Today's top business news: Fitch rating on India's GDP; Indonesia stops food & beverage import from China; Hong Kong recession deepens and more

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

4:50 PM

Interest of LIC policyholders will be protected, says Anurag Thakur

The government will protect the interest of policyholders of LIC, which is likely to go public in the next financial year, Minister of State for Finance Anurag Thakur has said.

Listing of LIC will help bring in greater transparency, public participation and also deepen the equity market, he said.

“Government came out with the idea (LIC listing). The details will follow and it will be in the interest of LIC and its policyholders. Interest of LIC and policyholders will be safeguarded,” he told PTI in an interview.

Asked about quantum of stake sale, he said, once the amendment to the LIC Act is finalised you will get all the details.

“LIC have an independent set-up to decide where they want to invest even today and what will continue in the next format that would come into light as well in the future,” he said.

Finance Minister Nirmala Sitharaman while presenting the Budget 2020-21 on Saturday proposed to sell a part of government stake in LIC through an initial public offer next fiscal.

The government aims to garner Rs 90,000 crore from the listing of LIC and stake dilution in IDBI Bank in the next fiscal out of total disinvestment target of Rs 2.10 lakh crore.

The government currently owns 100 per cent in LIC, while it holds around 46.5 per cent stake in IDBI Bank.

Assuring that the numbers presented in the Budget as realistic, Thakur said several measures announced in the Budget will help boost economy and meet nominal GDP growth target of 10 per cent set in the Budget.

“Just three four months back the government announced corporate tax rate cut. It takes some time to implement that at the grassroot level. So, you will see impact of that in some time. That is why we have not said 7.5 per cent, we have said 6.5 per cent (growth). And that is a real and genuine numbers we are looking at,” he said. PTI

4:30 PM

Fitch predicts India’s FY21 GDP growth at 5.6%

Fitch Ratings on Monday said India is expected to clock a GDP growth of 5.6 per cent in the next financial year, lower than the projection made by the government’s Economic Survey, as Budget 2020 has not “materially altered” its view on the country’s growth outlook.

The Economic Survey, released a day before Finance Minister Nirmala Sitharaman presented Union Budget for 2020-21 on February 1, had projected a GDP growth of 6-6.5 per cent, up from 5 per cent estimate for 2019-20.

“The fiscal slippage announced in the government’s new FY21 budget is modest relative to its previous targets, and is consistent with our expectations when we affirmed India’s ‘BBB-’ rating with a stable outlook last December, given slowing growth momentum,” said Thomas Rookmaaker, Director and Primary Sovereign Analyst for India, Fitch Ratings.

Sitharaman’s Budget missed deficit target for the third year in a row, pushing shortfall to 3.8 per cent of GDP in the current fiscal as compared to 3.3 per cent previously planned. The fiscal deficit target for the coming fiscal year starting April 1, has been fixed at 3.5 per cent.

“The new budget targets imply some further postponement of fiscal consolidation, in line with the government’s ambivalent approach to consolidation of the past few years when deficit outturns have typically exceeded budget targets,” Fitch said projecting general government debt to remain close to 70 per cent of GDP through FY22. PTI

4:15 PM

Sensex recovers 137 pts, Nifty reclaims 11,700 level

Equities benchmark BSE Sensex ended 137 points higher on Monday led by gains in HUL, ICICI Bank and Asian Paints amid broad-based buying in the market.

After a volatile session, the 30-share BSE Sensex settled 136.78 points, or 0.34 per cent, higher at 39,872.31. It hit an intra-day high of 40,014.90 and a low of 39,563.07.

The broader NSE Nifty finished higher by 46.05 points, or 0.39 per cent, at 11,707.90.

Asian Paints was the top gainer in the Sensex pack, rallying 6.32 per cent, followed by Nestle India, HUL, Bajaj Auto, IndusInd Bank, Tata Steel, Maruti and PowerGrid.

On the other hand, ITC cracked 5.09 per cent. TCS, HCL Tech, Hero MotoCorp and Tech Mahindra too ended in the red.

