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.
China's local govt debt seen topping 1 trillion yuan in May
Indian shares tumble as lockdown extends
The benchmark stock indices that opened deep in the red in the morning only managed to suffer further losses, closing the day down almost 6%
Reuters reports: "Indian stocks fell sharply on Monday after the government extended a nationwide coronavirus lockdown by two weeks and as tensions between the United States and China dashed hopes of a pick up in global economic activity.
India on Friday extended its nationwide coronavirus lockdown for another two weeks after May 4 while easing restrictions in lower-risk zones, but travel, hotels, restaurants, shopping malls and cinema halls remain shut.
The NSE Nifty 50 index ended 5.74% lower at 9,293.50, clocking its worst day since March 23 and the benchmark S&P BSE Sensex fell 5.94% to 31,715.35.
The NSE gained 14% in April, its best month in 11 years. Still, Both the NSE and BSE are down roughly 23% this year as the coronavirus pandemic clobbers markets worldwide.
Shares in Indian lenders HDFC Bank Ltd, Housing Development Finance Corp and ICICI Bank were the top three drags on the Nifty on Monday.
The broad-based selloff also included sharp losses in automotive stocks after reports of near-zero sales by carmakers in April and metals and mining stocks, which have been particularly sensitive to news of any escalations in U.S.-China trade tensions."
Gold futures surge on domestic demand
With volatility back in stocks, gold is benefiting as investors seek safe abode in the precious metal.
PTI reports: "Gold prices on Monday rose Rs 213 to Rs 45,740 per 10 gram in futures trade as speculators indulged in creating fresh positions on firm spot demand.
On the Multi Commodity Exchange, gold contracts for June traded higher by Rs 213, or 0.47 per cent, to Rs 45,740 per 10 gram in a business turnover of 13,764 lots.
The yellow metal for August delivery edged up by Rs 328, or 0.72 per cent, to Rs 46,024 per 10 gram in a business turnover of 6,221 lots.
Fresh positions built up by participants on spot demand mainly led to rise in gold prices, analysts said.
Globally, gold prices rose 0.76 per cent to USD 1,713.90 per ounce in New York."
Rupee settles 64 paise lower at 75.73 against US dollar
The rupee didn't make much recovery during the day after the steep fall in value in the morning session.
PTI reports: "The Indian rupee depreciated by 64 paise to settle at 75.73 (provisional) against the US dollar on Monday tracking heavy selloff in domestic equities and a strengthening greenback overseas.
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, they said.
The rupee opened weak at 75.70 at the interbank forex market and then lost further ground to finally end at 75.73, down 64 paise over its last close.
During the day the domestic unit saw an intra-day high of 75.65 and a low of 75.80.
It had settled at 75.09 against the US dollar on Thursday."
Hero MotoCorp resumes manufacturing operations at three plants
The country’s largest two-wheeler maker Hero MotoCorp on May 4 said it has resumed operations across three of its manufacturing plants with actual product roll-out expected to begin from May 6.
The company is commencing operations in a graded manner at three of its manufacturing plants — Gurugram, Dharuhera (both in Haryana) and Haridwar (Uttarakhand), Hero MotoCorp said in a statement.
Additionally, the company’s Global Parts Center (GPC) at Neemrana in Rajasthan has also resumed operations.
The decision comes in the wake of the relaxations put in place by the government on the countrywide lockdown and the necessary permissions granted by local authorities, it added.
Housing becomes preferred asset class amid corona crisis
Amid increased volatility in other asset classes like stocks, real estate could witness fresh interest from investors.
IANS reports: "As the coronavirus crisis hits financial markets and other investment options hard, a survey by Anarock Property Consultants shows that more and more people now want to purchase residential properties.
The survey also indicated that home-ownership is now a compelling priority for the millennials facing uncertain times.
“A majority of participants (48 per cent) in an Anarock survey to gauge housing market sentiment in COVID-19 times chose real estate as their preferred investment asset class. Of these, 59 per cent of intending buyers are end-users,” it said.
Out of the total voters favouring real estate, 55 per cent are aged between 25-35, and 68 per cent are end-users. In the H2 2019 edition of this survey, only 42 per cent were in this age bracket.
Anuj Puri, Chairman, Anarock Property Consultants, said: “The security of owning a physical asset during a coronavirus-like crisis now combines with a rising aversion to high-risk investments. As a result, the demand for residential real estate has increased.”
He noted that millennials are key demand-drivers, their preferences are now dictated by the prevailing uncertainties, stock market volatility and recent-past financial sector incidents.
Many of them now prefer buying homes over renting, Puri said, adding that the general homebuying sentiment is also guided by cheaper home loan interest rates, which currently average between 7.15-7.8 per cent."
Coronavirus risks future of India's coal fired power plants
Interesting changes are underway in the country's power sector amid the financial stress on coal plants due to the nation-wide lockdown.
IANS reports: "The coronavirus pandemic and subsequent nationwide lockdown have highlighted the growing financial risks to India’s coal-fired power plant sector, a technology being replaced by new, cheaper, and cleaner renewable energy, an IEEFA note said on Monday.
