After yesterday's sharp correction, the benchmark stock indices have opened the day on a negative note as the global equity sell-off persists.
Join us as we follow the top business news through the day.
Oil rally loses steam
Sensex sheds 173 points amid F&O expiry; Nifty slips below 11,700
Yet another day of losses for the equity indices.
PTI reports: "Equity benchmark Sensex tumbled 173 points on Thursday, tracking losses in index majors HDFC twins, L&T and HUL as volatility persisted amid expiry of month derivatives contracts.
Lacklustre cues from global markets also kept domestic investors on the edge, traders said.
The 30-share BSE Sensex ended 172.61 points or 0.43 per cent lower at 39,749.85. The broader NSE Nifty fell 58.80 points or 0.50 per cent to 11,670.80.
L&T was the top laggard in the Sensex pack, dropping around 5 per cent, followed by Titan, ONGC, Axis Bank, HUL, M&M and HDFC.
On the other hand, Asian Paints, UltraTech Cement, HCL Tech, Kotak Bank and Reliance Industries were among the gainers.
According to traders, market volatility was heightened as October futures and options contracts expired.
The Indian market opened on a subdued note following mixed global cues as coronavirus cases in the Europe surged and several countries considered re-imposing strict lockdown measures, said Narendra Solanki, Head- Equity Research (Fundamental), Anand Rathi Shares & Stock Brokers.
During the afternoon session, the markets continued to trade weak with selloff in metals, auto, realty and financial stocks, he added.
Bourses in Hong Kong, Seoul and Tokyo ended on a negative note, while Shanghai was in the positive territory.
Equities in Europe were trading higher in early deals.
Meanwhile, international oil benchmark Brent crude was trading 3.15 per cent lower at USD 38.39 per barrel.
In the forex market, the rupee continued its downward journey, sliding another 23 paise to close at 74.10 against the US dollar."
Higher rural demand unlikely to offset urban plunge: Report
Rural India won't be able to compensate for the plunge in economic activity in the cities.
PTI reports: "The 270 basis points (bps) likely incremental growth in agricultural gross value add (GVA) to 17.3 per cent of the economy this year and the resultant spike in rural demand may not compensate for the massive plunge in urban demand, warns a report.
However, an India Ratings analysis of the agri GVA performance of the states says the six states that accounted for nearly 33 per cent of the farm GVA will see a spurt in overall demand.
In spite of the pandemic and the ensuing lockdowns, agricultural activities have not been hit very badly, raising hope that rural demand may drive the recovery, which is over-optimistic, says the report.
“We believe rural demand will perk-up somewhat, but will not be able to offset the shortfall in urban demand because the share of agriculture in GVA of the economy has ranged between 14.6 per cent and 17.8 per cent during FY13-FY20 and is expected to be 17.3 per cent in FY21, up from 14.6 per cent in FY20, warns the report.
Furthermore, the contribution of agriculture to GVA growth has ranged between 4.8 per cent and 11.2 per cent during FY13-FY20 and is expected to increase to only 14.4 per cent in FY21, up from 8.6 per cent in FY20, despite the pandemic-induced contraction in the industrial and services sectors, the report stated and added that on the negative side the rural wages have been on a steady decline for many years now.
But Andhra Pradesh, Madhya Pradesh, Rajasthan, Uttar Pradesh, Punjab and West Bengal stand to benefit and see higher rural spend as the share of their agriculture in GSVA and its contribution to GSVA growth is higher as these six states contributed 32.7 per cent to real GVA in FY20.
According to the first advance estimates of Union agri ministry late last month, Kharif food grains production in FY2021 is estimated at 144.52 mt, up from 143.38 mt in FY2020, up only 1.14 mt.
Since the largest chunk of rural population consists of daily wage earners and not farmers, a peep into the rural wages is as vital as the agricultural income to understand the rural demand. And this suggests that rural wages have been under pressure and declined substantially both in nominal and real terms during FY16-FY20.