Indian markets traded volatile in the first session of the week with investors assessing the implications from budget, overnight gains in the US index futures and a sell-off in China, said Narendra Solanki, Head Fundamental Research (Investment Services) - AVP Equity Research, Anand Rathi Shares & Stock Brokers.

Markets turned positive in the afternoon session after a monthly survey said the country’s manufacturing sector activity climbed to a near eight-year high in January, he said.

The IHS Markit India Manufacturing PMI rose from 52.7 in December to 55.3 in January, driven by sharp rise in new business orders amid a rebound in demand conditions that led to rise in production and hiring activity. PTI

4:00 PM

Gold prices decline Rs 281, silver drops Rs 712

Gold prices declined by Rs 281 to Rs 41,748 per 10 gram in the national capital on Monday, in line with the fall in global rates, according to HDFC Securities.

In the previous trade, the precious metal had closed at Rs 42,029 per 10 gram.

Silver prices also dropped Rs 712 to Rs 47,506 per kg as compared with Rs 48,218 per kg in the previous trade.

“Spot gold for 24 karat in Delhi fell by Rs 281 with fall in global gold prices despite weaker rupee,” HDFC Securities Senior Analyst(Commodities) Tapan Patel said.

In the international market, gold was trading lower at USD 1,578 per ounce, while silver was quoting at USD 17.78 per ounce.

3:45 PM

Indonesia to temporarily stop food and beverage imports from China - minister

Indonesia will temporarily stop food and beverage imports from China as a precaution to prevent the coronavirus spreading to the Southeast Asian country, Indonesia's trade minister said on Monday.

Minister Agus Suparmanto told reporters the measure would be put in place soon and would remain in place until “the virus problem has ended”.

China is Indonesia's biggest trade partner. The Southeast Asian country imports garlic and fruit, among other food and beverages, from China. Reuters

3:30 PM

Hong Kong recession deepens as virus outbreak darkens outlook

Hong Kong's economy contracted for the first time in a decade in 2019 as violent anti-government protests and trade tariffs between Washington and Beijing took more steam out of the economy in the final quarter of last year.

The worst is yet to come, with no end in sight to the protests in the Chinese-ruled city and a new coronavirus outbreak in mainland China.

“The coronavirus outbreak will probably keep the city in recession for a while longer,” said Martin Rasmussen, China economist at Capital Economics.

Hong Kong, which has so far seen 15 confirmed cases of the virus, has taken measures to reduce the flow of visitors from China where the death toll has risen to 361. The city's retail and tourism sectors rely heavily on spenders from the Chinese mainland.

The economy shrank by a seasonally adjusted 0.4% in October-December from the previous quarter, versus a revised 3.0% contraction in July-September. On an annual basis, the economy shrank 2.9%, compared with a revised 2.8% fall in the third quarter.

For the whole of 2019, real gross domestic product contracted by 1.2%, the first annual decline since 2009.

“The coronavirus is grabbing the headlines, but the protests haven't gone away,” said Iris Pang, Greater China economist at ING, who expects the economy to contract by 4.5% this year and return to mild growth in 2021 “if the virus is contained”.

“Retail, catering, tourism, mass transportation are all suffering.”

ANZ analysts predicted a 1.4 percentage point negative impact on Hong Kong's first quarter gross domestic product from the effects of the virus, making it the worst hit region in Asia outside mainland China. Reuters

3:00 PM

Huawei, Chinese chip makers keep factories humming despite virus outbreak

Some technology firms in China have maintained operations to manufacture parts and products despite government calls in various cities and provinces for companies to halt work to help stop the spread of a new coronavirus.

Chinese telecom giant Huawei Technologies Co Ltd said on Monday it had resumed production of goods including consumer devices and carrier equipment, and operations were running normally.

The company restarted manufacturing after the Lunar New Year holiday in line with a special exemption that allows certain critical industries to remain in operation, despite Beijing's call to halt all work in some cities and provinces.

The spokesman said most of the production was in Dongguan, a city in the southern province of Guangdong.

