The Reserve Bank of India has cut interest rates this morning, promising an accommodative stance to guide the economy through the current crisis.
The benchmark stock indices are trading flat this morning after gapping down at open.
Join us as we follow the top business news through the day.
US Federal Reserve props up Treasury market
Sensex drops 260 points as RBI measures fail to cheer investors
The benchmark indices failed to recover the losses suffered after the RBI's presser this morning.
PTI reports: "Equity benchmark BSE Sensex tumbled 260 points on Friday, dragged by losses in banking and financial stocks as RBI’s rate cut and other measures to prop up the economy failed to meet market expectations.
After falling over 450 points during the day, the 30-share index ended 260.31 points or 0.84 per cent lower at 30,672.59.
The broader NSE Nifty too settled 67 points or 0.74 per cent down at 9,039.25.
Axis Bank was the top laggard in the Sensex pack, plunging more than 5 per cent, followed by HDFC, Bajaj Finance, ICICI Bank, Tata Steel, Bajaj Auto, HDFC Bank and IndusInd Bank.
On the other hand, M&M, Infosys, Asian Paints, UltraTech Cement and Tech Mahindra were among the gainers.
Earlier in the day, the Reserve Bank of India (RBI) unexpectedly slashed benchmark interest rates to their lowest levels since 2000 in a effort the revive the economy."
Rupee falls 34 paise to close at 75.95 against US dollar
The rupee depreciated 34 paise to provisionally close at 75.95 against the US dollar on Friday as the Reserve Bank of India’s rate cut move failed to cheer investor sentiment.
Forex traders said weak domestic equities, strengthening American currency overseas, rising coronavirus cases in the country and US-China trade tensions also weighed on the local unit.
The rupee opened weak at 75.72 at the interbank forex market, fell further, and finally settled at 75.95, down 34 paise over its last close.
It had settled at 75.61 against the US dollar on Thursday.
Economic damage for India from lockdown to be significant, says Moody's
With the coronavirus-induced lockdown coming at a time when the Indian economy was already slowing down, analysts believe there could be extensive economic damage.
IANS reports: "Moody’s Investors Service said on Friday that economic damage as a result of India’s coronavirus lockdown will likely be extensive and reflect the country’s inherent economic vulnerability and fiscal constraints.
The report pointed out that this will have wide-ranging effects on both public and private sectors.
Moody’s Investors Service has released a report titled “Coronavirus — India: Lockdown compounds economic challenges as credit risks rise in many sectors”.
“We expect the economic fallout from the coronavirus outbreak to weigh on the already fragile household consumption which, coupled with sluggish business activity, will result in a sharp decline in India’s economic growth in fiscal 2020-21,” says Deborah Tan, a Moody’s Assistant Vice President and Analyst.
Even before the coronavirus outbreak, the economy had already been growing at its slowest pace in six years.
Adding the impact from the outbreak, Moody’s now expects India’s real GDP to contract in the fiscal year ending March 2021 (fiscal 2020-21) compared with an earlier projection of zero growth.
The Reserve Bank of India (RBI) Governor Shaktikanta Das in his monetary policy review statement projected that the economy will contract in FY21."
Virus attack takes the aroma out of coffee
The Indian coffee industry will take a long time to recover from the severe blow dealt by the pandemic on all commercial activities across the globe.
Most coffee growers in the country were already in deep debt after they were hit by excessive monsoon rains, floods, landslides and huge crop losses consecutively in 2018 and 2019. Again, during the December-March (2020) picking season, they could not sell or export much of their beans due to the lockdown.
“The global coffee situation is grim as the entire coffee chain is shut due to COVID-19. A bulk of our coffee goes to Europe and cafés in all those countries are shut. Nobody in the coffee community has any visibility right now and no one knows how things are going to pan out for the industry. All these could lead to a decline in demand for the commodity in the export markets,’’ Anil Kumar Bhandari, president, India Coffee Trust (ICT) told The Hindu.
Bank, NBFC stocks tumble after RBI decision
Investors pummelled stocks of banks and NBFCs as they expect the RBI's loan moratorium extension to erode balance sheet strength.
