Today’s top business news: Stocks close flat, Raghuram Rajan says GDP numbers should alarm us all, Vodafone Idea to rebrand as Vi, and more
The benchmark stock indices are down marginally at the moment after opening the day on a flat note.
Vodafone-Idea Limited, whose stock has clocked substantial gains recently, has rebranded itself as Vi in an attempt to turn its fortunes.
Join us as we follow the top business news through the day.
Retail investors are going all-in on stocks
Sensex ends 60 points higher, Nifty above 11,350
The indices ended the day with slight gains after choppy trading throughout the session.
PTI reports: “Domestic equity benchmark Sensex ended 60 points higher after a volatile session on Monday amid mixed cues from global markets.
After swinging 459.18 points during the day, the 30-share BSE index settled 60.05 points or 0.16 per cent higher at 38,417.23.
Similarly, the NSE Nifty advanced 21.20 points or 0.19 per cent to close at 11,355.05.
HUL was the top gainer in the Sensex pack, rising around 2 per cent, followed by TCS, ITC, Asian Paints, HDFC, HCL Tech and Nestle India.
On the other hand, M&M, Bajaj Finance, NTPC, UltraTech Cement and ONGC were among the laggards.
Narendra Solanki, Head- Equity Research (Fundamental), Anand Rathi said the markets started off the week on a mixed note following sluggish Asian market trends as traders took note of rising US-China tensions.
In the afternoon session, however, the markets attempted a comeback led by buying in index heavyweights Reliance Industries, TCS and HDFC, but failed to hold on to the gains amid lack of direction from global equities due to holiday in the US market, he added.
Bourses in Shanghai, Hong Kong and Tokyo ended with losses, while Seoul settled with gains.
Stock exchanges in Europe were trading a positive note in early deals.
Global oil benchmark Brent crude was trading 1.73 per cent lower at USD 41.91 per barrel.
In the forex market, the rupee depreciated 21 paise to end at 73.35 against the US dollar.”
Coronavirus | Tourism sector in dire straits, needs urgent relief from govt., says IATO
Industry body IATO on Monday urged the government to provide immediate relief to the tourism sector, which has been severely hit by the COVID-19 pandemic.
Most of the tour operators have been forced to lay off their staff, many have sent staff on furlough and those who are remaining are getting less than 30% salary, the Indian Association of Tour Operators (IATO) said in a statement.
In light of this, IATO has sought various relief measures from the government. This includes one-time financial grant of the gross salaries amount paid to the staff of tour operators on the basis of the balance sheet of fiscal year 2018-19 which is submitted with the government authorities, IATO said.
Gold steadies as stronger dollar counters safe-haven demand
Looks like gold could be trading at an important inflection point.
Reuters reports: “Gold steadied in a tight range on Monday, paring initial gains after a firmer dollar offset support from renewed fears over the economic hit from the COVID-19 pandemic.
Spot gold was steady at $1,931.91 per ounce by 0742 GMT, after hitting a one-week low of $1,916.24 on Friday. U.S. markets are shut for the Labor Day holiday on Monday.
U.S. gold futures rose 0.1% to $1,936.20.
The dollar index rose 0.2% against its rivals, making gold expensive for holders of other currencies.
The dollar’s trend is the “big wall of risk” to gold right now, said Stephen Innes, chief market strategist at AxiCorp.
“The general theme from last week’s U.S. jobs report showed that the recovery is continuing to slow… The lower for longer interest rates narrative continues to chime well for the gold bulls.”
Federal Reserve Chairman Jerome Powell said on Friday the U.S. jobs report for August was “a good one,” but noted that with gains likely to slow, the Fed is planning to keep its foot on the monetary policy gas pedal for years.
Global central banks have rolled out massive stimulus and slashed interest rates to near zero to counter the economic damage from the coronavirus, helping gold climb over 28% this year. Focus will now be on the European Central Bank’s policy decision on Thursday.