Other companies have also kept production running, in some cases even through the New Year, in a sign of the critical importance Beijing places on its domestic tech supply chain, a subject of friction with the United States

Yangtze Memory Technologies Co Ltd (YMTC), a state-backed maker of flash memory chips based in Wuhan - the city where the virus outbreak began - confirmed that it had not ceased production.

“At present, production and operations at YMTC are proceeding normally and in an orderly manner,” a company spokesman wrote in a statement.

The spokesman said no employees had been confirmed as infection cases, and the company had enacted certain isolation measures and partitions to ensure the safety of employees. Reuters

2:30 PM

TVS Motor sales down 17 pc in January

TVS Motor Company on Monday reported a 16.88 per cent decline in total sales in January at 2,34,920 units.

The company, which primarily makes two-wheelers and three-wheelers, had sold 2,82,630 units in January 2019, TVS Motor Company said in a statement.

Total two-wheeler sales during the month stood at 2,20,439 units as against 2,69,277 units in January 2019, down 18.13 per cent.

Domestic two-wheeler sales stood at 1,63,007 units last month as compared to 2,28,654 units in January 2019, a decline of 28.71 per cent, it added.

Total exports increased 34 per cent to 70,784 units last month as compared with 52,650 units in January 2019. PTI

2:15 PM

Maritime Unions oppose NRI tax proposal in Budget 2020

Terming the Budget 2020 proposal to tax NRIs in India as “draconian”, maritime unions on Monday said they will call on Union Finance Minister Nirmala Sitharaman to express their concerns.

Countries like Philippines and Ukraine compete with India for global share of seafarers, but they do not levy high income taxes on their seafaring citizens, leading maritime unions said.

The Maritime Union of India (MUI) and National Union of Seafarers of India (NUSI) have initiated a strong protest campaign against the proposed change in the Income Tax Act after Budget 2020 proposed to tax Non Resident Indians (NRI) in India, who are not paying tax anywhere in the world, a joint statement from MUI and NUSI said.

Also, with the period of stay in India being reduced from 181 to 120 days, people have to spend more time abroad — more than 245 days compared to 183 days earlier, will get the NRI status as proposed in Budget 2020, it added.

“It is a double whammy as Indian seafarers will have to pay income tax on the income generated from sailing aboard cargo ships across the globe for atleast 245 days in a year.

“We have started collecting the protest letters signed by all members of NUSI and intend to submit them to both, Ministry of Finance and Ministry of Shipping within few days. Our nationwide protest against this Draconian and frustrating tax proposal is going to escalate in various forms across the country in the days to come,” said NUSI General Secretary, Abdulgani Serang.

The statement said a joint delegation of MUI and NUSI is likely to meet Finance Minister, Nirmala Sitharaman and Shipping Minister, Mansukh Mandavia to hand over the protest letters signed by Indian seafarers. PTI

2:00 PM

Centre to release GST compensation to states in 2 instalments

The Centre will release all due GST compensation to states in two instalments, Union Minister Anurag Thakur said in Lok Sabha on Monday.

The reply came after MPs from Telangana and Odisha complained during Question Hour that their states were not getting the share of the Goods and Services Tax (GST) and Integrated Goods and Service Tax (IGST).

“All due GST compensation will be given to states in two instalments,” Thakur, union minister of state for finance, said.

The minister said GST (Compensation to States) Act, 2017 provides for compensation to States/UTs (UT with legislature only) on account of revenue loss due to implementation of GST on a bi-monthly basis.

Accordingly, he said, the states have been paid GST compensation on a bi-monthly basis with effect from July, 2017.

Thakur said the GST Compensation has been released till September, 2019 and the next bi-monthly GST Compensation is due for October-November, 2019. PTI

1:30 PM

Godrej Properties Q3 net up 9% at Rs 45 crore

Realty firm Godrej Properties on Monday reported a 9.2 per cent increase in its consolidated net profit at 45.49 crore for the quarter ended December 31, 2019.

The company had posted consolidated net profit (after tax) of Rs 41.63 crore in the year-ago period, Godrej Properties said in a regulatory filing.

