The benchmark indices got off to a strong start this morning with gains of well over 1%
Another rating agency has projected that India's economy will witness a sharp correction this year.
Join us as we follow the top business news through the day.
Fed pushes risk into the shadow banking system
Forced lending to cripple banks; NPAs to soar by up to 600 bps in 2 years
Fitch warns about the massive credit risk posed by the government's stimulus package.
PTI reports: "With incremental bank lending making up the bulk of the government’s nearly Rs 21 lakh crore stimulus package, lenders face significant asset quality challenges which can increase their dud loan ratios by up to 6 percentage points over the next two years, warns a report.
The impact of forced lending on banks’ impaired-loan ratios can be anywhere between 200 and 600 basis points (bps), depending on the severity of stress and banks’ individual risk exposures and the higher regulatory provisions, Fitch Ratings said in the report on Thursday.
The agency, however, did not offer a break-up of the NPAs between the state-run and private sector banks.
The stimulus measures include extension of the 90-day moratorium on recognition of impaired loans to 180 days, in addition to several relaxations in bank lending limits, including allowing banks to fund interest on working capital loans.
“These measures will put a heavy onus particularly on state-run banks which already have very weak balance sheets to bail out the affected sectors, due to their quasi-policy role, considering that much of the so-called stimulus measures is in the form of new loans,” the report said."
Sensex rallies 595 points; Nifty tops 9,450
Another good day for stocks, which ended the day up close to 2%
PTI reports: "Equity benchmark Sensex rallied 595 points on Thursday, tracking gains in index-heavyweights HDFC twins, Reliance Industries, L&T and ICICI Bank amid positive cues from global markets.
Extending its gains for the second session, the 30-share index hit a high of 32,267.23 points during the day ahead of the expiry of May derivatives contracts. It finally ended 595.37 points or 1.88 per cent higher at 32,200.59.
Similarly, NSE Nifty jumped 175.15 points or 1.88 per cent to 9,490.10.
L&T was the top gainer in the Sensex pack, spurting over 6 per cent, followed by Hero MotoCorp, HDFC Bank, IndusInd Bank, Maruti, HDFC and HCL Tech.
On the other hand, ITC, SBI and Bharti Airtel ended in the red.
Benchmarks witnessed a broad-based rally on account of short-covering by market participants as May derivatives expired at the end of the session, analysts said.
Further, domestic investors took positive cues from most global markets amid optimism over the reopening of major economies across the world."
ITC ropes in Amway to sell new immunity boosting fruit juices
ITC’s B Natural and Amway India have collaborated to launch the first of its kind B Natural+ range of products. The new B Natural + range will be available in two popular variants – Orange and Mixed Fruit.
As per the retail conglomerate, B Natural intends to provide its consumers the dual benefit of Immunity + Fruit & Fiber with the launch of the B Natural + range.
Addressing a media conference on Thursday, Hemant Malik, Divisional Chief Executive − Foods Division, ITC Ltd said. “At ITC, we are committed to developing world class Indian products that address the needs of the Indian consumer. Given the current health crisis, immunity of the entire family has emerged as a key consumer priority and B Natural proactively spearheaded the endeavour of providing an effective fruit beverage range this summer that could contribute to supporting immunity with a clinically proven ingredient.”
Lockdown has to end, says Kiran Mazumdar-Shaw
One more voice from the business community questioning the utility of prolonging the lockdown.
PTI reports: "With the exodus of migrant labour back to their home states, there is no case for extending the COVID-19-induced lockdown any longer, according to biotechnology veteran Kiran Mazumdar-Shaw, who said the focus now should be to bring any outbreak under control quickly.
The Executive Chairperson of Bengaluru-headquartered biotech major Biocon Ltd said on Thursday their return without controls would cause infections and the states such as Bihar, Uttar Pradesh and Rajasthan should be prepared to meet the possible surge.
“The Lockdown has to end. What we really need now is prepare for tracking any outbreak and quickly bringing it under control. That has to be our strategy going forward. You cannot go on increasing the lockdown,” Mazumdar-Shaw told PTI.
“I think now there is anyway no point in extending the lockdown because of exodus of the migrant labour; they have basically gone to various parts of the country without any controls. So, now there is no point trying to extend lockdown any further. Now, its a question of quickly bringing under control any outbreak,” she said."
Rupee settles 5 paise lower at 75.76 against US dollar
For the second day in a row, the positive sentiment in domestic equities failed to help the rupee.
PTI reports: "The rupee on Thursday settled 5 paise down at 75.76 against the US dollar amid escalating tension between the US and China.
Forex traders said the rupee traded in a narrow range as positive domestic equities and improving risk appetite were offset by a flare-up in US-China tensions.