Lower interest rates decrease the opportunity cost of holding non-yielding bullion.
However, low physical demand remained a headwind for gold as coronavirus cases in the world’s second biggest bullion consumer India surpassed Brazil to take the second place after the United States.
Spot gold may bounce to $1,949, as it has cleared a resistance at $1,936 per ounce, said Reuters technical analyst Wang Tao.
Elsewhere, silver was steady at $26.87 per ounce, platinum rose 0.8% to $901.89 and palladium climbed 0.5% to $2,308.32.”
GDP numbers should alarm us all, says Raghuram Rajan
The 23.9% contraction in GDP growth numbers for the first quarter of FY 2020-21 “should alarm us all” and the government and its bureaucrats need to be “frightened out of their complacency” and into meaningful activity, former Reserve Bank of India Governor Raghuram Rajan said in a LinkedIn post.
With discretionary spending expected to stay low until the virus is contained, government-provided relief becomes all the more important, Mr. Rajan said, adding that the government’s reluctance to do more today to conserve resources for a possible future stimulus is a “self-defeating” strategy.
“Without relief measures, the growth potential of the economy will be seriously damaged,” he said.
Mr. Rajan said that the 23.9% contraction in India, which will probably be worse when estimates of the damage in the informal sector come out, compares with a drop of 12.4% in Italy and 9.5% in the United States — two of the most COVID-19-affected advanced countries.
Lakshmi Vilas Bank shares gain nearly 5% on fund raising plan, foreign shareholding limit
Could this be the catalyst event that investors in Lakshmi Vilas Bank have been waiting for?
PTI reports: “Shares of Lakshmi Vilas Bank (LVB) on Monday gained nearly 5 per cent in early trade after the lender said it plans to raise up to Rs 1,500 crore to fund business growth and increase foreign shareholding to up to 74 per cent.
The stock jumped 4.61 per cent to Rs 20.40 on the BSE.
At the NSE, it rose by 3.33 per cent to Rs 20.15.
LVB said it will seek approval for the said proposals from its shareholders in the upcoming annual general meeting (AGM) on September 25, that will take place through audio/visual means due to the coronavirus pandemic.
The bank has been exploring various options for raising funds for augmenting the tier-I capital to support business growth as directed by the RBI, it said in the notice.
“Whilst no specific instrument has been identified at this stage, in the event, the issue will be structured in such a manner that the proceeds of the same would not exceed Rs 1,000 crore,” it said.
The bank will also seek shareholders’ approval for raising another Rs 500 crore by issuing debt securities.
The lender will also seek shareholders’ nod for raising the foreign shareholding to 74 per cent which has been already approved by the board.
The existing aggregate holding of non-resident investors in the bank’s equity share capital as of March 31, 2020, is approximately 12.35 per cent, the bank said.”
Staggered payment of AGR dues “a good outcome”, tariff hike must for sustainability, returns: Vodafone
Struggling telecom operator Vodafone Idea on Monday said that the Supreme Court giving 10 years to telcos to clear past dues is eventually a good outcome but stressed that mobile tariffs need to be raised to give sustainability and returns to companies.
At a virtual briefing on Monday, Ravinder Takkar, MD and CEO, Vodafone Idea Limited said the company, in the past, had not shied from raising tariffs, which are under forbearance but insisted that the regulator and the government should take a call on fixing a minimum floor price.
Last week, VIL board approved fund-raising plans of up to ₹25,000 crore through a combination of equity and debt instruments, to keep the company afloat.
The upcoming fundraising will offer a lifeline to cash-strapped VIL, which has suffered massive losses, has been losing subscribers and Average Revenue Per User (ARPU), and faces outstanding Adjusted Gross revenue (AGR) dues of about ₹50,000 crore.
Vodafone Idea to rebrand as Vi as it prepares for telecom battle
Rebranding coupled with fund infusion and restructuring at the troubled telecom company.
