Volatility is back in markets this morning as Asian stocks fell in line with the sharp fall in US stocks late Friday.
The decision by the Centre to extend the nation-wide lockdown by two weeks has not gone well with investors.
Join us as we track the top business news through the day.
India’s factory activity slumped to record low in April
Yet another data point showing us the massive economic cost of the global lockdown.
Reuters reports: “India’s manufacturing activity contracted at its sharpest pace on record in April as a lockdown to combat the rapid spread of the coronavirus led to a slump in demand and massive supply chain disruptions, a private sector survey showed on Monday.
Asia’s third largest economy is taking a huge hit from the ongoing nationwide lockdown, which started on March 25, and its gross domestic product is expected to shrink for the first time since the mid-1990s this quarter, a Reuters poll showed last month.
That was despite the government announcing a spending package of 1.7 trillion Indian rupees ($22.4 billion) and a significant easing in monetary policy by the Reserve Bank of India.
The Nikkei Manufacturing Purchasing Managers’ Index , compiled by IHS Markit, plunged to 27.4 last month from March’s 51.8, by far its lowest since the survey began in March 2005 and its first time below the 50-mark separating growth from contraction in nearly three years.
“After making it through March relatively unscathed, the Indian manufacturing sector felt the full force of the coronavirus pandemic in April,” noted Eliot Kerr, economist at IHS Markit.
“Record contractions in output, new orders and employment pointed to a severe deterioration in demand conditions.”
With new orders and output shrinking at the steepest pace since at least early 2005 factories cut jobs at the fastest rate in the survey’s history, signaling a high chance of recession.”
Rupee plunges 71 paise to 75.80 against US dollar in early trade
The fall in domestic equities has affected the rupee’s value against the dollar this morning as investors pulled money out of India.
PTI reports: “The rupee depreciated 71 paise to 75.80 against the US dollar in opening trade on Monday tracking selloff in domestic equities and strengthening American currency overseas.
The rupee opened weak at 75.70 at the interbank forex market and then fell further to 75.80, down 71 paise over its last close.
It had settled at 75.09 against the US dollar on Thursday.
Forex market was closed on Friday on account of Maharashtra Day.
Traders said the weakness in the local unit was largely due to heavy correction in domestic equities and strengthening of the US dollar. Moreover, rising coronavirus cases in the country also weighed on the local unit.”
‘6 to 9 months, even longer for consumption to get back to normal,’ says TVS Supply Chain Solutions MD
The supply chain sector needs cash flow. As such, banks have to provide funding through ways and means advances, which means that it is not linked with an asset or with any working capital related security, says R. Dinesh, managing director, TVS Supply Chain Solutions, in an interview to The Hindu. Edited excerpts:
Do you think COVID-19 will have a long-term or short-term impact?
It will have both short-term and long-term impact. Today, we are operating only about 15-20% of our normal business. We have about a thousand people working, as against 12,000 to 13,000 people under normal circumstances. Therefore, it is going to have a short-term impact on our cash flow and operations. While post-lockdown this may improve, it is going to have a significant short-term impact as we ramp up during the next couple of months. It will affect other businesses and the economy as a whole. It will be about six to nine months or even longer for the consumption side to get back to normal. Definitely the first two quarters will be significantly impacted and it will last beyond the third quarter, with some pick-up happening by the fourth.
Indian bank bad debt could double in coronavirus crisis
It looks like the ongoing nation-wide lockdown could hit bank balance sheets really hard.
Reuters reports: “India expects bad debts at its banks could double after the coronavirus crisis brought the economy to a sudden halt, a senior government official and four top bankers told Reuters.
Indian banks are already grappling with 9.35 trillion rupees ($123 billion) of soured loans, which was equivalent to about 9.1% of their total assets at the end of September 2019.
“There is a considered view in the government that bank non-performing assets (NPAs) could double to 18-20% by the end of the fiscal year, as 20-25% of outstanding loans face a risk of default,” the official with direct knowledge of the matter said.
A fresh surge in bad debt could hit credit growth and delay India’s recovery from the coronavirus pandemic.
“These are unprecedented times and the way it’s going we can expect banks to report double the amount of NPAs from what we’ve seen in earlier quarters,” the finance head of a top public sector bank told Reuters.
The official and bankers declined to be named as they were not officially authorized to discuss the matter with media.
India’s finance ministry declined to comment, while the Reserve Bank of India and Indian Banks’ Association, the main industry body, did not immediately respond to emails seeking comment.”
After Facebook, Silver Lake invests ₹5,656 crore in Reliance Jio Platforms
Leading global tech investor Silver Lake on Monday agreed to pay ₹5,655.75 crore to buy 1.15% stake in the firm that houses billionaire Mukesh Ambani’s telecom arm Jio.
The investment in Jio Platforms comes within days of Facebook investing USD 5.7 billion to buy a 9.99% stake in Jio Platforms. The investment is at a premium of 12.5% to the Facebook deal.
Sensex nosedives over 1,500 points; Nifty tanks below 9,500
Indian stocks have witnessed a sharp fall of more than 5% this morning, which comes more than a month since hitting bottom in March.
Ashish Rukhaiyar reports from Mumbai:
Fresh tensions between the US and China pulled down global equity markets on Monday with the Indian benchmarks shedding over 5% during the morning session.
At 10:10am, the Sensex was trading at 31,995.36, down 1,722.26 points or 5.11%.
As many as 29 of the 30 Sensex constituents were in the red with Sun Pharmaceutical the only exception. Stocks like ICICI Bank, Bajaj Finance, Indusind Bank, Tata Steel, Hero Motocorp, Axis Bank, Maruti Suzuki India, Tech Mahindra and the HDFC twins were among the top losers shedding over 7% each.
The overall market breadth was extremely weak with more around 1,470 stocks in the red as against less than. 360 gainers. The broader Nifty was down 500 points or 5.07% at 9,360.15. More importantly, the India VIX index surged over 28% after staying subdued in the last few trading sessions.
Elsewhere in Asia, almost all the leading benchmarks were in the red after fresh tensions erupted between US and China after the former alleged that coronavirus originated in a lab in China.
Incidentally, the Indian indices lost heavy ground even as the government relaxed lockdown measures in most part of the country that would lead to economic activity being resumed albeit in a limited context. Investor sentiments were also subdued due to weak corporate earnings as last week saw heavyweights like Reliance Industries and HUL announce numbers that were well below industry estimates.