Stocks have rallied heavily this morning as investors continue to be enthused by the prospects of a return to economic normalcy as the global lockdown begins to be eased in a phased manner.
Meanwhile, the US economy has witnessed its worst slump since the 2008 financial crisis with data released overnight suggesting an annualized contraction of nearly 5%
Join us as we follow the top business news through the day.
Eurozone economy shrinks at record rate
With 7.45 lakh followers, RBI most popular among central banks on Twitter
The Reserve Bank of India is not the most powerful in terms of monetary fire power like its peers in the US and Europe but when it comes to popularity, the monetary authority is the most followed on Twitter.
With the microblogging site emerging as a key platform for information dissemination, many central banks are active on Twitter, especially in these times of economic uncertainties amid the coronavirus pandemic.
The 85-year-old RBI and its Governor Shaktikanta Das have separate Twitter accounts.
An analysis of official Twitter accounts of major central banks shows that RBI has the maximum number of followers.
Shell cuts dividend for first time since World War Two
Here's some news that offers a glimpse into the level of the stress in the energy sector at the moment.
Reuters reports: "Royal Dutch Shell cut its dividend for the first time since World War Two on Thursday as the energy company retrenched in the face of an unprecedented drop in oil demand due to the coronavirus pandemic.
Shell also suspended the next tranche of its share buyback programme and said it was reducing oil and gas output by nearly a quarter after its net profit almost halved in the first three months of 2020.
Shell's shares in London had slumped 7% by 0753 GMT, sharply underperforming rival BP which was down 2.2%.
For years, Shell has taken pride in having never cut its dividend since the 1940s, resisting such a move even during the deep downturns in the oil market of the 1980s.
Some investors, however, had called on major oil firms to break an industry taboo and consider cutting dividends, rather than taking on more debt to maintain payouts.
“Given the risk of a prolonged period of economic uncertainty, weaker commodity prices, higher volatility and uncertain demand outlook, the Board believes that maintaining the current level of shareholder distributions is not prudent,” Shell Chairman Chad Holliday said.
He also said the cut in Shell's payout was a long-term ”reset” of the company's dividend policy."
Sensex soars 997 points; Nifty tops 9,850 mark
Stocks witnessed a strong rally today, with the benchmark indices up well over 3% on the back of positive economic sentiment.
PTI reports: "Taking its rising streak to the fourth straight session, equity benchmark Sensex rallied 997 points on Thursday led by gains in energy, IT and banking stocks as positive cues from global markets enthused domestic investors.
Short covering due to expiry of April series F&O contracts added to the momentum, traders said.
After surging 1,167 points during the day, the 30-share index settled 997.46 points or 3.05 per cent higher at 33,717.62. It hit an intra-day high of 33,887.25.
Similarly, the NSE Nifty soared 306.55 points, or 3.21 per cent, to 9,859.90.
ONGC was the top gainer in the Sensex pack, rallying over 13 per cent, followed by HCL Tech, Hero MotoCorp, NTPC, TCS, M&M, Infosys and Maruti.
Shares of Reliance Industries and Tech Mahindra climbed around 3 per cent ahead of their earnings announcements, while HUL settled in the red.
Sun Pharma, IndusInd Bank and Asian Paints too closed with losses.
Most major global markets have rallied in the current week as several countries have started to talk about lifting the lockdown, said Sanjeev Zarbade, VP PCG Research, Kotak Securities."
Spicejet says it wll pay staff as per hours clocked
SpiceJet says it will pay its employees partial salaries on the basis of the number of hours clocked by them.
In a press statement, it said it was taking such a drastic step because its primary source of income, i.e. passenger flights, had completely dried up.
“While a number of airlines the world over have been forced to retrench employees and withhold salaries, SpiceJet, with its limited cargo operations during the lockdown period, will pay part salaries to over 92% of its employees. As a fair measure to cater to the requirement of our employees during this complete lockdown situation, the company has devised a structure where all employees will be paid according to the work hours contributed while maintaining basic thresholds,” the statement said.
CPI says timing of loan waivers for corporates “distressing”
The controversy over the write-off of loans owed by fugitives refuses to die down.
PTI reports: "Demanding action against economic offenders and recovery of bank loans, CPI General Secretary D Raja on Thursday said the timing of the loan waivers for big corporates by the government was “distressing".
