The benchmark stock indices have opened the day negative with losses of well over 1%
The Centre’s second economic rescue package, which has been keenly awaited, is expected to be finalised today and announced in the next few days.
Join us as we follow the top business news through the day.
Builders should offer discounts to sell units worth Rs 66,000 crore amid COVID-19 outbreak, says Anarock
Can the Covid-19 crisis be the moment that brings real estate prices in India down to levels that can help clear huge unsold inventory?
PTI reports: “Property brokerage firm Anarock on Friday said cash-starved builders are sitting on ready-to-move-in housing units worth Rs 66,000 crore across seven cities and asked them to offer discounts to clear their finished unsold stocks during the ongoing coronavirus pandemic.
According to Anarock, there were 78,000 unsold ready-to-move-in flats at the end of March quarter across seven cities namely Delhi-NCR, Mumbai Metropolitan Region(MMR), Chennai, Kolkata, Bengaluru, Hyderabad and Pune. These units are worth about Rs 65,950 crore.
“Developers need to take a call on what they want to do with their unsold inventory, depending on their holding capacity and financial distress, if any,” Anarock Chairman Anuj Puri told PTI.
“Organized developers with strong balance sheets are less apt to offer discounts, but those which need liquidity urgently will need to consider their options. These would include discounted prices and other incentives,” he added.
The unsold ready-to-move-in units contribute 12 per cent of the total unsold stocks of over 6.44 lakh units. The remaining 88 per cent are under construction.
Puri also advised first time homebuyers to negotiate hard with builders and get a good deal on ready-to-move-in apartments. He said interest rates on home loans are low at 7.15-7.8 per cent.”
India’s funds body urges investor calm after Templeton shuts funds
After rising concerns among investors over the shutdown of certain funds by Franklin Templeton, there’s been some firefighting by mutual funds.
Reuters reports: “The Association of Mutual Funds in India on Friday urged investors to remain calm after global fund manager Franklin Templeton shut six of its debt funds in India, citing market dislocation and a lack of liquidity amid the coronavirus pandemic.
Franklin Templeton Mutual Fund, one of India’s most prominent mutual fund houses within the fixed income space, said late on Thursday it would wind up six credit funds with a large exposure to higher-yielding, lower-rated credit securities.
AMFI said the debt portfolios of most mutual funds had ”superior credit quality” and were “fairly liquid” and called on investors to “not get side-tracked by an isolated event”.
“There is no need for (investors) to panic and redeem their investments,” AMFI chairman Nilesh Shah said in a statement. ”The industry continues to remain robust.””
Rupee slips 40 paise to settle at 76.46 against US dollar
An update on the rupee as trading comes to a close for the day.
PTI reports: “The rupee depreciated by 40 paise to settle at 76.46 (provisional) against the US dollar on Friday, tracking weak domestic equities and a strengthening greenback overseas.
Forex traders said market sentiment weakened after a potential antiviral drug for coronavirus reportedly failed its first trial.
The rupee opened lower at 76.30 at the interbank forex market and then fell further to 76.47 and finally closed at 76.46, down 40 paise over its last close.
The rupee had settled at 76.06 against the US dollar on Thursday.
The dollar index, which gauges the greenback’s strength against a basket of six currencies, advanced by 0.31 per cent to 100.74.”
NBFCs, MFIs to see Rs 50-60k crore funding gap on lack of moratorium
The shadow banking sector has been hit hard by the RBI moratorium for retail borrowers and is now in need of emergency funding to make good on the debt they owe towards commercial banks.
PTI reports: “The RBI may have to open direct liquidity window for small NBFCs and MFIs as banks refuse to offer moratorium to them on one hand, and gave a muted response to the first TLTRO auction, aggravating their funding gap to Rs 50,000-60,000 crore, according to a report.
Small and medium shadow banks and micro-lenders need a direct refinance from financial institutions or the RBI should open direct refinance window for them, Acuite Ratings said, a day after the apex bank said the first TLTRO auction of Rs 25,000 crore saw a tepid response from banks, which put in bids for just half the amount — only Rs 12,850 crore.