PTI reports: "Bank and NBFC stocks on Friday tumbled up to 8 per cent after the Reserve Bank of India (RBI) extended moratorium on loan repayments.
The BSE BANKEX was trading lower by 2.64 per cent.
The RBI has announced further extension in moratorium period to end-borrowers from May 31 till August 31.
"We read this as major negative for all NBFCs (including the ones with strong liability franchises) as this would further delay the overall collection and recovery procedure, and stretch the total liquidity cycle for all. In addition, this would further damage financial discipline, especially for small-ticket borrowers and MFIs (microfinance institutions),” Emkay Global Financial Services said in a note.
Jimeet Modi, founder and CEO of SAMCO Securities & StockNote said, “Extension of moratorium is good for the economy but in substance, it will negatively impact banks and NBFCs. As a whole, the RBI has taken a calibrated approach to save the economy rather than favouring banks.”
The RBI on Friday slashed interest rates, extended moratorium on loan repayments and allowed banks to lend more to corporates in an effort to support the economy which is likely to contract for the first time in over four decades."
Half of Facebook's employees may work remotely over next few years, says Mark Zuckerberg
Facebook Inc will permanently embrace remote work even after coronavirus lockdowns ease, Chief Executive Mark Zuckerberg said on Thursday, accelerating the tech sector's geographic diversification away from its home in Silicon Valley.
Zuckerberg said the world's largest social network would start “aggressively opening up remote hiring” in July, expecting that about half its workforce would eventually do their jobs outside Facebook's offices over the next five to 10 years.
The company would take a more “measured approach” with existing employees based on job function and past performance, he said, and set a January 1, 2021 deadline for staff to update the company on their new locations for tax purposes.
AIIB, PBoC among 16 China-based entities registered as FPI in India
Amid increased scrutiny of Chinese investments in India, here are some interesting details about Chinese FPIs investing in India.
PTI reports: "At least 16 China-based institutions, including Asian Infrastructure Investment Bank (AIIB) and People’s Bank of China (PBoC), have got permanent registration as foreign portfolio investors (FPIs) in India.
While AIIB is a multilateral development bank, which has got India as a member too, PBoC is China’s central bank. Other registered FPIs in India include the National Social Security Fund (NSSF), a government-run investment fund established primarily to provide a reserve of funds for China’s social security system.
Sources said the FPI registration is a one-time process and permanent in nature in India for a long time, and most of these China-based institutions have been registered for investment in Indian capital markets for several years.
According to sources, PBoC was originally registered as a foreign institutional investor (FII) on May 4, 2011, and its registration has continued with payment of fees every three years.
From 2014, when a new FPI regulatory regime replaced the erstwhile FII regime, registration and continuance activities of FPIs are being handled by DDPs. All registered FIIs at that time were deemed registered as FPIs after shift to this new FPI regime.
According to data available with National Securities Depository Ltd (NSDL), a leading depository in India, there are 16 China-based entities registered as FPIs in India.
In addition to PBoC, AIIB and NSSF, these entities are eight FPIs linked to Best Investment Corporation, China AMC Global Selective Equities Fund, cIFM Asia Pacific Advantage Fund, Flourish Investment Corp, Manulife Teda India Opportunities Equity Fund and Wei Chieh Li."
Shares slip after surprise RBI rate cut
Ashish Rukhaiyar reports from Mumbai:
Indian equity indices dipped in the red after the Reserve Bank of India governor Shaktikanta Das said that GDP growth in the current financial year is expected to be in negative territory.
At noon, the benchmark Sensex was trading at 30,623, down 310 points or 1%. Prior to the RBI statement, the benchmark had touched an intra-day high of 31,107.91 while gaining around 175 points from the previous day's close.
As many as 25 of the Sensex constituents were in the red with financial majors like Axis Bank, Bajaj Finance, ICICI Bank, HDFC and Indusind Bank shedding the maximum among the benchmark.
Overall, nearly, 1,200 stocks were in the red as against around 740 that gained. Meanwhile, the broader Nifty was trading at 9,018, down 88 points or 0.97%. The India VIX index moved up by nearly 2%.