“Thus, FY21 may not result in very higher income either for farmers or wage earners than previous years.”"
Dr.Reddy’s to get BIRAC support for Sputnik V vaccine clinical trials
Dr. Reddy’s Laboratories has announced a collaboration with Biotechnology Industry Research Assistance Council (BIRAC) to receive advisory support for the clinical trials of Russia’s Sputnik V vaccine that the company plans to start soon in the country.
Under the partnership, it will get to identify and use some of BIRAC’s clinical trial centres for the vaccine, which are funded under the National Biopharma Mission, implemented by Project Management Unit-NBM at BIRAC.
Further, it will have access to Good Clinical Laboratory Practice (GCLP) labs to conduct immunogenicity assay testing of the vaccine, the pharma major said in a statement on Thursday.
An industry-academia interface, BIRAC was set up by the Central government’s Department of Biotechnology.
DBT Secretary and BIRAC Chairperson Renu Swarup said the government is committed to fast track clinical development of COVID vaccine candidates and provide facilitation to accelerate market readiness of a suitable vaccine.
Rupee slumps 23 paise, settles below 74/USD level
The currency market pretty much mirrored stocks today.
PTI reports: "The rupee continued its downward journey on Thursday, sliding another 23 paise to settle at 74.10 against the US dollar, tracking weak domestic equities and strong American currency amid global risk aversion.
At the interbank forex market, the domestic unit opened weak at 74.02 against the greenback, then lost further ground and finally closed at 74.10 against the American currency, showing a fall of 23 paise over its previous close.
On Wednesday, the rupee depreciated by 16 paise to settle at more than one-month low of 73.87 against the US currency.
The local unit witnessed an intra-day high of 73.94 and a low of 74.16 against the greenback.
“The slide for the rupee continues, as it slips below the 74/USD level, INR is now trading at a 2-month low. The US dollar has strengthened as investors flock to a safe haven in times of uncertainty.
The rising number of COVID-19 cases has forced governments in a few EU countries to enforce lockdown,” said Nish Bhatt, Founder and CEO, Millwood Kane International - an Investment consulting firm.
Bhatt further said that reports are emerging that the Indian government is finalising the next stimulus package to boost sentiment and bring growth back on track. “Going forward a clear outcome from the US election, clarity on stimulus package from the US, and the Indian government will guide the INR,” Bhatt said.
Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, rose 0.09 per cent to 93.49.
On the equity market front, BSE index Sensex was trading 291.74 points lower at 39,630.72, and the broader NSE Nifty fell 80.45 points to 11,649.15.
Foreign institutional investors were net sellers in the capital market as they offloaded shares worth Rs 1,130.98 crore on a net basis on Wednesday, according to exchange data.
Brent crude futures, the global oil benchmark, fell 0.87 per cent to USD 38.78 per barrel."
Chennai gets another player in the coworking space
Awfis, a homegrown coworking service provider, has entered the Chennai market and has set up its first space, spread over 65,000 sq. ft at Gemini Circle, Nungambakkam. This centre has 1,200 seats.
“Chennai is an untapped market with great underlying potential for the flexible workspace sector. With industries opening up to the flexible/shared workspace concept, we are confident that this trend will continue to grow,” said Amit Ramani, CEO and Founder, Awfis.
He added, “Due to pandemic-induced restrictions, even the most traditional companies will see merit in setting up satellite offices outside metros, with offices spread across multiple locations to help people work near home or to enable distributed workspace model.” Mr. Ramani also pointed out that with good connectivity to metro trains, Chennai as a market had tremendous potential in the coworking space.
NBFCs need to follow prudential measures to ward off risks, monitor lending: CEA
The eyes of policymakers turn towards shadow lenders.
PTI reports: "Non-banking financial companies (NBFCs) need to follow prudential measures to ensure that risks do not mount and be vigilant about the quality of lending in these difficult times, Chief Economic Adviser K V Subramanian said on Thursday.