“We believe the liquidity concerns of NBFCs (non-bank financial companies) and MFIs (microfinance institutions) have aggravated and a quick response is the need of the hour. The funding gap is estimated to further increase to Rs 50,000-60,000 crore,” the agency said in a report.
The estimate is based on the analysis of “the top 11 retail NBFCs which may find the funding gap of Rs 10,000-20,000 crore in Q1. Without the moratorium or partial moratorium from banks, the funding gap will increase further to Rs 15,000-25,000 crore in Q1. Clearly, the gap for the sector including MFIs in Q1 will be much higher at Rs 50,000-60,000 crore based on broad estimates“.”
COVID-19 crisis likely to hit 29 lakh jobs in Indian aviation, dependent sectors, says IATA
The COVID-19 pandemic is expected to impact more than 29 lakh jobs in the Indian aviation and dependent industries, global airlines’ grouping IATA said on Friday.
Commercial flight services in the country remain suspended till May 3 amid the nationwide lockdown to curb the spread of infections.
The International Air Transport Association (IATA) said its latest estimates indicate a worsening of the country impact from the COVID-19 crisis in the Asia-Pacific region.
About India, IATA said the pandemic is expected to potentially impact 29,32,900 jobs in the country’s aviation and its dependent industries. The passenger traffic has declined 47%.
India’s truckers in crisis: Police checks, no food and fears of coronavirus
Even a month after the lockdown, supply-chain issues continue to plague the country threatening food supplies.
Reuters reports: “India had exempted truckers carrying food, medicine and other essential items from the nationwide lockdown that started on March 25, but in many cases, the message had not gone through to police on the highways and officials at state border checkpoints.
Restaurants and repair shops along highways are also mostly closed, despite government approval this week to open them, further throwing the sector into turmoil. For the trucks that do operate, loading and unloading times have spiked because of a lack of workers.
Industry bodies estimate only about 20% of India’s roughly 9.8 million trucks are currently operating – either due to a lack of drivers or because demand from manufacturing and other industries has come to a halt. The $130 billion domestic trucking industry ships roughly 60% of the nation’s freight.
Globally, freight movements by road were down about 30-40% at the end of March, the International Road Transport Union has said.
About a dozen truck drivers who spoke to Reuters in India said despite empty roads, it was taking longer to make deliveries due to non-availability of food and repair shops, slow loading of goods and in some cases, harassment by police.
They said hundreds of thousands of drivers, many of whom fear catching the virus as well, have fled to their villages, slowing movement of goods, pushing up freight rates and causing logjams at ports and warehouses.”
Cheaper oil, foreign flows a tailwind for Indian rupee
The rupee, which has lost significant value against the US dollar this year, could be in for some major gains once the global economy gets back on track, believe economists.
Reuters reports: “India’s rupee, among Asia’s worst performing currencies this year, could be the fastest in the region to rally as the world restarts economic activities after the coronavirus pandemic, oil prices weaken and the U.S. dollar eases broadly, analysts said.
The partially convertible Indian rupee has lost nearly 7% against the dollar so far this year, despite heavy dollar supplying intervention by the central bank. It hit a life low of 76.92 to the dollar on Wednesday.
But a turnaround could be swift because of the collapse in the price of oil, which is a major import for the country, and the return of foreign investment into rupee stocks and bonds.
The crash in oil prices to 18-year lows is in particular a tailwind for the rupee and could even return the country’s current account balance to a surplus for the first time in 15 years, economists said.
“Global liquidity glut and prolonged lower global rates is expected to bring back risk-on sooner than the recovery in the real economy. I expect to see a recovery in the rupee in the next month or so,” said Upasna Bhardwaj, economist at Kotak Mahindra Bank.
“The only challenge for the rupee is if the health situation worsens,” said Sameer Narang, chief economist at Bank of Baroda, referring to the possibility of a second wave of infections in the country once the lockdown is lifted.
“With oil prices at less than $20 a barrel, we don’t have to pay out too many dollars,” he added.
But a prolonged drop in oil prices from the virus-induced falloff in demand will not benefit even heavy importers such as India, and will likely lead to more monetary easing from its central bank.”
