After a day of choppy trading yesterday, the benchmark indices have opened this morning on a flat note.
The global economic scene continues to be uncertain as virus cases surge adding to fears of a second pandemic wave.
Join us as we follow the top business news through the day.
Pandemic puts healthy diets out of children's reach
Sensex pares intra-day gains to end 52 points lower; Nifty slips below 11,350
Stocks ended the day with minor losses after failing to hold on to gains during the day.
PTI reports: "Domestic equity benchmark Sensex pared all intra-day gains to end 52 points lower on Tuesday, tracking losses in Bharti Airtel, Axis Bank and HDFC amid weak global cues.
After swinging 471.03 points during the day, the 30-share BSE index ended 51.88 points or 0.14 per cent lower at 38,365.35.
The broader NSE Nifty slipped 37.70 points or 0.33 per cent to 11,317.35.
Tata Steel was the top loser in the Sensex pack, shedding over 4 per cent, followed by Bharti Airtel, Axis Bank, ONGC, SBI and Sun Pharma.
On the other hand, HCL Tech, Infosys, Reliance Industries, Tech Mahindra and TCS were among the gainers.
Domestic equities traded on a positive note during the session, but pared all gains at the fag-end of the day tracking weak opening of European equities, traders said.
Bourses in Shanghai, Hong Kong, Seoul and Tokyo ended on a positive note, while stock exchanges in Europe opened in the red.
Global oil benchmark Brent crude was trading 1.69 per cent lower at USD 41.30 per barrel.
In the forex market, the rupee depreciated 25 paise to close at 73.63 against the US dollar."
PUBG Corp says China’s Tencent won’t publish mobile game in India
PUBG Corp, the unit of a South Korean company behind PlayerUnknown's Battlegrounds (PUBG), will no longer give Tencent Games the rights to publish its popular mobile game in India, it said in a blog.
The announcement came a week after India banned 118 apps , mostly of Chinese-origin, PUBG among them, to step up pressure on Beijing over a months-long border standoff between the nuclear-armed rivals.
“Moving forward, PUBG Corporation will take on all publishing responsibilities within the country,” the company said, adding that it was exploring ways to provide gaming experiences to Indian users in future.
It was not immediately clear if the move would spur Indian authorities to revoke their ban.
Dues payment over 10 years not enough to aid VIL; expect market gains for Airtel, Jio: Fitch
The SC's relief and rebranding won't help Vodafone-Idea enough, says Fitch.
PTI reports: "The Supreme Court’s decision to allow telcos to pay outstanding dues over 10 years will not be enough to help Vodafone Idea to stabilise its position, while Jio and Airtel are expected to strengthen their market shares through subscriber gains, Fitch Ratings has said.
It further said another tariff hike of at least 20 per cent is probable in the next 12 months.
Vodafone Idea’s plan to raise funds through a mix of equity and debt is “unlikely” to restore its competitive position and reverse subscriber losses, as the amount would not be sufficient for capex, it argued.
“We believe Vodafone Idea will gradually lose market share given its weak balance sheet and limited financial flexibility,” a Fitch release said, adding that Jio and Bharti, on the other hand, are expected to gain market share on the SC verdict.
Industry tariffs are expected to rise as users adopt higher-price 4G plans.
“We expect Jio and Bharti to increase their combined revenue market share to 75-80 per cent from around 70 per cent in the next 12-18 months, at the expense of Vodafone Idea, which will likely lose 50 million-70 million subscribers in the next 12 months; it lost about 155 million subscribers in the last nine quarters,” it said.
Reliance Jio could snap up more than half of Vodafone Idea’s subscriber losses, with the balance going to Bharti, the release added.
While Jio had posted Earnings before Interest Tax Depreciation and Amortisation (EBITDA) growth of 55 per cent, and Bharti reported Indian mobile EBITDA growth of 35 per cent in the first quarter of the current fiscal, Vodafone Idea’s numbers remained stagnant, covering only half of its interest cost.
“Vodafone Idea’s auditor expressed material uncertainty over the company’s ability to continue as a going concern, which, the auditor said, depends on successful negotiations with Vodafone Idea’s lenders to waive their rights to repayment after breaches of covenants under its bank loans,” Fitch Ratings said.