Reuters reports: “Vodafone Idea Ltd said on Monday it plans to rebrand itself as the debt-ridden telecoms carrier, which has been losing customers, looks to change its image three years after it announced the biggest merger in India’s telecoms market.
The loss-making carrier on Friday approved fundraising of up to 250 billion rupees at a time it owes roughly 500 billion rupees ($6.81 billion) in dues to the government. The dues, according to an Indian Supreme Court order, will have to be paid over a ten-year period.
Vodafone Idea, a joint venture between Britain’s Vodafone and India’s Idea Cellular, said it will go by the brand name “Vi”.”
Oil skids after Saudi price cuts, demand optimism fades
The oil markets continue to be dominated by the bears.
Reuters reports: “Oil prices dropped more than 1% on Monday after earlier hitting their lowest since July as Saudi Arabia made the deepest monthly price cuts for supply to Asia in five months while optimism about demand recovery cooled amid the coronavirus pandemic.
Brent crude was at $42.21 a barrel, down 45 cents or 1.1% by 0439 GMT, after earlier sliding to $41.51, the lowest since July 30.
U.S. West Texas Intermediate crude skidded 51 cents, or 1.3%, to $39.26 a barrel after earlier dropping to $38.55, the lowest since July 10.
The world remains awash with crude and fuel despite supply cuts by the Organization of the Petroleum Exporting Countries (OPEC) and their allies, known as OPEC+, and government efforts to stimulate the global economy and oil demand. Refiners have reduced their fuel output as a result, causing oil producers such as Saudi Arabia to cut prices to offset the falling crude demand.
“Sentiment has turned sour and there might be some selling pressure ahead,” Howie Lee, an economist at Singapore’s OCBC bank said.
The Labor Day holiday on Monday marks the traditional end of the peak summer demand season in the United States and that renewed investors’ focus on the current lacklustre fuel demand in the world’s biggest oil user.
China, the world’s biggest oil importer which has been supporting prices with record purchases, slowed their intake in August, according to customs data on Monday.
“Abundant supplies, fears of loosening OPEC+ compliance, the end of the U.S. driving season and stale long positioning have all combined to erode confidence in oil,” OANDA’s senior market analyst Jeffrey Halley said in a note.
The world’s top oil exporter Saudi Arabia cut the October official selling price for Arab Light crude it sells to Asia by the most since May, indicating demand remains weak. Asia is Saudi Arabia’s largest market by region.
In August, the OPEC+ group eased production cuts to 7.7 million barrels per day after global oil prices improved from historic lows caused by the coronavirus pandemic cutting fuel demand.
Oil is also under pressure as U.S. companies increased their drilling for new supply after the recent recovery in oil prices.
U.S. energy firms last week added oil and natural gas rigs for the second time in the past three weeks, according to a weekly report by Baker Hughes Co on Friday.”
Airtel launches ‘unlimited’ broadband plans starting at ₹499, bundles OTT apps, STB
Telecom operator Bharti Airtel on Sunday launched ‘unlimited’ category broadband plans starting at ₹ 499 per month which will come bundled with subscription to video entertainment apps and high definition set-top box (STB) against refundable deposit.
Airtel has enhanced high speed data usage limit (fair usage policy) by up to 23 times in the revised plans to 3,500 gigabytes.
The move from Airtel comes within a week of its competitor Reliance Jio revising broadband plans with unlimited data usage and bundling subscription fee of video entertainment apps in them.
The new and revised plans will be rolled out September 7 onwards across 125 cities where the company has operations, and in new cities where it will gradually expand its footprint, Airtel said in a statement.
The bubble in Big Tech
Rupee slips 4 paise to 73.18 against US dollar in early trade
The rupee which experienced increased volatility last week has started this week on a flat note.
PTI reports: “The rupee slipped 4 paise to 73.18 against the US dollar in early trade on Monday as strengthening US dollar and muted opening in domestic equities weighed on the local currency.