Oil this week was cheaper than it was in 1870
Gold attracting first-time buyers, of late
At a time when Indian investors are shying away from assets like equities and real estate, gold is emerging as a preferred choice of investment. A large number of retail investors, who have never bought gold in the past, are now looking at the yellow metal as an investment avenue.
A recent retail survey from the World Gold Council (WGC) revealed that 29% of retail investors surveyed had never bought gold in the past, but are open to the idea of buying gold in the future.
Further, 52% of investors already owned some form of gold, with 48% having invested in the 12 months preceding the survey.
Chinese investors flummoxed by India’s new foreign investment rules
With India’s tighter FDI rules to prevent “opportunistic” takeovers, Chinese investors are now worried about increased delays and fewer investments.
Reuters reports: “India’s plan to screen foreign direct investments from neighbouring countries has Chinese firms concerned that such scrutiny will affect their projects and delay deals in one of Asia’s most lucrative investment markets.
The tougher rules were not a surprise, as other countries are also on guard against fire sales of corporate assets during the coronavirus outbreak, but that they apply to investments from countries that share a land border with India raised eyebrows.
Unlike neighbouring Pakistan, Bangladesh, Myanmar, Nepal and Bhutan, China has major investments in India.
Chinese firms existing and planned investments in India stand at more than $26 billion, research group Brookings said in March, with the world’s second-most populous nation emerging as a key market for everything from automobiles to digital tech.
The new rules are to curb “opportunistic” takeovers during the coronavirus outbreak that has hit Indian businesses, but government sources have said they will also apply to greenfield investments. China has called the rules ”discriminatory”.
Some Chinese investors have already “put things on hold” as they await further clarity on the rules, said Vaibhav Kakkar of Indian law firm L&L Partners.
“Every Chinese investor is worried, any government approval could take months,” said Kakkar, who advises several foreign companies and investors.
This will affect India’s digital businesses who are in dire need of funds to tide over the coronavirus crisis, he said.”
Nestle posts better than expected Q1 sales as customers stockpile food
The economic uncertainty caused by the coronavirus pandemic is turning out to be good news for Nestle.
Whether increased stockpiling in Q1 adversely affects sales in future quarters, however, remains to be seen.
Reuters reports: “Nestle reported a 4.3% rise in organic sales growth for the first quarter, the food giant said on Friday, as consumers filled cupboards with Purina pet food and Poland Spring water to prepare for lockdowns caused by the coronavirus pandemic.
Nestle also said it is launching a 500 million Swiss franc ($511.77 million) program to help its food service suppliers during the coronavirus crisis, by extending payment terms and suspending rental fees for coffee machines. The company also said it was keeping its outlook for the year.
Analysts on average were expecting a 3.0% increase in first-quarter underlying sales growth, according to company-supplied estimates.”
Rupee falls 25 paise to 76.31 against US dollar in early trade
The weakness witnessed in the domestic equities market has weighed on the rupee this morning.
PTI reports: “The rupee depreciated by 25 paise to 76.31 against the US dollar in opening trade on Friday, tracking weak domestic equities and strengthening of the US dollar overseas.
Forex traders said the rupee opened on a weak note taking negative cues from Asian equities.
The rupee opened at 76.30 at the interbank forex market and then fell further to 76.31, down 25 paise over its last close.
The rupee had settled at 76.06 against the US dollar on Thursday.
“Asian equities and US stock futures fell on Friday morning, amid doubts about progress in the development of drugs to treat COVID-19 and weak data from the United States,” Reliance Securities said in a research note.
It further added that “the US dollar rose against the Euro and a basket of currencies this Friday morning and could weigh on the domestic unit intraday“.”
Repo auction gets poor response
The first auction of the second tranche of Reserve Bank of India’s (RBI) targeted long term repo operations (TLTRO 2.0), which were meant for liquidity support to non-banking financial companies, (NBFCs), received poor response as total value of bids received from banks was almost 50% less than the notified amount.
The RBI received 14 bids worth ₹12,850 crore in the auction that was conducted on Thursday, against a notified amount of ₹25,000 crore, of three-year tenor.