At June end, it had a cash balance of USD 470 million (about Rs 3,454 crore) which was well short of short-term debt maturities and guarantees of USD 3.6 billion (about Rs 26,450 crore).
“It has so far paid about USD 1.1 billion of its total unpaid dues of USD 8.9 billion, and it will need to pay around USD 1-1.2 billion a year during FY2021-2031,” it said.
The Supreme Court’s latest ruling will allow Bharti Airtel to pay the remaining outstanding dues in 10 annual payments of about USD 600 million (about Rs 4,410 crore) starting March 2022 instead of a lump sum.
Bharti’s FY21 Indian mobile EBITDA is likely to improve by 30-40 per cent on the back of improved margins following tariff hikes and 5-6 per cent subscriber growth.
Fitch expects Jio’s FY21 mobile revenue to increase by 45-50 per cent, driven by higher monthly average revenue per user (ARPU) and subscriber addition of about 40 million.
Vodafone Idea - whose ARPU is about 30 per cent, lower than Bharti’s - could raise tariffs to improve cash flows. As it is, all three telcos had simultaneously increased tariffs by an average of 30 per cent in December 2019.
“We estimate industry ARPU to grow by around 10 per cent in FY21, as users upgrade gradually to higher-tariff 4G price,” it said, citing Bharti’s stance that industry’s monthly ARPU needs to touch about Rs 200 and eventually Rs 300 for a sustainable business."
Rupee settles 25 paise lower at 73.63 against US dollar
The rupee depreciated 25 paise and settled at 73.63 (provisional) against the US dollar on Tuesday amid rise in demand for the American currency from banks and importers.
At the interbank forex market, the rupee started off on a tepid note at 73.63 and finally closed at 73.60 against the greenback, down 25 paise over its previous close.
The local unit traded in a range of 73.37 and 73.64 per US dollar during the session.
On Monday, the rupee had settled at 73.35 against the US dollar.
Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, rose 0.43 per cent to 93.11.
Byju’s raises fresh funding from Silver Lake, others
Ed-tech major Byju’s has raised fresh funding from Silver Lake and existing investors, Tiger Global, General Atlantic and Owl Ventures.
While the company did not disclose financial details, sources said Byju’s has raised $500 million (about ₹3,672 crore) in the new round that valued it at $10.8 billion.
“We are fortunate to be in a sector of positive relevance during this crisis. This has brought online learning to the forefront and is helping parents, teachers and students experience and understand its value,” Byju’s founder and CEO Byju Raveendran said.
In a statement on Tuesday, Byju’s said the fresh funding round saw participation from Silver Lake, and existing investors Tiger Global, General Atlantic and Owl Ventures.
Indian economy to contract 10.5% in FY21; COVID-19 spread disrupting economic activity: Fitch
Economic performance in the upcoming quarters won't be enough to make up for the huge loss in th first quarter, believes Fitch.
PTI reports: "Fitch Ratings on Tuesday slashed India’s FY21 growth projection to (-) 10.5 per cent, from (-) 5 per cent estimated earlier, saying the continued spread of the virus and imposition of sporadic shutdowns across the country has disrupted economic activity.
In the first quarter of current fiscal India’s gross domestic product (GDP) contracted by a massive 23.9 per cent.
Fitch said India recorded one of the sharpest GDP contractions in the world in the April-June quarter, but noted that growth should rebound strongly in the July-September period amid re-opening of the economy.
However, there are signs that the recovery has been sluggish and uneven, it said.
In its September update of Global Economic Outlook (GEO), Fitch said, the deepest recessions were in India, the UK and Spain, countries that saw particularly large shocks in daily mobility data on visits to retail and recreation venues, and where lockdowns were stringent and long-lasting throughout 2Q20 (April-June).
It said multiple challenges are holding back growth recovery, both in the short and medium term.
“New cases of the coronavirus continue to increase, forcing some states and union territories to re-tighten restrictions... The continued spread of the virus and the imposition of sporadic shutdowns across the country depress sentiment and disrupt economic activity,” Fitch said.
It further noted that the severe fall in activity has also damaged household and corporate incomes and balance sheets, amid limited fiscal support.