The consolidated income of the company during October-December quarter increased to Rs 517.47 crore, over Rs 430.70 crore in the year-ago period.

Shares of Godrej Properties were trading at Rs 1,068 a piece on BSE, up 7.96 per cent from the previous close. PTI

1:00 PM

China counts economic cost of virus as markets plunge, death toll up

Investors worried about the spread of the coronavirus wiped more than $400 billion off the value of China's stocks in the first trading session on Monday after an extended Lunar New Year break while the death toll from the epidemic rose to 361.

Markets plunged at the open in their first session since Jan. 23, when the outbreak of the newly identified virus had claimed only 17 lives in Wuhan city, the epicentre of the outbreak, in the central province of Hubei.

Since then, the flu-like virus has been declared a global emergency and spread to more than two dozen other countries and regions, with the first death outside of China reported on Sunday, that of a 44-year-old Chinese man who died in the Philippines after travelling from Wuhan.

The number of deaths in China rose to 361 as of Sunday, up 57 from the previous day, the National Health Commission said. The number of new confirmed infections in China rose by 2,829, bringing the total to 17,205.

Jittery investors erased $420 billion from Chinese stocks, with the Shanghai Composite index shedding 8% to hit a one-year low, according to Reuters calculations.

The yuan began trade onshore at its weakest level this year . Iron, oil and copper traded in Shanghai all dropped by their daily limits, catching up with global price falls as the spread of the virus has weighed on the world's growth outlook.

Investors were bracing for volatility when onshore trade in Chinese stocks, bonds, yuan and commodities resumed, following a steep global selldown on fears about the impact of the virus on the world's second-biggest economy.

Looking to head off panic, China's central bank injected 1.2 trillion yuan ($173.8 billion) of liquidity into the markets via reverse repo operations on Monday.

Beijing also said it would help firms that produce vital goods resume work as soon as possible, state broadcaster CCTV reported. Reuters

12:45 PM

India electricity supply rises after 5 straight months of decline

India's electricity supply rose 3.25% during the month of January after five straight months of decline, provisional government data showed, in a relief for power producers.

Power supply rose to 106.36 billion units in January, up from 103.01 billion units last year, an analysis of daily load despatch data from state-run Power System Operation Corp Ltd (POSOCO) showed.

India's Central Electricity Authority (CEA), an arm of the federal power ministry, is expected to release official data on power demand later this month. POSOCO releases provisional load despatch data every day.

Higher electricity supply could mean a rise in power demand, as electricity deficit in India is marginal. Electricity demand is seen by economists as an important indicator of industrial output and a deceleration could point to a further slowdown.

However, the potential rise would be from a low base, as electricity demand grew at the slowest pace in January 2019 in nearly two years, CEA data showed.

India's annual electricity demand in 2019 grew at its slowest pace in six years. Electricity supply fell 0.4% in December, 4.2% in November and 12.8% in October, according to the CEA.

Annual consumption of electricity by industry accounts for more than two-fifths of Indias annual electricity consumption, according to government data, with residences accounting for nearly a quarter and commercial establishments for another 8.5%.

The country's overall economic growth slowed to 4.5% in the July-September quarter, government data in November showed, the weakest pace since 2013 as consumer demand and private investment weakened.

India is expected to grow at the slowest pace since the global financial crisis during the fiscal year 2019/20. India also cut its estimates of growth for 2018/19 and 2017/18 last week.

Slower economic activity has resulted in a fall in sales of everything from cars to cookies, prompting some large scale industries such as the automobile sector to slash jobs. Reuters

12:30 PM

Small savings rate may see moderation next quarter: DEA secretary

Department of Economic Affairs Secretary Atanu Chakraborty has hinted at revision in small savings rate next quarter, in line with market rate, a development that could lead to speedier transmission of monetary policy rate.

During the current quarter, the government refrained from cutting interest rates on small savings schemes, including Public Provident Fund (PPF) and National Savings Certificate (NSC), despite moderating bank deposit rates.

“In India, right now we have about Rs 12 lakh crore in small savings schemes and roughly Rs 114 lakh crore in bank deposits. So the liability side of banks is getting affected by Rs 12 lakh crore. When banks say this, it seems a bit of a tail wagging the dog situation,” he said.

