Today's top business news: Stocks slip as coronavirus cases jump, equity mutual fund inflows plunge 27%, Michael Burry flags online advertising bubble, and more

Sharebrokers and holders check the Sensex and Nifty at a Share market in Kolkata | File

Sharebrokers and holders check the Sensex and Nifty at a Share market in Kolkata | File   | Photo Credit: PTI

News updates from the world of economy, markets, and finance

Stocks opened this morning with minor losses as economic uncertainty due to the coronavirus lockdown continues to bother investors.

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

4:30 PM

Michael Burry flags online advertising bubble

 

4:00 PM

Sensex drops 242 points; Nifty gives up 9,200-mark

The benchmark indices remained in the red through the day today as investors remained concerned about the spurt in coronavirus cases in the country.

PTI reports: "Equity benchmark Sensex fell over 242 points on Thursday, dragged by losses in index-heavyweights HDFC twins and Kotak Bank amid rising coronavirus cases in the country.

After touching a low of 31,362.87, the 30-share index settled 242.37 points or 0.76 per cent lower at 31,443.38.

Similarly, the broader NSE Nifty slipped 71.85 points, or 0.78 per cent, to end at 9,199.05.

ONGC was the top loser in the Sensex pack, slumping over 4 per cent, followed by NTPC, Kotak Bank, Titan, Bharti Airtel and PowerGrid.

On the other hand, IndusInd Bank rallied over 6 per cent. M&M, Reliance Industries, Axis Bank and Tech Mahindra were the other gainers.

Market tried to cut losses in the morning session but failed as selling resumed in consumer durables and banking sectors, keeping benchmarks below Wednesday’s levels, said Narendra Solanki, Head- Equity Research (Fundamental), Anand Rathi.

In the afternoon session, volatility intensified amid fears that the peak of fresh COVID-19 cases was nowhere near after the case count surged past 50,000, he added."

3:30 PM

ONGC, OIL earnings to decline, credit metrics weaken due to lower oil prices

The oil price crash due to the sharp drop in demand amid the global lockdown has put Indian public sector oil companies in a spot of bother.

PTI reports: "State-owned Oil and Natural Gas Corp (ONGC) and Oil India Ltd are likely to see earnings decline and credit metrics weaken due to fall in oil prices, Moody’s Investors Service said on Thursday.

ONGC and OIL get rates equivalent to those prevalent in the international markets. Oil prices in the international markets last month slumped to a two-decade low of USD 18 per barrel before rebounding by some measure.

In addition to the decline in oil prices, ONGC and OIL also face a reduction in government-regulated prices for the natural gas they produce.

“We expect ONGC’s earnings to decline and its credit metrics to weaken because of lower oil prices over the next 12-18 months,” Moody’s said in a report on Asian national oil and gas companies.

Although ONGC is an integrated oil and gas company, its downstream segment contributed only about 30 per cent of its consolidated EBITDA for the year ended March 31, 2019 (fiscal 2019).

Crude oil, which accounted for about half of its total production, contributed nearly 80 per cent of its upstream revenue in FY19.

“In addition to the decline in oil prices, ONGC also faces a decline in natural gas selling price. The natural gas selling price in India is regulated by the government of India which has revised the price of natural gas with effect from April 1, 2020, to USD 2.39 per million British thermal units (btu) from USD 3.23 per million btu,” Moody’s said.

ONGC’s credit metrics, it said, will weaken but still remain appropriate for its baa2 rating.

“However, if prices remain depressed for longer than we expect, its credit metrics will weaken beyond our downgrade threshold,” it said."

3:00 PM

Inflow in equity MF plunges 27% to Rs 81,600 crore in FY20

Some surprising numbers on flows into and out of equity mutual funds as we live amid high volatility.

PTI reports: "Investors pumped Rs 81,600 crore in equity-oriented mutual fund (MF) schemes in 2019-20, registering a decline of 27 per cent from Rs 1.12 lakh crore inflows in the preceding fiscal.

However, this was the sixth successive year of net inflows in equity mutual funds, according to data by the Association of Mutual Funds in India (AMFI).

The flows into equity funds in the last fiscal were lower than the flows in 2018-19 primarily due to the equity markets displaying volatility which made some investors take a break from making fresh equity investments.