In reply to a question under the RTI, the Reserve Bank of India has revealed 50 names of bank loan defaulters for whom a total amount of Rs 68,607 crores has been written off as on September 30, 2019.
“Though such write offs of huge amounts in favour of big corporates is a regular feature in the banks, the timing of the same is very distressing. At a time when the poor people of our country are facing innumerable problems on account of COVID-19 pandemic and are bearing the burden through loss of livelihood, at a time when lakhs of migrant workers and contract workers have lost their jobs and have overnight become virtual beggars...it is a matter of shame that under the very nose of the present BJP-NDA government, such huge loans have been written off to favour these willful defaulters,” he said in a statement.
Raja said his party has pointed out that bad loans in banks are alarmingly increasing year after year and demanded that effective measures should be taken by the government to recover these loans."
India Inc staring at 15% profit erosion in FY21, 10% revenue decline: Crisil
Here are some estimates of how the nation-wide lockdown is likely to affect the financials of corporates.
PTI reports: "India Inc is staring at a bleak and forgettable fiscal year FY21, which is likely to see a 10 per cent fall in revenues and at least 15 per cent erosion in profits due to the COVID-19 pandemic, domestic ratings agency Crisil said on Thursday.
Loan servicing can become difficult as a result of the troubles, its research wing said, estimating banks’ non-performing assets (NPAs) to rise by up to 2 percentage points to 11.5 per cent, and credit growth to slow down to 2 per cent.
At present, the country is under a 40-day lockdown till May 3, and there are indications of it being gradually withdrawn.
Crisil estimated one month of the lockdown to shave off 3 percentage points from the gross domestic product (GDP) and warned that its base case of 1.8 per cent growth for FY21 may fall to zero if the lockdown continues.
Its chief economist Dharmakirti Joshi said up to 4 per cent of the GDP will be lost permanently as a result of the crisis, which will lead to scores getting unemployed.
He said the fiscal support worth Rs 1.7 lakh crore announced till now is inadequate to fight the crisis.
Crisil expects a doubling of the stimulus to Rs 3.5 lakh crore with a focus on the industries segment in the second phase. Apart from the spending measures, there can be others like loan guarantees also, it said."
Rupee settles 57 paise higher at 75.09 against US dollar
The rupee witnessed a strong rally against the US dollar today on the back of a rally in domestic equities and signs that the economy may return to normalcy soon.
PTI reports: "The Indian rupee surged 57 paise to close at 75.09 (provisional) against the US dollar on Thursday, amid higher domestic equity markets and a weak American currency in the overseas market.
Forex traders said a positive start of domestic stocks supported the local unit. Moreover, investor risk appetite is improving as India could relax restrictions in many areas from May 4.
This is the fourth consecutive day of gain for the rupee, during which it has appreciated by 137 paise.
At the interbank foreign exchange, the rupee opened at 75.17. During the session it touched an intra-day high of 74.94 and a low of 75.20.
The domestic unit finally settled at 75.09, registering a rise of 57 paise over its previous close.
On Wednesday, the local unit had settled at 75.66 against the US dollar.
Traders said fears surrounding COVID-19 faded to some extent after an antiviral drug showed promise in treating coronavirus patients."
Indian retail may eventually need ventilator support, says CEO
The retail sector in India has been one of the hardest-hit due to the nation-wide lockdown, putting at risk loans offered to the sector.
IANS reports: "As no economic package has been announced so far and restrictions for shops and retail stores still exist in most states across the country, Retailers Association of India’s (RAI) CEO Kumar Rajagopalan feels that the condition of the retail sector is becoming untenable now and, will soon require “ventilator support”.
Speaking to IANS, Rajagopalan said that in the absence of government support and further regulatory relief from the Reserve Bank of India (RBI) there will be a large number of non-performing assets (NPA) in the retail sector, which may go up to Rs 75,000 crore.
“If the banking sector and the government does not come and help now, the retail sector will become an NPA, then they will have to handle a very different problem, which would be a much larger problem. NPAs could be as much as Rs 75,000 crore from retail,” he said.
He said that if the retail sector is supported with a package, it would have a positive ripple effect on the manufacturing sector and the supply chain.