At the interbank forex market, the rupee opened weak at 75.90, but pared most initial losses and finally settled at 75.76 against the US dollar, down 5 paise over its last close.
It had settled at 75.71 against the US dollar on Wednesday.
During the session, the local unit witnessed an intra-day high of 75.69 and a low of 75.90.
On the domestic equity market front, the 30-share benchmark Sensex was quoting 437.12 points higher at 32,042.34 and the broader Nifty rose 136.30 points to 9,451.25.
The dollar index, which gauges the greenback’s strength against a basket of six currencies, rose by 0.02 per cent to 99.07."
Eligible MSMEs to get offer of pre-approved loan under relief package
Eligible MSME borrowers will get an offer from their lending institutions for a pre-approved loan under the ₹3 lakh crore scheme announced for micro, small and medium enterprises to help them deal with the impact of COVID-19.
The Guaranteed Emergency Credit Line (GECL) of ₹3 lakh crore was announced as part of ₹21 lakh crore package by the government.
As per a set of FAQs, GECL is a loan for which 100% guarantee would be provided by National Credit Guarantee Trustee Company to Member Lending Institutions (MLIs) — banks, financial institutions and NBFCs.
The FAQs were issued by National Credit Guarantee Trustee Company (NCGTC).
Workers shun city jobs after lockdown ordeal
An account of the ordeal faced by migrant workers due to the nation-wide lockdown.
Reuters reports: "When power loom operator Lokanath Swain boarded a bus home after a 40-day wait in the Indian textile hub of Surat, he took a silent vow - to never return to his workplace of two decades.
Like millions of migrant workers left jobless by India's strict coronavirus lockdown, Swain was left penniless and facing starvation and could only afford the 1,700 km (1,100 miles) trip back to eastern Odisha state after his family wired him money.
Countless workers in India have walked thousands of miles home after losing their jobs, many dying in accidents along the way, and the ordeal has made them reluctant to return to work despite India easing restrictions to reboot industrial activity.
About 80% of these migrant workers are men who send their earnings back to their villages to support their families.
Reports compiled by aid workers show that more than half of the stranded workers who contacted them in distress during the lockdown were out of food and money, with nearly four out of every five not paid by their employers.
About 13% of 17,000 migrants in contact with the volunteers of Stranded Workers Action Network, a collective of relief workers, said they would seek work in their home towns in the future."
Google to pay ₹75,000/employee for WFH expenses
Alphabet Inc's Google said it would reopen buildings in more cities at roughly 10% of their capacity beginning July 6 and scale it up to 30% in September, if conditions permit.
Google and its peer Facebook Inc had allowed their employees to work from home in early March following tough government-mandated restrictions to contain the coronavirus.
The bullish case for stocks
India may need to pump $20 billion into coronavirus-hit state banks
Some initial details of the likely cost of the government's capital-injection plan for banks.
Reuters reports: "India may need to inject up to 1.5 trillion rupees ($19.81 billion) into its state-owned lenders as their pile of soured assets is expected to double during the coronavirus pandemic, three government and banking sources told Reuters.
The government initially considered a budget of around 250 billion rupees for bank recapitalisations but that has risen significantly, a senior government source with direct knowledge of the matter said, with loan defaults likely to rise as businesses take a severe hit from nationwide lockdowns to tackle the coronavirus.
“The situation is very grim,” the source said, adding that banks would require fresh funds soon.
All the sources asked not to be identified as the discussions are private. India's finance ministry did not respond to a request for comment during working hours on Wednesday.
The capital plans were still being discussed and a final decision could be taken in the second half of the fiscal year, a second government source said. India's fiscal year runs from April 1.
Indian banks were already saddled with 9.35 trillion rupees of non-performing assets at the end of September 2019, or roughly 9.1% of their total assets at the time.
Reuters reported earlier this month that bad loans would likely rise to 18-20% of total assets by the end of the fiscal year next March, as 20-25% of outstanding loans are considered at risk of default.
A nationwide lockdown entering its third month is expected to lead to a contraction in economic growth in the current financial year, according to several global rating agencies, which have also changed their outlook on the banking sector to negative. Economic recovery is likely to take a long time."
Loans to MSMEs may get ‘risk-free’ tag
The Reserve Bank of India (RBI) is likely to allow banks to assign zero risk weight for loans that will be extended to the micro, medium and small enterprises (MSMEs) under the ₹20 lakh crore economic package announced by the government earlier this month.
Also read: MSMEs will be the biggest casualty of COVID-19 in India: study
The Finance Ministry had requested the central bank to make these loans risk free, following an interaction with banks.