According to the data, net inflows into equity funds, which also include equity-linked saving schemes (ELSS), were Rs 81,600 crore in the last fiscal as against Rs 1,11,858 crore in 2018-19.

Net inflows in these funds were Rs 1,71,069 crore in 2017-18, Rs 70,367 crore in 2016-17, Rs 74,024 crore in 2015-16 and Rs 71,029 crore in 2014-15.

However, they had witnessed a net outflow of Rs 9,269 crore in 2013-14

Of the total inflow in the latest fiscal, investors poured Rs 11,485 crore in March, which was the highest level in the year. Also, they had invested Rs 10,730 crore in February, the highest level in 11 months.

This comes even as the broader market witnessed extreme volatility amid concerns over the impact of the coronavirus pandemic."

 

2:30 PM

World food prices fall sharply in April because of coronavirus

The drop in consumer demand globally has had a cooling effect on food prices.

Reuters reports: "World food prices fell for a third consecutive month in April, hit by the economic and logistical impact of the coronavirus pandemic, the United Nations food agency said on Thursday.

The Food and Agriculture Organization (FAO) food price index, which measures monthly changes for a basket of cereals, oilseeds, dairy products, meat and sugar, averaged 165.5 points last month, down 3.4% on March.

“The pandemic is hitting both the demand and supply sides for meat, as restaurant closures and reduced household incomes lead to lower consumption and labour shortages on the processing side are impacting just-in-time production systems,” said FAO Senior Economist Upali Galketi Aratchilage.

By contrast with the other indices, FAO's cereal price index declined only slightly, as international prices of wheat and rice rose significantly while those of maize dropped sharply.

Rice prices rose 7.2% from March, due in large part to temporary export restrictions by Vietnam that were subsequently repealed, FAO said. Wheat prices rose 2.5% amid reports of a quick fulfilment of the export quota from Russia.

However, prices of coarse grains, including maize, fell 10%, hit by reduced demand for both animal feed and biofuel production.

FAO held its forecast for cereal production largely steady at 2.720 billion tonnes in 2019, but reduced its forecast for cereal utilisation in 2019/20 by 24.7 million tonnes, mainly because of the impact of the coronavirus on the economy."

 

2:00 PM

ICRA downgrades Edelweiss debt

Rating agency ICRA has downgraded debt instruments of Edelweiss Housing Finance and Edelweiss Finance & Investments Limited and said the outlook remained negative.

ICRA said it has taken a consolidated view of the Edelweiss Group, given the close linkages between the group entities, common promoters and senior management team, shared brand name and strong financial and operational synergies.

“The rating downgrade action takes into account the increased stress in the wholesale portfolio, leading to a deterioration in the asset quality, and the consequent impact on the financial performance,” ICRA said.

Read more
 

1:30 PM

MSMEs need govt push to benefit from comparative advantage over China-made consumer goods

As the government plans to take steps to attract businesses from China, here is a reminder of what needs to be done.

PTI reports: "The government needs to give direct push to MSMEs to ramp up export of consumer goods to reap the benefits of India’s comparative advantage over products made in China in the post-pandemic world, a report said.

India can look in the range of incremental exports growing by USD 20 billion (in the least favourable outcome) to a significant USD 193 billion jump in the five-year horizon, only if it builds its capabilities and captures share from China, according to SBI’s Ecowrap report released on Thirsday.

Although we do have a comparative advantage in textiles and animal goods, in food products we are not competitive. The government can give a direct push to this sector, so that MSME firms involved in food products manufacturing get benefitted, the report said.

“When we look at the value of merchandise exports, for 2019, China exported USD 2.5 trillion worth of goods, while India exported USD 0.3 billion worth of merchandise. This means that China exports 7 times the amount of goods India exports in a year,” it said.

As per the report, India is one country that can fulfill global demands with its sizeable population. However, India will have to take a hard look at its labour reforms and currency outlook to gain market share."

1:00 PM

Global markets in limbo

 

12:40 PM

HCL posts 22.8% rise in profit

HCL Technologies on Thursday posted a 22.8% increase in its consolidated net profit to ₹3,154 crore for the quarter ended March 31,2020.