Entitled ‘Who Would Still Fund a New Coal Power Plant in India?’, the note said renewable energy delivered more than two thirds or 9.39 gigawatts (GW) of India’s new generating capacity additions in the fiscal 2019/20, while new thermal power plants delivered 4.3GW, net of the 2.5GW removed due to end-of-life plant closures.
Further, coal-fired plants today are running at half their capacity assumed in the Central Electricity Authority’s modelling guidelines used to evaluate the financial and operating performance of new coal-fired plants.
The COVID-19 pandemic and national lockdown has reduced power demand, with the casualty being coal-fired power generation.
In the first 25 days of the 2020-21 fiscal year, coal-fired power generation was down 22,300 gigawatt hours (GWh), amounting to 600GWh more than the total decline in demand during lockdown.
The note finds new domestic and international finance is backing solar, with a landmark 2GW solar tender awarded by NHPC in April 2020 priced at a near record low of Rs2.55/kWh, fixed flat for 25 years."
Smartphone sales in India hits zero in April, May too hot to handle
The extended lockdown in India has resulted in zero shipments for the smartphone players in India in the month of April as factories are shut and it will take two-four weeks time for the manufacturing units to resume normal operations once lockdown is relaxed.
The month of March saw a steep annual decline in smartphone shipments, at 19%, due to COVID-19 nationwide lockdown from March 24.
Since then, factories are closed, retail shops are shut and online sellers are busy delivering groceries and other essential items. Result: April has seen almost zero sales.
Indian state retailers' April petrol sales down 61%; diesel down 57%
The month-end figures on domestic fuel consumption in April have come in line with expectations.
Reuters reports: "Indian state retailers' gasoline and gasoil sales in April fell by 61% and 57% from a year earlier, two industry sources said, though declines eased slightly later in the month when some transportation and industrial activity resumed.
State companies Indian Oil Corp, Hindustan Petroleum Corp and Bharat Petroleum own about 90% of the retail fuel outlets in the country.
The state retailers' petrol and diesel sales in first half of April declined by 61% and 64%, respectively, as a nation-wide lockdown to curb the spread of the coronavirus brought economic activity to a standstill.
Overall fuel sales during the month declined by 50% from a year ago, according to provisional industry data provided by two sources, who asked not to be identified.
India's overall refined fuel demand includes consumption of fuel oil, bitumen and liquefied petroleum gas (LPG).
Jet fuel sales in April declined by about 92%, the provisional industry data showed."
Auto stocks slump nearly 12% as lockdown-hit automakers score nil domestic sales in April
Stocks of automobile manufacturers have been the worst hit in today's market sell-off as manufacturers record zero sales in April due to the lockdown.
PTI reports: "Auto stocks on Monday plunged nearly 12 per cent after top carmakers, including Maruti Suzuki reported zero monthly domestic sales for the first time ever in April after the nationwide lockdown halted output and shut sales network.
Shares of Tata Motors tanked 12.45 per cent, Motherson Sumi Systems shares plummeted 12.27 per cent, Apollo Tyres 9.45 per cent, Hero MotoCorp 8.34 per cent, Maruti Suzuki India 8 per cent on the BSE.
Ashok Leyland tumbled 7.83 per cent, TVS Motor Company 7.16 per cent, Mahindra & Mahindra 6.95 per cent, Bajaj Auto 6.66 per cent and Eicher Motors 6.30 per cent.
The BSE Auto index fell by 6.33 per cent in early trade.
Maruti Suzuki India, Hyundai Motor India Ltd, Mahindra & Mahindra, Toyota Kirloskar Motor and MG Motor India reported nil sales as they suspended operations even before the imposition of lockdown on March 25, to check the spread of coronavirus.
Maruti Suzuki, which produces more than half of the cars running on Indian roads, said it did not sell any vehicle in the domestic market in April.
Homegrown automaker M&M also reported zero sales of passenger and commercial vehicles in the domestic market. In two-wheeler segment, niche bike maker Royal Enfield said it had zero sales in the domestic market."
Global markets begin week in risk-off mood
‘Now is the time for Centre to use its mints’
Printing currency notes, abolishing the Foreign Exchange Management Act (FEMA) and allowing Indian firms to borrow abroad at low interest rates are among the steps that former Solicitor General of India and Supreme Court lawyer Harish Salve said India needed to take right away to help resuscitate the economy.
Addressing the ICAI Leadership Summit last week, Mr. Salve said the economy needed a ventilator immediately. “The first thing you would do [to such a patient] is give a blood transfusion ie cash in the system. The second is the electrolytes; that would be smooth-enough-doing-business in India. Statutory compliances? Tax disputes? Intrusive investigations into small violations? Put them on the back burner; let people spend time in factories rather than run to government offices answering show-causes.”
“Every government is cash strapped. The U.S. has had several million claims for unemployment; they are looking at a huge outflow. The U.K. is paying £2,500 to every person without a job, so at least the groceries can be bought. Where is the money coming from? This is the time to use your mints.
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.