At the interbank forex market, the rupee was trading in a narrow range. It opened at 73.17 against the American currency, lost further ground and was trading at 73.18, down 4 paise from its previous close.
The rupee had closed at 73.14 against the US dollar on Friday.
“RBI forex reserves rose to a new record high of USD 541.4 billion. The rupee strengthened on break of 73.25 on Friday. We expect the 72.50-73.50 range to hold this week,” said Abhishek Goenka, Founder and CEO, IFA Global.
Goenka further said that “developments on the Indo-China border will have to be closely tracked. Any escalation poses up side risks to USD-INR“.
Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, rose 0.17 per cent to 92.87.
On the domestic equity market front, the 30-share BSE benchmark Sensex was trading 42.60 points lower at 38,314.58, and the broader NSE Nifty fell 12.40 points to 11,321.45.
Foreign institutional investors were net sellers in the capital market as they sold shares worth Rs 1,888.78 crore on Friday, according to exchange data.
Brent crude futures, the global oil benchmark, fell 1.08 per cent to USD 42.20 per barrel.”
RBI loan restructuring plan | A difficult choice for borrowers
The moratorium offered by banks and other institutional lenders ended last month. However, the economic disruption caused by the pandemic and the resultant income and job loss continue to a large degree.
In this scenario, the Reserve Bank of India (RBI) has announced a loan restructuring plan to offer relief to impacted borrowers, who may struggle to repay their debt over the short term, at least.
This plan is unique in many ways. Unlike the earlier restructuring windows with a largely open-ended structure, the latest resolution framework has a strict entry barrier and a clearly defined timeline for the implementation of the scheme.
Also, unlike the moratorium on term loans that was open for all, only those borrowers whose income has been adversely impacted due to the pandemic and repayment capacity seriously restricted would be eligible for the loan restructuring scheme offered by the lender.
Indian shares flat, Vodafone Idea news awaited
Stocks seem to losing steam as the surge in virus cases adds to economic uncertainty.
Reuters reports: “Indian shares were subdued on Monday, as broader Asian markets were on the defensive after a continued Wall Street selloff in technology stocks, while investors awaited an announcement from debt-laden Vodafone Idea Ltd later in the day.
The blue-chip NSE Nifty 50 index was down 0.04% at 11,330.35, while the benchmark S&P BSE Sensex fell 0.02% to 38,333.02 as of 0358 GMT.
Japan’s Nikkei fell 0.3% and China’s blue-chip index slipped 0.2% on concerns of high valuations after Wall Street closed lower on Friday as a selloff continued in technology stocks.
In Mumbai, Vodafone Idea rose as much as 10%. The company has scheduled a media announcement at 0630 GMT later in the day.
On Friday, the carrier said it would raise up to 250 billion rupees ($3.41 billion) in fresh funds as it tries to pay off hefty dues it owes to the government.
The Nifty auto index was up 0.57%. India’s commerce minister said on Friday the country is open to raising duties on auto imports to boost local production.”
Small positive growth may not be ruled out in FY21, says former RBI Governor Rangarajan
A small positive economic growth in 2020-21 may not be ruled out as sectors like agriculture and essential goods and services were fully operational in the first quarter despite coronavirus-induced lockdown, according to a paper co-authored by former RBI Governor C. Rangarajan.
Mr. Rangarajan and India EY India chief policy advisor D.K. Srivastava in a paper titled ‘India’s Growth Prospects and Policy Options: Emerging from the Pandemic’s Shadow’ stated that the story of the Indian economy as it unfolds under the impact of COVID-19 is disquieting.
The paper noted that although many national and international agencies have projected a sharp contraction in the GDP in 2020-21, ranging from World Bank’s projection of 3.2% to SBI’s 6.8%, there are reasons to believe that the outcome may be better than these strong contractionary prospects.