The IT giant said its revenues for the quarter under review stood at ₹18,590 crores, up 16.3% from January-March 2019, as per US GAAP.

For the FY-20, the net profit was up 9.3% to ₹11,062 crore year-on-year, while revenues were up 17% to ₹70,678 crores.

In constant currency, revenue growth for full year was up 16.7% to $9,936 million — in line with forecasted outlook of 16.5-17% for the full year. This time, however, HCL Technologies has not given revenue guidance amid uncertainties on account of COVID-19 pandemic.

Read more
 

12:30 PM

Yes Bank shares zoom 20% on quarterly profit

Shares of this private sector lender, which was in the news for the wrong reasons, are up close to 30% at the moment. Still, the share price is down for the year.

PTI reports: "Shares of Yes Bank on Thursday zoomed 20 per cent after the company reported a net profit of Rs 2,629 crore for the March quarter.

The stock jumped 19.92 per cent to Rs 31.60 on BSE, while it rallied 19.96 per cent to Rs 31.55 on NSE.

Yes Bank on Wednesday reported a net profit of Rs 2,629 crore for the March quarter, helped by a massive gain of over Rs 6,200-crore arising out of a controversial write-off of bond investors’ investment.

If the one-off gain is excluded, then the bank, which was bailed out by a consortium-led by State Bank of India (SBI) in March, has a loss of Rs 3,668 crore in the latest quarter under review.

The private sector lender posted a loss of Rs 18,560 crore in the December quarter while the loss was at Rs 1,506 crore in the March 2019 quarter.

The one-time gain is from the write off of additional tier-I bondholders’ Rs 8,419-crore investment, according to a release.

For the fiscal year 2019-20, Yes Bank reported a loss of Rs 16,481 crore. It had a profit of Rs 1,720 crore in the year-ago period."

12:00 PM

SBI to extend loan moratorium to NBFCs

In a move that could give a huge relief to the non-banking finance companies (NBFCs) facing a cash crunch, the State Bank of India (SBI) has decided to extend loan moratorium to these entities.

According to top sources in the bank, the decision was taken after a meeting on Wednesday, wherein it was decided that non-banks that wanted to avail the three-month moratorium on payment of instalments will have to apply for the same and the facility will not be extended by default.

The move comes days after a recent meeting between the Reserve Bank of India (RBI) and commercial banks wherein the issues of moratorium and liquidity flow to NBFCs were discussed.

Read more

 

11:20 AM

Zomato targets push into alcohol deliveries

The popular food delivery company is looking to tap into the huge demand for alcohol during the lockdown.

Reuters reports: "Indian food delivery company Zomato aims to branch out into delivering alcohol, according to a document seen by Reuters, as it seeks to cash in on high demand for booze during the country's coronavirus lockdown.

Zomato has already diversified into grocery deliveries as the restrictions on movement shuttered some restaurants and people hesitated to order outside food due to fears of catching the disease.

Alcohol stores, closed nationwide on March 25, were allowed to re-open this week, generating queues of hundreds of people outside some outlets in some cities and leading to baton charges by police to enforce social distancing protocols.

To deter the large crowds, New Delhi authorities introduced a “Special Corona Fee” of 70% on top of retail alcohol prices, while Mumbai shut its liquor stores within two days of reopening them.

There is currently no legal provision for home deliveries of alcohol in India, something that industry body International Spirits and Wines Association of India (ISWAI) is lobbying to change in conjunction with Zomato and others.

“We believe that a technology-enabled home delivery based solution can promote responsible consumption of alcohol,” Mohit Gupta, Zomato's CEO for food delivery, wrote in a business proposal to ISWAI."

 

11:00 AM

Airbnb cuts 1,900 jobs as coronavirus hits home rentals

Airbnb Inc is laying off 25% of its workforce, or nearly 1,900 employees, the home rental start-up said on Tuesday, as the COVID-19 pandemic brings global travel to a near standstill.

“Airbnb's business has been hit hard, with revenue this year forecasted to be less than half of what we earned in 2019,” founder Brian Chesky said in a memo to employees.

Reuters reported about the move earlier on Tuesday. The laid off employees in the United States will get 14 weeks of base pay plus one additional week for every year at Airbnb, the company said.

