Today's top business news: UBS projects negative GDP growth for India this year, stocks extend rally, oil majors rush to borrow funds, and more

Prime Minister Narendra Modi interacting with sarpanchs across the country through video-Conferencing on Panchayati Raj Divas, on Friday.

Prime Minister Narendra Modi interacting with sarpanchs across the country through video-Conferencing on Panchayati Raj Divas, on Friday.   | Photo Credit: Twitter@PMOIndia

Updates from the world of economy, markets, and finance

Stocks are off to a strong start this morning as investors are enthused by the prospects of an end to the global lockdown and fiscal stimulus measures to boost the economy.

Meanwhile, the sharp fall in oil prices has put gulf countries in a spot of bother with burgeoning budget deficits.

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

4:20 PM

Oil majors rush to borrow funds

 

4:10 PM

Sensex rallies 606 points, Nifty reclaims 9,500

The benchmark indices experienced a steady rise through the day, up over 2% at one point.

PTI reports: "Extending its gains for the third session, equity benchmark Sensex rallied 606 points on Wednesday, buoyed by banking and IT stocks amid positive cues from global markets.

Investor sentiment improved on hopes that gradual lifting of lockdowns across the world would help start economic recovery, traders said.

After surging 783.07 points during the day, the 30-share BSE index ended 605.64 points or 1.89 per cent higher at 32,720.16.

Similarly, the NSE Nifty advanced 172.45 points, or 1.84 per cent, to close at 9,553.35.

HDFC was the top gainer in the Sensex pack, rallying over 7 per cent, followed by HCL Tech, M&M, HDFC Bank, Tata Steel, SBI, Bajaj Finance and Infosys.

On the other hand, Axis Bank, Asian Paints, HUL, Titan and IndusInd Bank were among the laggards.

Indian markets opened on positive note taking positive cues from its Asian peers and ahead of U S Federal Reserve’s decision on interest rates amid ongoing coronavirus pandemic, said Narendra Solanki, Head- Equity Research (Fundamental), Anand Rathi.

“Indian benchmarks extended their gains in late afternoon session as traders also took encouragement from reports of Finance Minister’s likely announcement of larger stimulus package for the economy, which also led to some short covering in heavily negative sectors like financials ahead of monthly expiry on Thursday,” he said."

3:40 PM

Airbus says virus aviation crisis still at 'early stage'

Airbus reported 481 million euros ($515 million) in losses in the first quarter, put thousands of workers on furlough and sought billions in loans to survive the coronavirus crisis and its CEO said Wednesday the aviation industry’s unprecedented troubles are still at an “early stage.”

Even after virus-related travel restrictions eventually ease, Chief Executive Guillaume Faury acknowledged it will take a long time to persuade customers to get back on planes. Just how long, he can’t predict.

Airbus executives expressed hope Wednesday that jet deliveries stalled by the virus could start picking up in the second half of the year. But they refused to issue long-term guidance given that the virus is still spreading, thousands of jets are grounded worldwide and governments are reluctant to relax travel restrictions.

Read more
 

3:20 PM

Post-negative crude shocker, MCX sharply hikes margins up to 125%

To mitigate counter-party risk amid sharp volatility seen in the oil market, MCX has decided to raise margin requirements.

PTI reports: "To avoid a repeat of the past Tuesday’s negative price shocker on crude futures, MCX that controls 95 per cent of the country’s market traded crude has increased the margin requirements to up to 125 per cent or Rs 1,95,000 per lot effective Thursday.

With this extremely cautious move which mandates risk margins up to Rs 95,000 to Rs 1,95,000 per lot, investors will have to pay in full to open a position in crude futures on MCX, besides replenishing it with mark-to-market loss overnight from Thursday.

The new margin is steeply higher the existing levels, which since early March has been going up from 12.75 per cent on March 6 to 57.9 per cent on April 16.

The new margin requirement came after a week of the negative pricing shocker on April 20, which saw brokers taking a hit of around Rs 400 crore on their May contracts. MCX has not yet made any changes in its trading software to allow commodity derivatives to trade at negative prices.