He said that in case a package is not provided 20-25 per cent of the retail sector will be out of business, which would include a large number of medium scale players.
Rajagopalan observed that retail is not a high margin business and retailers don’t sit on large cash reserves like other industries."
Coal set for largest decline since World War II, says IEA
The International Energy Agency has come out with a report on the extent to which energy demand has been hit by the global lockdown.
IANS reports: "In a historic shock amid Covid-19 pandemic, coal is set for the largest decline since World War II alongside sharp reductions for oil and gas, the International Energy Agency (IEA) said on Thursday in a report.
Nuclear power is less affected, while renewables are the only energy source on the rise in 2020, thanks to priority access to grids and low operating costs.
The Covid-19 pandemic represents the biggest shock to the global energy system in more than seven decades, with the drop in demand this year set to dwarf the impact of the 2008 financial crisis and result in a record annual decline in carbon emissions of almost eight per cent.
The report provides an almost real-time view of the Covid-19 pandemic’s extraordinary impact across all major fuels.
Based on an analysis of more than 100 days of real data so far this year, the IEA’s Global Energy Review includes estimates for how energy consumption and carbon dioxide (CO2) emissions trends are likely to evolve over the rest of 2020.
“This is a historic shock to the entire energy world. Amid today’s unparalleled health and economic crises, the plunge in demand for nearly all major fuels is staggering, especially for coal, oil and gas. Only renewables are holding up during the previously unheard-of slump in electricity use,” said IEA Executive Director Fatih Birol said."
India's scrap gold supplies seen at record high on price rally, coronavirus, says WGC
The rise in gold prices and the financial pressures caused by the nation-wide lockdown could be pushing a lot of Indians to sell their gold holdings.
Reuters reports: "Scrap gold supplies in India are likely to hit an all-time high in 2020 as consumers sell jewellery to reap record high prices and cope with the financial crunch from the coronavirus lockdown, the World Gold Council (WGC) said on Thursday.
Rising scrap supplies amid a fall in demand could dent the world's second-biggest bullion consumer's imports and cap a rally in global prices, which hit a more than seven-year high earlier this month.
Falling bullion imports, however, could help reduce India's trade deficit and support the ailing rupee.
Record high local prices, coupled with short-term pressure on household finances, could encourage people to sell gold, said Somasundaram PR, the managing director of WGC's Indian operations.
“Definitely it (scrap supplies) will be much higher than last year,” he told Reuters.
Scrap supplies in India jumped 37% in 2019 from a year ago to a record 119.5 tonnes, the WGC said, driven by rising prices."
Rs 11.2 lakh crore package needed to resurrect economy post lockdown
It looks like the Centre's 1.7 lakh crore stimulus announced last month may not be enough to help in the recovery of the economy.
IANS reports: "Government will need to pump prime the economy hit by COVID—19 pandemic and subsequent lockdowns by putting in place a massive Rs 11.2 lakh crore ($150 billion) worth of economic package, Acuite Rating has said in a report.
The economic package working out to around 4.8 per cent of FY20 GDP, is the amount of loss that the present lockdown starting from mid March and now expected to end on May 3 had created. The rating agency has said that with economy losing GDP worth $4.5 billion per day in the period of lockdown, only a big stimulus package from the government could create the environment to where the economy hoped to revive from the second half of current year.
Given that the virus lockdown came closely following a weak growth trajectory, Acuite believes that a contraction in GDP in Q1FY21 aside, there is a significant downside risk to our growth estimates of two per cent— three per cent for FY21 unless there is an appropriate and timely stimulus package for the economy.
“Ideally, we would like the government to opt for a stimulus package of Rs. 11.2 Lakh Cr ($150 billion), the economic loss that is already set to be recorded for the current lockdown period and that will tantamount to 4.8 per cent of FY20 GDP,” the report said.
“However, in our opinion, it is not so much the size of the package but its effectiveness that will be the key to a healthy revival of the economy by H2 FY21. The stimulus should primarily focus on maintaining productive government expenditure including capital expenditure to the extent possible, given the latter’s ability to push up growth,” it added."
DCGI nod for Glenmark Pharma clinical trials on Favipiravir antiviral tablets for COVID-19 patients
Glenmark Pharmaceuticals has received approval from the Drug Controller General of India (DCGI) to conduct clinical trials on Favipiravir antiviral tablets for COVID-19 patients.