With millions of tourists cancelling plans for vacations, work trips and family visits, Airbnb earlier this year said it was allocating $250 million to help offset losses incurred by hosts.

Read more
 

10:40 AM

Yes Bank posts Rs 2,629 crore Q4 profit due to AT1 bond write down

Manojit Saha reports from Mumbai:

Private sector lender Yes Bank reported Rs 2,629 crore net profit for the for the quarter ended March 31 as compared to Rs 1,507 crore loss during the same period of the previous year. The increase in profit is due to an extraordinary gain of Rs 6,297 crore (net of tax) due to write down of additional tier-1 bonds of Rs 8,415 crore.

Excluding the extraordinary gain, the bank posted a loss of Rs 3,668 crore loss for the quarter ended March 31. Provisions for the quarter stood at Rs 4,872.34 crore as compared to Rs 3,661.70 crore during the fourth quarter of 2018-19.

Provision for investments jumped to Rs 3,336 crore during the quarter as compared to Rs 243 crore which includes Rs 1,228 crore provisioning on exposure to a housing finance company, which is now 100% provided for, the bank said. Another Rs 2,012 crore provision was on exposure to various entities of a ‘Diversified Conglomerate’.

The Covid-19 related standard asset provision was Rs 238 crore.

Gross non-performing assets as a percentage of total advances was 16.8% as on March 31 as compared to 3.22% a year ago but lower than 18.87% of end December.

The net interest income of the bank fell 49% on year to Rs 1274 crore while non-interest income grew by 12% to Rs 597 crore. The net interest margin for the quarter was 1.9% as compared to 3.1% a year ago and 1.4% in the third quarter.

The lender deposit deposit base has seen a sharp reduction from Rs 2,09,497 crore as at September 30, 2019 to Rs 1,65,755 crore as at December 31, 2019 and further to Rs 1,05,364 crore as on March 31 and Rs 1,02,717 crore as at May 2, 2020.

10:20 AM

Informal sector warrants special focus, workers need fixed income support for 3 months, say academics

A major concern surrounding the coronavirus lockdown has been the effect that it has had on the country's huge informal sector and inadequate efforts to address its plight.

PTI reports: "The government should lay a special focus on supporting the informal sector as well as micro, small and medium enterprises to revive economic activities reeling from the coronavirus crisis, according to academics.

They also stressed the need for providing a fixed income support for at least three months to informal sector workers, saying they play a major part in running the economy.

Addressing a webinar on ‘Indian economy during COVID-19’ on Wednesday, former professor of University of Hyderabad D Narasimba Reddy said the focus should be on the informal sector, which contributes significantly in the country’s GDP.

He advocated that Rs 6,000 per month should be given to workers at least for the next three months so that they can sustain in these difficult times.

Reddy also called for supporting the micro, small and medium enterprises (MSMEs), adding that there is also a need to provide social security and employment security to workers.

Echoing similar views, former professor at Jawaharlal Nehru University Ravi S Srivastava said the informal economy is highly impacted due to the outbreak of the coronavirus and suggested steps like loan waiver for small entrepreneurs to help the SME sector."

10:00 AM

Indian stocks slip as coronavirus cases jump; Hindustan Unilever drops

The benchmark indices have dropped slightly this morning as the number of coronavirus cases jumps as lockdown restrictions are eased.

Reuters reports: "Indian stocks slid on Thursday, with declines led by banks and Hindustan Unilever, as coronavirus cases in the country crossed 50,000 despite a strict weeks-long lockdown.

The NSE Nifty 50 index was down 0.58% at 9,215.70 by 0400 GMT, while the S&P BSE Sensex fell 0.62% to 31,487.85

The number of coronavirus infections rose to 52,952 in India, up by 3,561 over the previous day, the health ministry said on Thursday. The death toll was up by 89 to 1,783

Shares in Hindustan Unilever fell 4.3% after GlaxoSmithKline began selling $3.45 billion worth of the company's shares in the open market.

In a bright spot, Yes Bank's shares jumped nearly 10% after the lender reported a surprise profit for the March quarter."

 

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Printable version | Jul 12, 2020 6:59:44 PM | https://www.thehindu.com/business/businesslive-7-may-2020/article31523316.ece

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