Also a looming deterioration in asset quality in the financial sector will hold back credit provision amid weak bank capital buffers.
Furthermore, high inflation has added strains to household income and supply-chain disruption and excise duties increases have caused prices to rise. It projected inflation to slow amid weak underlying demand, easing supply-chain disruption and a good monsoon.
“We have slashed our GDP forecast for this fiscal year to - 10.5 per cent, a huge revision of - 5pp (percentage points) compared to the June GEO. We expect the shortfall of activity relative to our pre-virus forecast to be 16 per cent by early 2022,” Fitch said.
GDP growth is likely to be (-) 9.6 per cent in July-September, (-) 4.8 per cent in October-December and 4 per cent in January-March quarter this fiscal, as per Fitch projections.
For the next fiscal, Fitch estimated Indian economy to grow 11 per cent, while for 2022-21 growth would be 6 per cent.
Separately, India Ratings and Research, the India arm of Fitch Ratings, on Tuesday revised India’s GDP growth forecast to (-) 11.8 per cent, from (-) 5.3 per cent earlier.
Fitch said the pandemic has become more prevalent in emerging market countries excluding China as the year has progressed. Brazil, Russia and India now have some of the highest coronavirus caseloads in the world.
“India imposed one of the most stringent lockdowns worldwide in 2Q20 and domestic demand fell massively. Limited fiscal support, fragilities in the financial system, and a continued rise in virus cases hamper a rapid normalisation in activity.
“The double-digit growth rate we expect for 2021-2022 simply reflects the low base in 2020 — we do not expect GDP to return to pre-virus levels until 1Q22 (January-March. 2022),” Fitch said."
India’s hiring outlook bleakest in 15 years: Survey
More gloomy news on the job market.
PTI reports: "India is witnessing the weakest hiring sentiment in 15 years with just 3 per cent companies planning to add staff in the next three months, a survey of over 800 employers said on Tuesday.
According to the ManpowerGroup Employment Outlook Survey, that covered 813 firms across India, Indian employers report cautious hiring plans for the final quarter of 2020.
As per the survey, 7 per cent of employers anticipate an increase in payrolls, 3 per cent forecast a decrease and 54 per cent expect no change. Once the data is adjusted to allow for seasonal variation, the outlook stands at 3 per cent, it said.
“Hiring sentiment is the weakest since the survey began 15 years ago, remaining relatively stable when compared with the previous quarter, but declining by 16 percentage points in comparison with this time one year ago,” the survey said.
The strongest hiring pace is recorded in the small-sized organisations followed by the medium-sized and large-sized firms. From a region perspective, north and east regions indicate a more positive outlook compared to the west and south, the survey said.
“Post the ‘right sizing’ exercise aligning themselves to the current market demands, organisations are now looking at improving productivity, new forms of employee engagement, getting furloughed employees back and implementation of technology,” said Sandeep Gulati, Group Managing Director of ManpowerGroup India.
These factors are influencing the employment trends this quarter, he added.
Gulati further said that “the government is also trying to ease the burden on corporate India by providing various sops from production-linked incentives to changes in the labour law and leniency on tax returns. We hope to see the impact of these reforms in the subsequent quarters“.
The survey further said that nearly 44 per cent of employers reported that they may return to pre-COVID-19 hiring within the next nine months whereas 42 per cent are unsure about returning back to normalcy from the hiring perspective.
When asked about existing members of the workforce that have been placed on a job retention or furlough scheme, 42 per cent of companies suggest they plan to bring them back with reduced hours, however, 3 per cent indicate these staff will be let go.
Globally, employers in 22 of the 43 countries and territories surveyed by ManpowerGroup expect to add to payrolls in the period up to the end of December 2020. In 16 countries and territories, employers expect to reduce payrolls, while flat hiring activity is forecast in five.
The strongest labour markets are expected in Taiwan, the United States, Turkey, Japan and Greece, while the weakest hiring intentions are reported in Panama, Costa Rica, South Africa, Colombia and the UK.
“Interviewing was carried out during the exceptional circumstances of the COVID-19 outbreak. The survey findings for the fourth quarter of 2020 are likely to reflect the impact of the global health emergency, and may be notably different to previous quarters,” it noted."