As a part of the package, a ₹3 lakh crore loan for the MSME sector was announced. This will be guaranteed by the National Credit Guarantee Trustee Company Limited (NCGTC) in the form of a Guaranteed Emergency Credit Line (GECL) facility.
Winding-up process to be delayed in absence of investors’ authorisation, says Franklin Templeton MF
Looks like investors in Franklin Templeton are set for a long-drawn struggle to get back their money.
PTI reports: "Franklin Templeton Mutual Fund, which closed six debt schemes, has said the winding-up process will be delayed in the absence of authorisation from investors and further steps will be possible only after seeking fresh approval from them.
It further said that investors who do not have an e-mail ID or mobile number registered with the fund house will not be able to participate in the voting process.
The date at which the voting would start has not been disclosed yet.
Over the next few days, the trustees will send a notice related to the voting process and unitholders’ meet to the participants in the six schemes being closed. The notice will be sent for each scheme separately, the fund house said in a letter to its distribution partners.
The voting activity and the unitholders meet will be an electronic exercise and it will be conducted separately for each of the six schemes.
Apart from the letter, the fund also issued answers to frequently asked questions (FAQs).
Investors are being asked to vote as schemes can be wound up only after repaying the amount due to the unitholders.
The steps to wind up the schemes include active monetisation of assets and return of the investment proceeds to the unitholders.
In the absence of authorisation, the winding-up process will be delayed as further steps will be possible only after seeking a fresh authorisation from the unitholders, Franklin Templeton MF said in the FAQs."
Rupee falls 19 paise to 75.90 against US dollar in early trade
The rupee is showing further weakness today despite the rally in domestic equities as foreign investors continue to desert Indian stocks.
PTI reports: "The rupee depreciated 19 paise to 75.90 against the US dollar in opening trade on Thursday tracking weak Asian currencies amid escalation of tension between the US and China.
Forex traders said rising US-China tension weighed on the local currency even as positive domestic equities and improving risk appetite supported the local unit.
The rupee opened weak at 75.90 at the interbank forex market, down 19 paise over its last close.
It had settled at 75.71 against the US dollar on Wednesday.
“Asian currencies are weak this Thursday morning after US President Donald Trump said he was working on a strong response to China’s proposed security law in Hong Kong,” Reliance Securities said in a research note.
It further said that currencies could track the local equities during the session amid optimism over the reopening of economies combined with monetary and fiscal support the respective economies.
On the domestic equity market front, the 30-share benchmark Sensex was quoting 321.01 points higher at 31,926.23 and the broader Nifty rose 84.40 points to 9,399.35.
Foreign institutional investors were net sellers in the capital market, as they sold equity shares worth Rs 334.74 crore on Wednesday, according to provisional exchange data."
S&P projects Indian economy to contract 5% in FY’21
After Fitch and Crisil, another major rating agency has projected an economic contraction in India this year.
PTI reports: "S&P Global Ratings on Thursday forecast Indian economy to contract 5 per cent in the current fiscal as the lockdown imposed to contain COVID-19 pandemic has curtailed economic activity severely.
“We have lowered our growth forecast for fiscal year ending March 2021 to a 5 per cent contraction... We currently assume that the outbreak peaks by the third quarter,” S&P said in a statement.
Earlier this week rating agencies Fitch and Crisil too had projected a 5 per cent contraction for the Indian economy.
“The COVID-19 outbreak in India and two months of lockdown -- longer in some areas -- have led to a sudden stop in the economy. That means growth will contract sharply this fiscal year. Economic activity will face ongoing disruption over the next year as the country transitions to a post-COVID-19 world,” S&P said in a statement.
Policymakers have grouped geographical zones into red, orange, or green categories based on the number of cases.
Areas currently classified as red zones are also economically significant, and the authorities could extend mobility restrictions.
“We believe economic activity in these places will take longer to normalize. This will have knock-on impacts on countrywide supply chains, which will slow the overall recovery... We expect varying degrees of containment measures and economic resumption across India during this transition,” S&P said."
Sensex rises over 200 points in early trade; Nifty tops 9,350
Equity benchmark Sensex jumped over 200 points in early trade on Thursday as index-heavyweights HDFC twins, Reliance Industries and ICICI Bank extended their gains ahead of May derivatives expiry.
After touching a high of 31,899.31 in opening session, the 30-share index was trading 259.92 points or 0.82 per cent higher at 31,865.14.
Similarly, NSE Nifty rose 81.20 points or 0.87 per cent to 9,396.15.
ONGC was the top gainer in the Sensex pack, rising around 3 per cent, followed by Tata Steel, L&T, HDFC Bank, ICICI Bank, IndusInd Bank and Axis Bank.
On the other hand, M&M, ITC, Infosys, Bajaj Auto, TCS and HCL Tech were among the laggards.