A generic version of Japanese firm Fujifilm Toyama Chemical Co’s Avigan, Favipiravir has demonstrated activity against influenza viruses. It has been approved in Japan for the treatment of novel influenza virus infections. Multiple clinical trials had been initiated on COVID-19 patients, post the outbreak, in China, Japan and in the U.S.
Stating this, a Glenmark Pharmaceuticals release said having internally developed the active pharmaceutical ingredient (API) and the formulations for the product, the company filed for clinical trials with the DCGI. The regulator has given approval for conducting the trial on mild to moderate patients.
Glenmark said it is the first pharmaceutical company in India to be given an approval by the regulator to start the trial on COVID-19 patients.
Can gold keep rallying even as physical demand plunges?
Gold has been rallying strong on the back of demand for safety even as physical demand for the metal dropping sharply.
Reuters reports: "Imagine a commodity that posted a strong 12.8% rally in prices in the first quarter despite demand dropping a staggering 26% as buying collapsed in the world's two biggest consumers. Welcome to the weird world of gold.
Total physical demand for gold in the first quarter of 2020 was 753 tonnes, down from 1,019 tonnes in the first quarter of last year, according to data released on Thursday by Refinitiv Metals Research.
This was the lowest quarterly demand in 11 years and was driven by the novel coronavirus pandemic causing jewellery and bar and coin investment to fall off a cliff.
At the same time, the coronavirus helped boost flows into investment products such as exchange-traded funds (ETFs), which jumped 300 tonnes in the first quarter, taking the total holdings to a record high above 3,000 tonnes, according to Refinitiv.
The spot price of gold increased from $1,517.01 an ounce at the end of last year to close at $1,711.25 on Wednesday, and at one stage had rallied 15.1% to an eight-year high of $1,746.50 on April 14.
The price action suggests that gold is being driven by investor interest and its traditional role as a safe haven in times of economic uncertainty.
So far, this has been enough to outweigh the loss of physical demand in the two biggest buyers, but the question is whether this situation is likely to persist, or whether the lack of physical demand will act as a drag on the rally.
Ultimately, if physical demand remains weak in China and India, it would be hard to mount a case for a sustained gold rally on the back of investment flows."
Facebook Q1 revenue growth slows but stronger than expected
Facebook on Tuesday reported its slowest quarterly growth as a public company, pressured by the coronavirus pandemic and a resulting global slowdown in digital advertising.
The social network, like Google on Tuesday, said it’s feeling the squeeze from the global pandemic but expects to weather it with modest long-term effects.
Facebook said it earned $4.9 billion, or $1.71 per share, in the January-March quarter. That’s more than double the $2.43, or 85 cents per share, it reported in the same period a year earlier. Revenue rose 18% to $17.74 billion from $15.08 billion.
Analysts polled by FactSet were expecting higher earnings of $1.74 per share and lower revenue of $17.34 billion.
Rs 65,000 crore needed to feed the poor, says Raghuram Rajan
The former RBI governor, in a chat with Congress leader Rahul Gandhi, estimated the cost of feeding the country's poor and the wider economic effects of the pandemic.
IANS reports: "Former Reserve Bank of India Governor Raghuram Rajan in a video talk with Congress leader Rahul Gandhi, streamed by the party, said that country needs Rs 65,000 crore to feed the poor.
Raghuram Rajan said, “Rs 65,000 crore is needed to feed the poor and India can afford it as the GDP is Rs 200 lakh crore,” adding that “Social harmony is a public good; we cannot afford to have our houses divided at the time when challenges are big”.
He said that there should be efforts to give money to the poor through DBT, MGNREGA, old age pension and also supporting through PDS.
Raghuram Rajan said that India needs to be cleverer in lifting the lockdown as it has limited capacity to feed the poor.
“There are ways country can take advantage but I think there will be no positive impact of this situation as there may be rethinking in global economy.”
“There will be strategic change but these types of pandemic have rarely any positive effects in general,” said Rajan."
Rupee surges 63 paise to 75.03 against US dollar in early trade
A update on the rupee, which has risen against the US dollar amid a strong rally in domestic equities.