Following the historic price crash to -USD 37.63 a barrel on the May crude futures on the NYMEX on April 20, MCX, which prices its trade to the NYMEX prices, on April 21 settled the trade at — Rs 2,884 a barrel."

3:00 PM

Rupee settles 52 paise higher at 75.66 against US dollar

An update on the rupee which has risen strongly against the dollar, thanks to positive sentiment in domestic equities.

PTI reports: "The Indian rupee surged 52 paise to close at 75.66 (provisional) against the US dollar on Wednesday, tracking positive domestic equities and a weak American currency in the overseas market.

This is the third consecutive day of gain for the rupee, during which it has appreciated by 80 paise.

At the interbank foreign exchange, the rupee opened at 75.94. During the session it touched an intra-day high of 75.60 and a low of 75.96.

The domestic unit finally settled at 75.66, registering a rise of 52 paise over its previous close.

On Tuesday, the local unit had settled at 76.18 against the US dollar.

Forex traders said positive start of domestic stocks supported the local unit. Besides, market sentiments improved as more countries are announcing gradual lifting of lockdowns that have been imposed to contain coronavirus infection.

Meanwhile, domestic stock exchanges were trading on a positive note with benchmark indices Sensex trading 519.56 points higher at 32,634.08 and Nifty up by 150.70 points at 9,531.60."

 

2:30 PM

S&P affirms BBB+ rating of RIL on disciplined spending, resilient earnings

The large business conglomerate Reliance has received a shot in the arm from the global rating agency after its deal with Facebook.

PTI reports: "Rating agency S&P Global has affirmed its ‘BBB+’ rating with a stable outlook on Reliance Industries (RIL), saying the company’s leverage is poised to improve and stabilise over the next 12-24 months owing to disciplined spending, asset monetisation, and resilient earnings.

Last week, Facebook agreed to take 9.99 per cent stake in Jio Platforms Ltd, RIL’s wholly-owned subsidiary. “We expect RIL to use the proceeds of Rs 43,574 crore (USD 5.7 billion) to reduce its net debt,” Standard and Poor’s (S&P) said.

The Facebook transaction, it said, will also enhance RIL’s growth potential in the digital business.

RIL will team up with Facebook to accelerate the launch of its JioMart e-commerce platform on Facebook’s WhatsApp application.

“We expect the operating performance of RIL to remain resilient over the next two years, driven by the company’s prominent domestic market position in the digital and retail segments,” S&P Global said.

The agency said it has affirmed its rating on RIL with stable outlook because it believes the company’s leverage is poised to improve and stabilise over the next 12-24 months owing to disciplined spending, asset monetization, and resilient earnings."

1:45 PM

Technical loan write-off route should not be applied for fugitives, says Chidambaram to govt

The former Finance Minister has chipped in on the controversy surrounding the write-off of loans provided to fugitives.

PTI reports: "Senior Congress leader P Chidambaram on Wednesday asked the government why it had taken the technical loan write-off route for fugitives like Nirav Modi, Mehul Choksi and Vijay Mallya.

His remarks came after Finance Minister Nirmala Sitharaman said that wilful defaulters were beneficiaries of ‘phone banking’ under the UPA regime and the Modi government is chasing them to recover the dues.

She was responding to the opposition party’s allegations of loan waiver worth Rs 68,607 crore in the form of write-offs to the top 50 wilful defaulters during the first half of the financial year ended March 2020.

Chidambaram said one cannot deny the rule that banks can write-off loans technically and recoveries can continue against wilful defaulters, but why was the rule applied to fugitives, who fled the country, after committing frauds.

“One is not denying such a rule that can be applied to a wilful defaulter. But, we are asking these are fugitives and they have left the country and are absconding. Why are you applying this rule to Nirav Modi, Mehul Choksi and Vijay Mallya,” he said at press conference conducted through video conferencing.

The former finance minister said “when they are fugitives, the technical rule in the book should not be applied to them. That is my view”."

 

1:30 PM

Wilful defaulters beneficiaries of ‘phone banking’ under UPA regime, says Nirmala Sitharaman

Hitting out at the Congress party, Finance Minister Nirmala Sitharaman has said that wilful defaulters were beneficiaries of ‘phone banking’ under the UPA regime and the Modi government is chasing them to recover the dues.