Ram Shahaney, former Chairman Emeritus of Ashok Leyland, passes away
Ram J Shahaney (89), who has played a major role in the growth of Ashok Leyland Ltd during his more than three-decade stint at the company, passed away in Chennai on Tuesday.
Under his stewardship, Ashok Leyland grew manifold in scale and scope into a multi-location truck and bus behemoth in India.
Shahaney, who came from Jessop & Co in Kolkata, took charge as the first Indian Managing Director of Ashok Leyland in 1978.
Committed to technology, Shahaney led Ashok Leyland to come out with full air brakes and rear engines among others, for the first time in India. He played a big role in bringing a new range of vehicles for the mass market. His tenure saw tie-ups with Hino Motors for engines and ZF for transmissions.
China bond inclusion in WGBI may drive $140 billion in inflows - Goldman Sachs
An important milestone for China's plans to further deepen its capital markets.
Reuters reports: "The anticipated inclusion of Chinese government bonds in a major global index could draw an additional $140 billion into Chinese bonds, Goldman Sachs estimates, potentially offering a further boost to the yuan as China opens its capital markets.
Market watchers expect index provider FTSE Russell to agree to include bonds from the world's second-largest market in its World Government Bond Index (WGBI) during an annual review this month.
In a note on Tuesday, Goldman Sachs analysts Danny Suwanapruti and Maggie Wei said $140 billion was based on an estimated weighting of 5.7% and an assumption of assets under management of around $2.5 trillion tracking WGBI.
Assuming a 20-month phased-in inclusion period, inflows could total around $7 billion per month, they said.
“From a flow perspective, FTSE will likely be the most impactful index since it has a large AUM tracking this index ... its investors base is very passive and comprises just government bonds,” they said.
Standard Chartered previously predicted an 80% chance that China will be included in the WGBI review.
The Bloomberg Barclays Global Aggregate Index began a 20-month phased inclusion of Chinese government and policy bank bonds in April 2019, and J.P. Morgan began its 10-month inclusion process for Chinese government bonds in its Government Bond Index Emerging Markets suite in February.
FTSE Russell declined to include China in its last annual WGBI review, citing long-standing investor concerns about market liquidity and trading flexibility.
Last week, China published draft rules aimed at facilitating access to its $16 trillion bond market.
“Chinese regulators also have a very positive attitude to push forward for inclusion. (And) when we have more participation from foreign investors into the bond market, index service companies will have a very strong incentive,” said Chaoping Zhu, global market strategist at J.P. Morgan Asset Management in Shanghai.
Analysts say foreign investment inflows, including purchases of bonds, have been key to the yuan's appreciation in recent months.
Foreigners raised their holdings of Chinese bonds for a 21st straight month in August, drawn by a firming yuan and attractive yields."
US Fed stimulus fails to boost economy
SBI Mutual Fund unveils scheme for children
SBI Mutual Fund has unveiled Magnum Children’s Benefit Fund - Investment Plan, an open-ended fund for parents to invest for their children. The scheme, open for subscription from September 8, is a part of SBI Magnum Children’s Benefit Fund that currently has Savings Plan, a predominantly debt-oriented offering. The scheme will predominantly invest in equity and equity-related instruments, said SBI MF, including Equity ETFs with a minimum of 65% going up to 100%, debt including Debt ETFs and money market instruments upto a maximum of 35% in REITS and InvITs up to 10% and up to 20 % in Gold ETFs.
The new plan for children aged 1 year going up to when he/she is 14 years old. There would be a lock-in period for at least 5 years or till the child attains age of majority, whichever is earlier.
Rupee falls 29 paise to 73.64 against U.S. Dollar in opening session
The Rupee depreciated 29 paise to 73.64 against the U.S. Dollar in opening deals on Tuesday amid rise in demand for the American currency from banks and importers.
Forex traders said strengthening American currency and foreign fund outflows weighed on the local unit.
At the interbank forex market, the Indian currency started off on a tepid note at 73.63 then fell further to 73.64 against the greenback, down 29 paise over its previous close.
The local unit traded in a narrow band of 73.54-73.64 per U.S. Dollar in early trade. On Monday, the Rupee had settled at 73.35 against the U.S. Dollar.