Nevertheless, he said that the rate of small savings should have some linkages to market rate, which is largely determined by the G-sec rates.

Stating that the Shyamala Gopinath Committee report has been accepted, but operation of the linkage was still in works, he said “wait for this quarter interest rates. That will give you a fairly good indication.”

There has been some signalling issue, which is being looked at, he told PTI in an interaction.

Bankers have been complaining that high small savings rates prohibits them to cut their deposit rates immediately to check flight of savings.

Currently, there is difference of nearly 100 basis point between deposit rate of banks and small savings rate for one year maturity.

He further said that although the government is not dependent on small savings schemes, there is no plan to do away with the scheme as people use those instruments. PTI

12:15 PM

China's Sinopec cuts Feb daily refinery output by 12% as virus hits demand

China's Sinopec Corp , Asia's largest refiner, is cutting throughput this month by around 600,000 barrels per day (bpd) as the rapidly spreading coronavirus hits fuel demand, four people with knowledge of the matter said on Monday.

The cut is equivalent to roughly 12% of the state refiner's average daily throughput last year.

Sinopec asked refineries last Friday to cut production and gave plants different reduction targets based on local fuel demand and logistics, the sources told Reuters. They declined to be named as they are not authorized to speak to media.

Sinopec is closely monitoring the changing market situations and stands ready to ensure supplies, the refiner said in an email to Reuters.

“Company is closely monitoring the changing market situations, and will optimise operation rates and product mix based on market demand,” the company said, without commenting directly on the throughput cut rates.

The four sources estimated cuts of about 2.5 million tonnes in total, equal to about 600,000 bpd on average, for February.

One plant in eastern Jiangsu province is lowering runs by 10%, while a plant in Tianjin, near Beijing, is cutting throughput by 20%, two people with direct knowledge of the plants' operations said.

A plant manager with a central-China based Sinopec refinery said his plant has since Friday lowered processing rates to 60% of capacity. He said his plant was operating at near full rates before the cut.

“It's likely that cuts may be extended into March,” said one of the sources, a refinery executive.

However, plants shall stand to respond quickly to ramp up runs once market situations turn, the executive added. Reuters

12:00 PM

NTPC raises Asia’s largest Japanese yen loan worth USD 750 million

State-run power giant NTPC on Monday said that it has become the top company in Asia to raise the largest syndicated Japanese yen loan worth USD 750 million (around Rs 5,367 crore).

According to a company statement, the loan has been raised under automatic route of RBI’s external commercial borrowings regulations, and is also the highest ever single foreign currency loan raised by NTPC.

The facility has a door-to-door maturity of 11 years under two tranches.

The company said, the facility is fully underwritten by State Bank of India, Tokyo, Sumitomo Mitsui Banking Corporation, Singapore and Bank of India, Tokyo, on January 20 and will be shortly launched by banks for general syndication.

“NTPC has signed a syndicated term loan in Japanese Yen (JPY), equivalent to USD 750 million,” it said, adding that this is the largest ever syndicated JPY loan raised by any Asian Corporate from offshore Samurai loan market.

The loan proceeds shall be utilised by the company for funding its capex for installation of flue gas desulphurisation (FGD) system, hydro projects and other projects using ultra supercritical technology with low carbon emission.

Shares of NTPC were trading at Rs 111.15 apiece in morning session, up 1.88 per cent from the previous close on BSE. PTI

11:45 PM

Gold slides from near 4-week high on China's 'band-aid' measures

Gold prices dipped after hitting a near four-week high on Monday, as China's central bank cut reverse repo rates and injected liquidity into markets to help support the economy hit by a rapidly spreading coronavirus outbreak.

Chinese authorities pledged to use various monetary policy tools to ensure liquidity remains reasonably ample and to support firms affected by the outbreak in Wuhan, which has so far claimed 361 lives.

Spot gold fell 0.6% to $1,580.48 per ounce by 0407 GMT, having earlier risen to its highest since Jan. 8 at $1,591.46. U.S. gold futures shed 0.2% to $1,584.70.