She was responding to the opposition’s allegations of loan waivers worth ₹ 68,607 crore in the form of write-offs of top 50 wilful defaulters during the first half of the financial year ended March 2020.

The Finance Minister, through a series of tweets posted late night on Tuesday, said that the Congress has attempted to mislead people, and former Congress President Rahul Gandhi should introspect why his party fails to play a constructive role in cleaning up the system.

Read more
 

1:00 PM

Indians venture into U.S. stocks as markets slump at home

As domestic stocks fail to impress with their returns, Indian investors are trying their hands at foreign markets.

Reuters reports: "More Indian investors are turning to U.S. stocks to escape tumbling markets at home and pick up exposure to global technology giants that are rising through the coronavirus-led market turmoil.

With more mom-and-pop investors chasing overseas stock investments that were until now a hobby of the wealthy, brokers that help investors navigate these trades through India's highly restrictive cross-border investment rules are thriving.

Vested Finance, an investment firm that helps Indians buy or sell U.S. stocks, opened 4,000 new accounts in March, double that in February. The company usually sees a 30% rise in account openings each month.

Vested Finance saw flows of more than $3.5 million into U.S. markets from India in the three months to March, a five-fold jump from the previous quarter and mostly from clients investing in the United States for the first time.

India's equity markets have lost more than a fifth of their value this year, while the S&P 500 has corrected by just over 11%. The S&P 500 also has almost no correlation with India's markets, making it an ideal hedge for domestic investors."

 

12:40 PM

2020 sees sharpest oil sell-off in history

 

12:20 PM

RBI’s liquidity support for MFs may struggle to be effective, says Fitch

Here's Fitch on why the RBI's special liquidity support is unlikely to help troubled mutual funds very much.

PTI reports: "The Reserve Bank of India’s liquidity support for mutual funds may struggle to be effective, as its success will hang on banks’ appetite to take up the risks involved, amid low capital headroom and a likely increase in fresh non-performing loans, according to Fitch.

The RBI’s Rs 50,000 crore Special Liquidity Facility for Mutual Funds (SLF-MF) will provide 90-day repo funding to banks, to extend liquidity to - or purchase commercial paper and debt securities from - local mutual funds.

The size of the SLF-MF appears broadly commensurate with the scale of the funds most at risk, Fitch notes.

“The official support measures announced for mutual funds in India may struggle to be effective, as undercapitalised banks are unlikely to be tempted to extend liquidity to the sector without capital relief on the facilities,” Fitch Ratings said in a statement.

The facility’s structure places the onus on banks to absorb the associated credit and capital risk, which may hinder their willingness to participate, it added.

The move by the banking regulator followed the suspension of redemptions in six Franklin Templeton bond funds, with combined assets under management (AUM) of approximately USD 4.1 billion equivalent, on April 23, 2020, and outflows from other funds in March 2020."

11:40 AM

Rupee rises 34 paise to 75.84 against US dollar in early trade

The rupee appreciated 34 paise to 75.84 against the US dollar in early trade on Wednesday tracking positive opening of domestic equities and weakness in the American dollar.

Forex traders said positive start of domestic stocks supported the local unit. Besides, market sentiments improved as more countries are announcing gradual lifting of lockdowns that have been imposed to contain coronavirus infection.

At the interbank foreign exchange, the rupee opened at 75.94, then gained ground and touched 75.84, registering a rise of 34 paise over its previous close.

On Tuesday, rupee had settled at 76.18 against the US dollar.

Read more

 

11:10 AM

UBS projects negative GDP for India this year, lowest in four decades

The nation-wide lockdown, which has dragged for over a month now, is set to plunge India into a recession this year, according to UBS' projections.

IANS reports: "India is likely to post a negative GDP growth rate in the financial year 2021, making it the lowest in four decades, according to an estimate by UBS.

It estimates that the Covid-19 shock-related mobility restrictions will drag FY2021 growth sharply. UBS is downgrading India’s growth forecasts on a looming global recession and domestic economic activity being much weaker than expected due to the nation-wide lockdown imposed until May 3.

