on a net basis on Monday, according to exchange data.
Brent crude futures, the global oil benchmark, increased 0.57 per cent to USD 40.69 per barrel."
‘Interest-on-interest waiver to cost exchequer ₹7,500 crore’
More than 40% of system credit and 75% of borrowers stand to benefit from interest-on-interest concession announced by the government, an analysis by Crisil Ratings showed.
It indicated that the ex-gratia payment of interest-on-interest by banks and non-banking financial companies for the moratorium period (between March 1 and August 31) would amount to ₹7,500 crore of benefit for eligible borrowers. Lenders will not be impacted as the Centre had agreed to pick up the tab.
The benefit will be extended to borrowers with outstanding loans (standard as on February 29, 2020) of less than ₹2 crore under select categories, irrespective of whether the moratorium was availed of or not.
Such loans account for more than 40% of systemic credit and 75% of borrowers, Crisil said. The cost to the exchequer would have halved if the waiver were allowed only for cases where moratorium was availed of, it added.
Indian shares fall for second session on losses in banks, metal stocks
The Nifty and the Sensex experienced further losses this morning at open.
Reuters reports: "Indian shares inched lower for a second straight session on Tuesday, pulled down by banking and metal stocks, as rising coronavirus cases globally soured appetite for equities.
The NSE Nifty 50 index fell 0.26% to 11,738.85 by 0400 GMT, while the S&P BSE Sensex was down 0.3% at 40,016.82.
Sentiment was weak across Asia as concerns grew over a second wave of virus infections in the United States and Europe, sending MSCI's gauge of Asia-Pacific stocks outside Japan down 0.43%.
In Mumbai, the Nifty Banking index was down about 0.2%, with Indusind Bank falling 3.35%.
ICICI Bank declined 2.5%, while the country's largest lender State Bank of India fell 2.08%.
The Nifty metals index fell 0.89%.
However, private-sector lender Kotak Mahindra Bank rose 5.6% after it beat expectations for September-quarter profit on Monday.
Telecom operator Bharti Airtel and automaker Tata Motors are scheduled to report earnings later in the day. Their shares were down about 0.3% each in early trading."
Reliance, Future commit to conclude the deal despite Amazon’s legal challenge
A day after Amazon Inc. secured an interim order from Singapore International Arbitration Centre (SIAC) restraining Future Retail Ltd. (FRL) and Reliance Retail Ventures Ltd. (RRVL) to go ahead with their ₹24,713 crore assets acquisition deal, Future Retail said it was not party to the agreement under which Amazon has invoked arbitration proceedings and it would proceed with the proposed transaction ‘unhindered’ without any delay.
RRVL has also said that it would enforce its rights without delay.
“The company has received a communication from the SIAC, enclosing an interim order of the Emergency Arbitrator in the arbitration proceedings under shareholders’ agreement between Amazon, Future Coupons Private Ltd. and the promoter group,” Future Retail informed the BSE.
“The company is examining the communication and the order. It may be noted that the company is not a party to the agreement under which Amazon has invoked arbitration proceedings,” it said.