“The fact that the People's Bank of China (PBOC) is backstopping (the impact from the virus) is driving gold lower,” said Stephen Innes, chief market strategist at AxiCorp.

“Asia's fear factor has dropped so they're not buying gold ... but there'll be a considerable knock-on effect over the longer term, given the fact that 50% of China is shut this week and there will be a drop in production and consumption.”

The dollar against a basket of rivals also firmed, making gold expensive for holders of other currencies. Reuters

11:15 AM

Ashok Leyland sales down 40% at 11,850 units in January

Hinduja group flagship firm Ashok Leyland on Monday reported 39.9 per cent decline in total vehicles sales at 11,850 units in January.

The company had sold 19,741 units in the same month last year, Ashok Leyland said in a regulatory filing.

Total domestic vehicles sales stood at 10,850 units in January against 18,533 units in the year-ago period, registering a decline of 41.4 per cent.

Medium and heavy commercial vehicles (M&HCV) sales in domestic market were down 49.1 per cent at 6,949 units in January this year, as compared to 13,663 units in the year-ago month, it added.

Light commercial vehicle sales last month stood at 3,901 units as compared to 4,870 units in January 2019, down 19.8 per cent the company said.

Shares of Ashok Leyland were trading at Rs 76.40 a piece on BSE, down 0.78 per cent from the previous close. PTI

11:00 AM

India's January manufacturing activity hits near 8-year high as orders jump

India's manufacturing activity expanded at its quickest pace in nearly eight years in January with robust growth in new orders and output, a private survey showed on Monday, suggesting the economy may be getting back on firmer footing.

In response to the jump in sales, factories hired new workers at the fastest rate in more than seven years.

If sustained, the improvement in business conditions could point to a gradual economic recovery in coming months, as forecast by analysts in a Reuters poll last month, after growth slowed to a more than six-year low in the July-September quarter.

The Nikkei Manufacturing Purchasing Managers' Index , compiled by IHS Markit, jumped to 55.3 last month from 52.7 in December. It was the highest reading since February 2012 and above the 50-mark separating growth from contraction for the 30th straight month.

“The PMI results show that a notable rebound in demand boosted growth of sales, input buying, production and employment as firms focused on rebuilding their inventories and expanding their capacities in anticipation of further increases in new business,” Pollyanna De Lima, principal economist at IHS Markit, said in a news release.

A new orders sub-index that tracks overall demand hit its highest level since December 2014 and output grew at its fastest pace in over seven and a half years, pushing manufacturers to hire at the strongest rate since August 2012. Reuters

10:30 AM

Rupee slips 34 paise to 71.66 against US dollar in early trade

The rupee opened on a weak note and declined by 34 paise to 71.66 against the US dollar in opening trade on Monday, after the Budget 2020 disappointed market participants.

Forex traders said rupee weakened amid concerns of fiscal slippage and rising coronavirus outbreak fears.

Finance Minister Nirmala Sitharaman in her Budget 2020 speech pegged the country’s fiscal deficit at 3.8 per cent for the current fiscal, compared to the earlier target of 3.3 per cent of GDP

The rupee opened weak at 71.62 at the interbank forex market and then fell further to 71.66, down 34 paise over its last close.

The rupee had settled at 71.32 against the US dollar on Friday.

Market participants further said that factors like weak opening in domestic equities and foreign fund outflows weighed on the local unit, while easing crude oil prices supported the local unit to some extent.

Brent crude futures, the global oil benchmark, fell 0.78 per cent to USD 56.18 per barrel.

Foreign institutional investors (FIIs) remained net sellers in the capital markets, pulling out Rs 1,199.53 crore on Friday as per provisional data.

Domestic bourses opened on a cautious note Monday with benchmark indices Sensex trading 98.61 points up at 39,834.14 and Nifty down 6.65 points at 11,655.20.

On February 1, the BSE benchmark Sensex had logged its biggest single-day plunge in more than a decade after the Union Budget failed to live up to market expectations.