Oil mixed after dropping on demand concerns post-U.S. holiday
Demand concerns continue to persist and keep in check any rally in oil prices.
Reuters reports: "Oil prices were mixed in early trade on Tuesday on looming demand worries about a possible rise in COVID-19 cases following the U.S. Labor Day long weekend, which also marks the end of the peak U.S. driving season.
Coronavirus cases rose in 22 of the 50 U.S. states, a Reuters analysis showed, on the holiday weekend traditionally filled with gatherings to mark the end of summer. At the same time cases are flaring up in India and Britain.
U.S. West Texas Intermediate (WTI) crude futures fell 64 cents, or 1.6%, to $39.13 per barrel at 0221 GMT, playing catch-up with a drop in Brent prices overnight.
Brent crude futures inched up 6 cents, or 0.1%, to $42.07 a barrel, after falling 1.5% on Monday.
Brent dropped on Monday after Saudi Arabia's Aramco, the world's top oil exporter, cut the October official selling prices for its Arab light crude, seen as a sign demand growth may be stuttering as COVID-19 cases flare up around the world.
“The combination of coming out of summer peak driving season in the U.S., which is a seasonal factor, has refocused the market's attention on whether the demand recovery is strong enough - and clearly there are some doubts, as Aramco's price move has demonstrated,” said Lachlan Shaw, National Australia Bank's head of commodity research.
Also weighing on the market is the upcoming maintenance seasons for U.S. refineries, which could cut crude demand by 1.5 million to 2 million barrels per day, he said.
WTI and Brent have dropped out of the ranges they were in throughout August, with WTI now below $40 after having traded around $42 for most of the month. Brent has dropped from around $45. The market had been helped by a weaker U.S. dollar, which has since rebounded slightly.
“This follows on from worrying signs of a resurgence in COVID-19 cases in other parts of the world. This has raised concerns that the recent recovery in demand may be halted as the general public remains cautious about extended travel,” ANZ Research said."
Market opens on choppy note amid mixed global cues
After yesterday's flat close, stocks have once again opened the day on a flat note.
PTI reports: "Domestic equity benchmark Sensex dropped over 85 points in early trade on Tuesday amid lack of directional cues from global markets.
The 30-share BSE index opened on a choppy note and was trading 2.15 points or 0.01 per cent lower at 38,415.08; while the NSE Nifty slipped 6.80 points or 0.06 per cent to 11,348.25.
PowerGrid was the top loser in the Sensex pack, shedding around 1 per cent, followed by NTPC, Nestle India, ONGC, L&T, HDFC and M&M.
On the other hand, Reliance Industries, Sun Pharma, Infosys, Axis Bank and ICICI Bank were among the gainers.
In the previous session, Sensex settled 60.05 points or 0.16 per cent higher at 38,417.23, while Nifty advanced 21.20 points or 0.19 per cent to close at 11,355.05.
Exchange data showed that foreign institutional investors sold equities worth Rs 6.93 crore on a net basis on Monday.
Domestic equities opened on a choppy note tracking mixed cues from global equities, traders said.
Bourses in Shanghai and Hong Kong were trading with losses in mid-session deals, while Seoul and Tokyo were positive.
Stock exchanges on Wall Street ended on a negative note in overnight session.
Global oil benchmark Brent crude was trading 0.14 per cent lower at USD 41.95 per barrel."
Curbs on current account affecting MFIs: Sa-dhan
The revised guidelines from the RBI pertaining to current accounts will lead to numerous difficulties and operational issues for the microfinance sector, industry body Sa-Dhan, said in a letter to RBI Governor Shaktikanta Das.
Sa-dhan demanded that microfinance institutions be exempted from the restrictions on the opening and operation of current accounts. In the recent circular, RBI instructed banks not to open current accounts for customers who had availed credit facilities in the form of cash credit (CC)/ overdraft (OD) from the banking system and said all transactions shall be routed through the CC/OD account.
“In the current scenario, when borrowers require urgent credit to restart their lives, implementation of the revised guidelines will result in numerous difficulties and operational issues for the microfinance sector,” P. Satish, executive director – Sa-Dhan, said.