“The total bids that were received amounted to ₹12,850 crore, implying a bid to cover ratio (i.e., the amount of bids received relative to the notified amount) of 0.5,” the RBI said.
“Will review the auction results and take a view in the matter,” the RBI added.
Sensex tumbles over 500 points in early trade; Nifty slips below 9,200
Indian stocks have made a negative start to the day, in line with the fall seen in US stocks over the latter half of last night’s trading session.
PTI reports: “Equity benchmark Sensex tumbled over 500 points in early trade on Friday dragged by losses in banking and IT stocks amid weak cues from global markets.
After hitting a low of 31,278.27, the 30-share index was trading 534.23 points or 1.68 per cent down at 31,328.85.
Similarly, the NSE Nifty declined 129.35 points, or 1.39 per cent, to 9,184.55.
Bajaj Finance was the top laggard in the Sensex pack, shedding up to 5 per cent, followed by ICICI Bank, IndusInd Bank, Axis Bank, HDFC twins, SBI, Infosys and TCS.
On the other hand, Hero MotoCorp, Sun Pharma, L&T, ONGC and HCL Tech were among the gainers.
In the previous session, the BSE barometer surged 483.53 points or 1.54 per cent to close at 31,863.08, and the broader Nifty advanced 126.60 points, or 1.38 per cent, to settle at 9,313.90.
Foreign portfolio investors were net sellers in the capital market on Thursday, as they offloaded equity shares worth Rs 114.58 crore, according to provisional exchange data.”
Virus pushes US unemployment toward highest since Depression
Countries are having to pay a massive economic price as they impose stringent lockdowns to fight the coronavirus pandemic.
PTI reports: “Unemployment in the US is swelling to levels last seen during the Great Depression of the 1930s, with 1 in 6 American workers thrown out of a job by the coronavirus, according to new data released Thursday. In response to the deepening economic crisis, the House passed a nearly USD 500 billion spending package to help buckled businesses and hospitals.
More than 4.4 million laid-off Americans applied for unemployment benefits last week, the government reported. In all, roughly 26 million people — the population of the 10 biggest US cities combined — have now filed for jobless aid in five weeks, an epic collapse that has raised the stakes in the debate over how and when to ease the shutdowns of factories and other businesses.”
Franklin Templeton MF winds up six credit funds due to covid-19
Franklin Templeton Mutual Fund has decided to wind up six credit funds on account of the liquidity crisis following the coronavirus pandemic.
“In light of the severe market dislocation and illiquidity caused by the COVID-19 pandemic, this decision has been taken in order to protect value for investors via a managed sale of the portfolio,” said a statement from Franklin Templeton Mutual Fund.
“This action is limited to the… funds, which have material direct exposure to the higher yielding, lower rated credit securities in India that have been most impacted by the ongoing liquidity crisis in the market,” it added.
The schemes that have been shut are Franklin India Low Duration Fund, Franklin India Dynamic Accrual Fund, Franklin India Credit Risk Fund, Franklin India Short Term Income Plan, Franklin India Ultra Short Bond Fund and Franklin India Income Opportunities Fund.
OPEC’s share in Indian imports lowest in nearly 2 decades
India’s dependence on OPEC oil continues to drop amid increased competition among suppliers.
Reuters reports: “OPEC’s share of India’s oil imports fell to 78.3% in 2019/20, its lowest in at least 19 years, data obtained from industry and trade sources show, as refiners in Asia’s third biggest economy increased imports of U.S. and Mediterranean grades.
India, which usually imports about 80% of its needs from members of the Organization of the Petroleum Exporting Countries (OPEC), has been diversifying its suppliers as local refiners have upgraded plants to process cheaper crude grades.
The world’s third-biggest oil importer shipped in 4.5 million barrels per day (bpd) of oil in the last fiscal year to March 2020, about 0.9% less compared with a year ago, data showed.
Of that, about 3.53 million bpd came from OPEC members.
The share of OPEC oil in India’s 2019-20 crude imports might be the lowest ever as crude imports by country before 2001-02 are not available.
In 2019/20 India’s overall imports declined as most refiners had shut units for upgrades ahead of stricter fuel standards effective from April 1.”