The benchmarks, which started on a shaky note on the Budget day, tanked soon after Finance Minister Nirmala Sitharaman pegged the fiscal deficit at 3.8 per cent for the current fiscal. PTI

10:15 AM

Opinion: India's mega-IPO sounds like Aramco mess in making

New Delhi is having a Saudi Aramco moment. The mooted listing of state-controlled Life Insurance Corp marks the strongest sign yet of the governments willingness to implement change. As with Riyadh's recent stock market listing of its oil giant, though, accomplishing the feat is destined to be a painstaking process that bends the rules only to achieve a half-baked outcome.

LIC has over 1 million agents and accounts for about 70% of first-year premiums. Smaller rivals SBI Life Insurance and HDFC Life Insurance are valued at 60% and 90%, respectively, of their total assets as of March. State-backed financial institutions typically trade at a big discount to privately run peers, but even on a multiple of 0.3 times, LICs $435 billion of assets would make it worth $130 billion, bigger than corporate titans Reliance Industries and Tata Consultancy Services .

A successful initial public offering would help Prime Minster Narendra Modis cash-strapped government. In the budget plan unveiled over the weekend, it set an ambitious target of collecting $30 billion from asset sales in the year to March 2021, twice this year's goal. But New Delhi tends to overpromise and underdeliver on divestments. It has only beat its stated number in two of the last six full financial years, according to Morgan Stanley.

For the LIC deal to get done, the Securities and Exchange Board of India will likely have to make some regulatory adjustments. A normal 25% floatation would amount to $33 billion, making it bigger than Aramco's record-setting IPO. That seems implausible given India's trading volume. Coal India's chart-topping 2010 debut raised barely $2.1 billion, at current exchange rates. Even a smaller float of, say 10%, sometimes allowed for big companies, would be too large.

LIC's worst habits may also complicate plans for public life. The insurer, where Indians turn to diversify savings from cash and gold, has aggressively mopped up shares sold by the government, including in troubled IDBI Bank and Coal India. That leaves the impression that it is doing New Delhi's bidding rather than prioritising future returns.

The Aramco IPO was a tortuous three-year journey. Riyadh was forced to shelve an international tranche after Mohammed bin Salman, the Saudi crown prince, insisted on an inflated $2 trillion price tag. Foreign investors largely shied away and it wound up selling on a tiny 1.5% sliver. India could encounter a similarly rough road for LIC. Reuters

10:00 AM

Sensex drops over 150 points; Nifty below 11,700

Market benchmark Sensex dropped over 150 points in morning session on Monday as investor sentiment took a beating after the Union Budget failed to meet expectations.

After swinging over 300 points in early session, the 30-share BSE index was trading 125.45 points or 0.32 per cent lower at 39,610.08, and the broader NSE slipped 21.30 points, or 0.18 per cent, to 11,640.55.

In the previous session, Sensex logged its biggest single-day plunge in more than a decade on Saturday after the Union Budget failed to live up to market expectations of growth-boosting measures and fiscal discipline.

Sensex settled 987.96 points or 2.43 per cent lower at 39,735.53, and Nifty plunged 300.25 points or 2.51 per cent to close at 11,661.85.

Meanwhile, on a net basis, foreign institutional investors sold equities worth Rs 1,199.53 crore, while domestic institutional investors purchased shares worth Rs 36.64 crore on Saturday, data available with stock exchanges showed.

ITC, Hero Motocorp, M&M, Tata Steel, HDFC Bank and ONGC were among the top laggards, while Asian Paints, IndusInd Bank, Nestle India, HUL and Bharti Airtel were trading with gains.

According to analysts, the market is disappointed as the budget lacked any significant measure to stimulate demand and did not provide any relief on capital gains tax as expected from budget.

Presenting the Union Budget for 2020-21 in Parliament, Finance Minister Nirmala Sitharaman pegged the fiscal deficit at 3.8 per cent for the current fiscal, compared to the earlier target of 3.3 per cent of GDP.

She also proposed lower income tax slabs for those foregoing various exemptions, and removed dividend distribution tax on companies, effectively shifting the tax burden to the recipients.