PTI reports: "The rupee appreciated by 63 paise to 75.03 against the US dollar in early trade on Thursday tracking positive opening of domestic equities and fresh foreign fund inflows.
Forex traders said a positive start of domestic stocks supported the local unit. Moreover, investor risk appetite is improving as India could relax restrictions in many areas from May 4.
At the interbank foreign exchange, the rupee opened at 75.17, then gained ground and touched 75.03, registering a rise of 63 paise over its previous close.
On Wednesday, rupee had settled at 75.66 against the US dollar.
Besides, market sentiments improved as more countries are announcing gradual lifting of lockdowns that have been imposed to contain coronavirus infection, traders said.
“Additionally, risk sentiments improved after an antiviral drug showed promise in treating coronavirus patients,” Reliance Securities said in a research note."
US economy sees biggest slump since 2008 financial crisis
The economic cost of the global lockdown is starting to become more obvious as official data begin to be released.
IANS reports: "The US economy has witnessed the biggest quarterly decline since the 2008 financial crisis, indicating the severity of the COVID-19 pandemic induced recession, while analysts have said that the worst was yet to come.
On Wednesday, the Commerce Department said that the US GDP in the first quarter contracted at an annual rate of 4.8 per cent amid the pandemic, the biggest decline in over a decade, Xinhua news agency reported.
The decline in first-quarter real GDP was, in part, due to the response to the spread of COVID-19, as governments issued “stay-at-home” orders in March, according to the “advance” estimate released by the department’s bureau of economic analysis.
Widespread “stay-at-home” orders and other measures to contain the virus led to “rapid changes in demand”, as businesses and schools switched to remote work or canceled operations, and consumers cancelled, restricted, or redirected their spending, the bureau noted.
“There was little good news in the underlying data, and the contraction that occurred in the first quarter is just a hint at what is to come in Q2,” Jay H. Bryson, acting chief economist at Wells Fargo Securities, wrote in an analysis.
Noting that the lockdown of the economy, which occurred in most states, did not really start to take effect until mid-March or early April, Bryson said “we look for real GDP to contract at an unprecedented annualized rate in excess of 20 percent in Q2”."
VC investments in Q1 '21 tumbled 57% over Q4 '20: KPMG
After a record-breaking $6 billion in calendar Q4 2019, VC investments in India fell sharply to just $2.2 billion in Q1 ’20, in part due to economic and political uncertainty. Despite these challenges, India saw a number of good deals.
India was not as affected by COVID-19 during Q1 ’20 compared to China. “Concerns relating to the pandemic grew later during the quarter, due in part, to the fact India receives a significant amount of venture capital (VC) investments from international VC firms and corporates,” said KPMG in a report.
India has seen many deals deferred as these investors waited to see how CoVID-19 would affect businesses. This was reflected in the number of deal being made. While the pipeline for deals is expected to remain relatively robust in India, the deal flow is expected to become very slow, particularly during the Q2 of calendar ‘20. “In India, while VC investments might be challenging in the short-term, it is expected to remain robust over the longer-term,” added KPMG, reposing faith in the India story.
Sensex rallies over 900 points, Nifty reclaims 9,800 level
Indian stocks have started the day on a positive note, rallying heavily in line with US stocks overnight.
PTI reports: "Equity benchmark Sensex soared over 900 points in opening trade on Thursday tracking heavy buying at ICICI Bank, Infosys, HDFC twins and Reliance Industries counters amid rally in global stocks.
After hitting a high of 33,640.73, the 30-share index was trading 895.69 points or 2.74 per cent higher at 33,615.85.
Similarly, the NSE Nifty shot up 247.20 points, or 2.59 per cent, to 9,800.55
Maruti was the top gainer in the Sensex pack, rallying nearly 7 per cent, followed by M&M, ICICI Bank, Infosys, Tata Steel, Bajaj Auto, Axis Bank and Bajaj Finance.
Shares of Reliance Industries, HUL and Tech Mahindra were trading on a positive note ahead of their earnings announcements.
On the other hand, Sun Pharma was the sole laggard.
In the previous session, the BSE barometer settled 605.64 points or 1.89 per cent higher at 32,720.16, while the Nifty advanced 172.45 points, or 1.84 per cent, to close at 9,553.35."