He suggested that the use of technology, especially data analytics, Artificial Intelligence (AI) and machine learning can help improve the quality of assets.
Speaking at an event organised by industry body FICCI, he said NBFCs need to be careful about rollover risk or the asset liability mismatch and interconnected risk.
“While regulators are mandated to monitor these things, at an individual level every NBFCs need to monitor its rollover risk and interconnected risk as well because in times like these prudential measures must be taken by each NBFCs to ensure that risks do not mount,” he said.
He also noted that “another key aspect that must be kept in mind is that forbearance is necessary at this point of time but the previous episode of 2008-09 (global financial meltdown) illustrates very well the kind of zombie lending that continued... evergreening happened that basically came back to really bite 3-4 years later.”
Post global meltdown, there was a spurt in non-performing assets (NPAs) of banks.
During this difficult period, he said, NBFCs and their boards should be vigilant about lending.
Talking about opportunities, Subramanian said the Bilateral Netting of Qualified Financial Contracts law that has been passed recently paves the way for credit derivatives.
It is a big move, he said, adding, bunch of reforms undertaken by the government in the agriculture and manufacturing sector also provide opportunities to the sector.
Observing that the financial sector plays an important role in the growth of the economy, he said it happened during the growth phase of Japan and China.
“If you look at the Japanese economy in the 1980s, when it grew really well, of the top 25 banks globally, 18 banks were Japanese. If you look today, of the top hundred banks globally, 18 are Chinese. And yet the 5th largest economy in the world has only one bank in the global top hundred,” he said.
State Bank of India (SBI) at the 55th position is the only bank in the global top 100 list.
“We seem to have quality problems in the financial sector, despite the really small scale at which we operate... We have so many problems, I think (it) is basically indicative that we are not doing enough in thinking about how to use data analytics, AI, machine learning. We’ve only scratched the surface,” he said.
Use of technology can be far higher in the financial sector, he said, adding, there are tools that can enable us to infer not only the ability to repay, but the willingness to repay.
For instance, he said, while technology data analytics has been used in retail lending, there hasn’t been that much use in large corporate lending at all."
Cognizant Q3 income down 30% to $348 million
IT major Cognizant has reported about 30% drop in September quarter net income at $ 348 million (around ₹2,578.3 crore).
The U.S.-based company, which posted a net income of $497 million in September 2019 quarter, said it expects its FY2020 revenue to be “at the high end of the previously guided range of approximately $ 16.7 billion.”
For the September 2020 quarter, Cognizant’s revenue was almost flat at $4.2 billion, including a negative 130 basis points impact from the exit of certain content services, Cognizant said in a statement.
Cognizant — which has about 2 lakh employees based in India — follows January-December as financial year.
“Against a challenging demand environment, we continued to strengthen our portfolio, execute our digital strategy and increase our competitiveness,” Cognizant Chief Executive Officer Brian Humphries said.
COVID-19 hits India’s gold-buying sentiment; Q3 demand drops by 30%: WGC
Consumers could be too purse-pinched to bet on gold.
PTI reports: "Gold demand in India dropped by 30 per cent during the July-September quarter to 86.6 tonnes compared to the same period last year due to COVID-19 related disruptions and ruling high prices, World Gold Council (WGC) said in a report.
The overall demand stood at 123.9 tonnes during the third quarter of 2019, according to WGC’s Q3 Gold Demand Trends report.
In terms of value, gold demand declined by 4 per cent during the quarter under review at Rs 39, 510 crore compared to Rs 41,300 crore in the same quarter of 2019.
India’s Q3 2020 gold demand fell by 30 per cent to 86.6 tonnes on the back of COVID-19 related disruptions, bleak consumer sentiment and high prices accompanied by volatility, WGC Managing Director, India, Somasundaram PR told PTI.
This is, however, higher than Q2, which at 64 tonnes was a 70 per cent drop and the second lowest in our quarterly series. This has been partially due to easing of lock down and some low prices in August that provided a small window of buying opportunities for the discerning, Somasundaram said.