Further, volatility in the market also heightened after Chinese stocks opened after an extended break, traders said.

Bourses in Shanghai plummeted over 8 per cent, Japan and South Korea were trading with significant losses, while Hong Kong was up.

Brent crude oil futures fell 0.69 per cent to USD 56.23 per barrel.

The rupee depreciated 26 paise to 71.58 against the US dollar in morning session. PTI

9:45 AM

India bonds poised to rally as government skips further borrowing plans

Indian bonds look set to rally when markets open on Monday after the new federal budget projected fiscal deficits in line with expectations, without any further market borrowing during the current fiscal year.

Finance Minister Nirmala Sitharaman outlined a multi-billion dollar package for farm and infrastructure spending in the budget for 2020/21, but the stimulus fell short of market expectations and stocks slumped during a special trading session on Saturday.

Bond market players, however, said the revised fiscal deficit target of 3.8% for the current fiscal year and 3.5% for the next were largely in line with expectations.

“The market expected extra borrowing for this year, that hasn't come. Also foreign portfolio limits have been opened up in some bonds and that could lead to those bonds being included in international bond indexes,” said A. Prasanna, head of fixed income at ICICI Securities Primary Dealership.

With the government expected to miss its fiscal deficit target, investors had assumed it would borrow additional funds from the market over the next two months to fund the deficit, but the government has made adjustments to avoid this.

Traders predicted a 5-10 basis-point rally in bond yields on Monday, but said there would be strong resistance for the benchmark 10-year bond around 6.5% levels. The benchmark 10-year bond yield closed at 6.6% on Friday.

Traders said although yields will fall in the near-term, gross borrowing of 7.8 trillion rupees for the next fiscal year will be challenging for investors, as this could push yields higher over the medium-term. Reuters

9:30 AM

Modi's guarded stimulus unlikely to revive growth

India's new federal budget is unlikely to drag Asia's third- biggest economy out of its worst slowdown in more than a decade as the government has proposed only moderate spending increases and small cuts in personal taxes, economists said on Sunday.

They said there was a risk the government might miss its fiscal deficit target for 2020-21 as it was dependent on raising almost $30 billion from the sale of stakes in state-run firms and financial institutions to meet ambitious revenue goals.

In its budget for the year starting in April unveiled on Saturday, the government relaxed its fiscal deficit target so it could spend an nearly $15 billion more, mainly on infrastructure and farming, while pushing ahead with privatisations.

Economists and industry leaders said the budget proposals would provide some support to growth over the longer term but were insufficient to give it an immediate boost.

India's economy is forecast to grow 5% in the year ending in March, its weakest pace in 11 years, ratcheting up the pressure on Prime Minister Narendra Modi, who is already facing backlash over a socially divisive citizenship law.

“We see the budget as largely neutral for growth and inflation,” said Nomura economist Sonal Varma, adding that the financial sector's problems could further delay any recovery.

The government has proposed increasing spending to boost consumer demand and investment but it could not go far enough because a slowdown in revenue receipts tied its hands, economists said.

Rating agency Moody's Investor Service said the budget highlighted the fiscal challenges from slower real and nominal growth, which may continue longer than the government expects.

Nomura said annual growth in gross domestic product (GDP)most likely slipped to 4.3% in the last three months of 2019, after dropping to 4.5% the previous quarter, its slowest in more than six years.

Economists said India risked missing its budget deficit target of 3.5% of GDP in 2020-21 as the government's revenue growth target of nearly 10% depends on raising almost 2.1 trillion rupees ($30 billion) from privatisations.

Investors and consumers were also disappointed by the budget as no new incentives were offered for the beleaguered financial sector and housing market while it wasn't clear whether proposed changes to individual taxes would result in net gains.

“The tax cuts won't translate into much benefit for taxpayers,” said Amit Maheshwari, Partner, Ashok Maheshwary & Associates LLP, a tax consultancy, adding that they could discourage saving and help push market interest rates higher. Reuters

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Printable version | Apr 9, 2020 2:02:52 PM |

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