“We now expect India’s real GDP to contract to -0.4 per cent in FY21 (previously +2.5 per cent), compared with 4.1 per cent year on year (previously 4.5 per cent) estimated in FY20. In our base case, we expect current mobility restrictions remain in place until mid-May and then get lifted, and activity is largely back to normal by end-June,” UBS said.

In the alternative scenarios where virus containment fails, UBS estimates that disruptions could last longer and the economic weaknesses in the short term could intensify and the significant secondary impacts (job losses, reduced income levels, corporate defaults, rising NPLs, rating downgrade, etc.) could delay a potential recovery. “There is a risk India’s real GDP could contract by a much larger magnitude of 3-4 per cent YoY,” it said.

UBS has projected that balance sheet concerns could drag India’s long term potential growth lower to 5 per cent."

10:40 AM

Saudi Arabia's Q1 budget slips into deficit at $9.1 billion as oil revenue slides

The fall in oil prices owing to the drop in global demand has hit the budgets of oil-producing countries pretty hard, threatening both internal and external stability.

Reuters reports: "Saudi Arabia on Wednesday reported a first quarter budget deficit of 34.107 billion Saudi riyals ($9.09 billion), as oil revenue was hit hard by a combination of sliding global prices, demand and a supply glut in the wake of the coronavirus crisis.

That reversed a first quarter surplus of around $7.4 billion in 2019.

The kingdom - which is trying to diversify its oil-dependent economy - has projected a deficit of 187 billion riyals, or 6.4 percent of gross domestic product (GDP), this year, widening sharply from 131 billion riyals last year.

Total revenues for the first quarter reached 192.072 billion riyals, down 22 pct percent year-on-year, the finance ministry said in a statement on its website.

Oil revenues dropped 24 percent to 128.771 billion riyals in the same period, mainly driven down by slumping global crude demand and prices as the coronavirus outbreak paralysed large parts of the global economy."

 

10:20 AM

Debt funds less exposed to risky issuers after IL&FS fiasco: Morgan Stanley

The recent events at Franklin Templeton Mutual Fund may have increased the risk of redemptions in debt funds, but a gradual reduction in exposure towards riskier issuers in the last year and a half could limit any further downside risks.

According to Morgan Stanley, mutual funds have gradually moved towards better assets after the IL&FS crisis came to the fore in September 2018 and hence should be able to tide over the current crisis.

“Recent events at credit risk funds have increased risk of redemptions at debt mutual funds. However, we think a big shift in the AUM mix over the past 18 months towards stronger borrowers should mitigate this risk,” stated a note by the global financial major.

Read more
 

10:00 AM

Sensex jumps over 300 points in early trade; Nifty reclaims 9,400

The rally in stocks, since hitting bottom last month, continues as hopes of an end to the global lockdown keep investors enthused.

PTI reports: "Equity benchmark Sensex surged over 300 points in opening trade on Wednesday led by buying in index-heavyweights HDFC twins and positive cues from Asian peers.

After hitting a high of 32,431.20, the 30-share index was trading 285.83 points or 0.89 per cent higher at 32,400.35.

Similarly, the NSE Nifty advanced 78.95 points, or 0.84 per cent, to 9,459.85.

HDFC was the top gainer in the Sensex pack, rallying nearly 5 per cent, followed by Bajaj Finance, HDFC Bank, Tech Mahindra, M&M, Reliance Industries and NTPC.

On the other hand, IndusInd Bank, Axis Bank, Titan, HUL, Asian Paints and Infosys were among the laggards.

In the previous session, the BSE barometer settled 371.44 points or 1.17 per cent higher at 32,114.52, while the Nifty advanced 98.60 points, or 1.06 per cent, to close at 9,380.90.

Foreign portfolio investors were net sellers in the capital market on Tuesday, as they offloaded equity shares worth Rs 122.15 crore, according to provisional exchange data."

 

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Printable version | Jun 1, 2020 1:49:23 AM | https://www.thehindu.com/business/businesslive-29-april-2020/article31459788.ece

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