Meanwhile, the total jewellery demand in India decreased by 48 per cent to 52.8 tonnes compared to 101.6 tonnes in the same quarter last year.
Similarly, in terms of value, jewellery demand fell 29 per cent to Rs 24,100 crore from Rs 33,850 crore in July-September 2019.
However, total investment demand during the third quarter surged by 52 per cent to 33.8 tonnes compared to 22.3 tonnes in the same period of 2019.
Similarly, in value terms, gold Investment demand was Rs 15,410 crore, up by 107 per cent from Rs 7,450 crore in the corresponding period of 2019.
The third quarter tends to be relatively low generally due to seasonal factors like monsoons and inauspicious periods like Pitru-Paksh and Adhik Maas. Jewellery demand fell by 48 per cent as jewellery purchases did not have any support of festivals or weddings, Somasundaram added.
Moreover, he pointed out that buying jewellery in the country is an experience and the restrictions including social distancing, wearing masks have kept consumer footfalls to the retail stores low.
On the other hand, he said gold’s safe haven attributes and an anticipation of price rise paved the way for an increase in investment demand for gold bars and coins by 51 per cent to 33.8 tonnes, he said."
Pidilite to acquire Huntsman unit for ₹2,100 crore
Pidilite Industries Ltd has entered into a definitive agreement with Huntsman Group (USA) to acquire 100% stake in one of its subsidiaries in India, Huntsman Advanced Materials Solutions Private Ltd (HAMSPL). The company’s board on Wednesday approved this.
This is for a cash consideration of approximately ₹2,100 crore, excluding customary working capital and other adjustments, subject to certain preconditions being met prior to the closing of the transaction.
HAMSPL manufactures and sells adhesives, sealants and other products under well-known brands such as Araldite, Araldite Karpenter and Araseal in India.
In 2019, the company clocked business revenue of ₹400 crore.
Larsen & Toubro shares tank nearly 5% after Q2 earnings
Here's one reason behind the fall in the indices this morning.
PTI reports: "Shares of Larsen & Toubro (L&T) on Thursday tanked nearly 5 per cent after the company posted a 45 per cent decline in consolidated net profit for the quarter ended September.
The stock plunged 4.88 per cent to Rs 935.55 on the BSE.
On the NSE, it tanked 4.85 per cent to Rs 935.10.
The engineering and construction giant on Wednesday posted a 45 per cent decline in consolidated net profit to Rs 1,410.29 crore for the quarter ended September, hit by the COVID-19 pandemic.
The company had clocked a net profit of Rs 2,551.67 crore in the year-ago period, it said in a regulatory filing.
“Net profit after tax (PAT) and share in profit / (loss) of joint ventures / associates from continuing operations before exceptional items for the quarter is at Rs 1,410 crore, registering a sequential improvement of nearly 4 times reflecting pickup in the business momentum.
“However, the impact of pandemic in terms of lower revenue, higher credit provisions in the financial services business and disruption of the Metro services, led to decline of 45 per cent vis-a-vis reported PAT of corresponding quarter of the previous year at Rs 2,552 crore,” the company said in a statement.
Total consolidated income fell to Rs 31,593.77 crore in July-September quarter, from Rs 35,924.89 crore in the year-ago period."
Stock sell-off one of the worst since 2008
Rupee slips below 74/USD level in early trade
The Indian rupee continued its downward journey on Thursday, sliding another 18 paise to 74.05 against the US dollar in opening trade, tracking weak opening in domestic equities amid global risk aversion.
At the interbank forex market, the domestic unit opened weak at 74.02 against the greenback, then lost further ground and fell to 74.05 against the American currency, showing a fall of 18 paise over its previous close.
On Wednesday, the rupee depreciated by 16 paise to settle at more than one-month low of 73.87 against the US currency.
“The risk sentiment has been dealt a serious blow with the worsening coronavirus situation in Europe on account of a second wave. Most countries have announced partial lockdowns, curfews or declared emergencies. This threatens to nip the nascent recovery in the bud,” said Abhishek Goenka, Founder and CEO, IFA Global.
Bharti won’t bid at 5G auction, reserve price too high: Vittal
Bharti Airtel on Wednesday indicated that it would refrain from bidding for 5G spectrum at the auctions, which were likely to be held early next year, given the current reserve prices.
The company may look at radio frequencies below 1,000 megahertz (Mhz) to improve network availability inside buildings and in rural areas, Gopal Vittal, MD and CEO, India & South Asia, said in a post-earnings call.
“We are hearing from the department that there may be an auction early next year… any time between January and March,” Mr. Vittal said. “Given that the reserve price of 5G is as high as it is, we will not buy it because we won’t be able to afford it. I can’t comment on what others will do, but from our perspective, it will not make sense,” he added.
Bharti would also consider whether it needs to bid for spectrum in the 1,800 Mhz band as the amount of spectrum being used for 2G was decreasing every quarter.
Indian shares slip as L&T results, global selloff weigh
Further losses this morning for Indian stocks after yesterday's sharp correction.
Reuters reports: "Indian shares fell on Thursday as infrastructure stocks declined after weak results from Larsen and Toubro, with surging global coronavirus cases and uncertainty around the U.S. election further dampening sentiment.
The NSE Nifty 50 index fell 0.6% to 11,661.05 by 0415 GMT and the S&P BSE Sensex declined 0.5% to 39,725.73.
Larsen and Toubro (L&T) fell as much as 4.86%, dragging down the Nifty infrastructure index 1.27%, after the industrial conglomerate reported a quarterly loss from continuing operations on a standalone basis https://www.bseindia.com/xml-data/corpfiling/AttachLive/6de2a3a8-7b6b-4cb0-856e-d32d4e11e41d.pdf on Wednesday.
The company declared a special dividend of 18 rupees a share, which was lower than expectations, said Saurabh Jain, assistant vice-president at SMC Global Securities.
“L&T's management also refrained from giving any sort of guidance and the market is not happy about that,” Jain said.
The domestic market was also pressured by fears of a contested U.S. presidential election and concerns over the global economic recovery as European countries imposed new restrictions to contain a second wave of virus infections.
MSCI's broadest index of Asia-Pacific shares outside Japan slumped 1% after U.S. stock indexes overnight posted their biggest single-day decline since June.
“Markets are seriously nervous with the way the virus is spreading in Europe,” SMC Global's Jain said. “There are concerns that the economic recovery could be patchy.”
At home, the country's coronavirus cases crossed a grim milestone of 8 million, health ministry data showed.
The Nifty state-owned banks index fell 0.9% and was the biggest percentage loser among sectors. The Nifty autos index declined 0.6%.
Watchmaker Titan Co slid 2.6% after the company reported a drop in quarterly profit on Wednesday.
Asian Paints rose 1.7%, topping gainers in the Nifty. Axis Bank rose 0.5% after returning to a quarterly profit.
Maruti Suzuki, India's biggest carmaker by market share, telecom firm Vodafone Idea, airline operator Interglobe Aviation and refiner BPCL Ltd are among companies reporting earnings on Thursday."
U.S. investors want more reforms in IPO rules: SEBI
Investors from the U.S. have emphasised the need for early finalisation of direct listing proposals, development of the corporate bond market and reforms in IPO regulations, said SEBI.
In an interaction with top Securities and Exchange Board of India (SEBI) officials, they have also shown interest in taking part in innovative ideas under the regulatory sandbox framework, the regulator said.
Ajay Tyagi, Chairman, SEBI, along with other officials, held an e-interaction with stakeholders from the U.S. on Tuesday which was organised by the U.S. India Strategic Partnership Forum (USISPF).
“We briefed them about key developments in the Indian economy as well as recent trends in the securities market, especially in this COVID era,” he said.