Earlier in the day, RBI governor announced a cut in the repo rate by 40 basis points while while saying that the lockdown has severely impacted domestic economy activity and investment demand has virtually been halted. It also extended the three-month moratorium by another three months till August.
RBI extends moratorium on loans for another 3 months till Aug
Reserve Bank Governor Shaktikanta Das on Friday extended the moratorium on payment of loans by another three months till August to provide much-needed relief to borrowers whose income has been hit due to the coronavirus crisis.
In March, the central bank had allowed a three-month moratorium on payment of all term loans due between March 1, 2020, and May 31, 2020.
Accordingly, the repayment schedule and all subsequent due dates, as also the tenor for such loans, were shifted across the board by three months.
US unemployment claims surged by 2.4 mn last week
The US job market continues to get worse even as the lockdown begins to be eased.
IANS reports: "The number of initial unemplyment claims in the US totalled to 2.4 million last week as the COVID—19 pandemic continues to sweep the nation, the Labor Department reported.
In the week ending May 16, the number of Americans filing for unemployment benefits decreased by 249,000 from the prior week to 2,438,000, the seventh weekly decline in a row but staying at high levels, Xinhua news agency quoted the Department as saying on Thursday.
With the latest numbers, more than 38 million Americans have applied for unemployment benefits since the COVID—19 pandemic forced widespread business closures in mid—March.
The figures came after the Labor Department reported earlier this month that US employers cut a staggering 20.5 million jobs in April, and the unemployment rate soared to a record 14.7 per cent.
“Once one accounts for the initial claims data and those who have lost their jobs but have not qualified for unemployment, are marginally attached or are working part time for economic reasons, the near real—time unemployment rate has reached roughly 29.4 per cent,” Joseph Brusuelas, chief economist at accounting and consulting firm RSM US LLP, wrote on Thursday."
Rupee falls 24 paise to 75.85 against US dollar in early trade
Negative sentiment in the domestic bourses after the RBI's policy announcement weighed on the rupee.
PTI reports: "The rupee depreciated 24 paise to 75.85 against the US dollar in opening trade on Friday tracking weak domestic equities and strengthening American currency overseas.
Traders said the weakness in the local unit was largely due to correction in domestic equities and strengthening of the US dollar. Moreover, rising coronavirus cases in the country and US-China trade tensions weighed on the local unit.
The rupee opened weak at 75.72 at the interbank forex market and then fell further to 75.85, down 24 paise over its last close.
It had settled at 75.61 against the US dollar on Thursday.
The rupee opened weak tracking negative cues from Asian currencies which have started weaker amid mounting tensions between the US and China, Reliance Securities said in a research note."
RBI cuts reverse repo rate to 3.35%; to maintain accommodative stance
Highlights from the RBI Governor's address to the media:
* RBI advances monetary policy committee meeting; cuts policy repo rate by 40 basis points
* RBI cuts reverse repo rate to 3.35%; to maintain accommodative stance
* Six member monetary policy committee voted 5:1 in favour of 40 bps cut in interest rate
* Private consumption has seen biggest blow due to COVID-19 outbreak, investment demand has halted
* India seeing collapse of demand; electricity, dip in petroleum product consumption; fall in private consumption
* Govt revenues have been impacted severely due to slowdown in economic activity amid COVID-19 outbreak
* Inflation outlook highly uncertain; elevated level of inflation in pulses worrisome, requires review of import duties
* Headline inflation may remain firm in first half of yr; ease in second half, falling below 4% in Q3/Q4 of FY21
* GDP growth in 2020-21 to be in negative territory
* Monetary policy transmission has continued to improve
* RBI extends moratorium on loan repayments by three more months in view of COVID-19
Reliance strikes fifth deal, sells 2.32% in Jio Platforms for ₹11,367 crore
Reliance Industries on Friday announced the sale of a 2.32% stake in its digital unit to U.S. private equity giant KKR for ₹11,367 crore, the fifth deal in four weeks that will inject a combined ₹78,562 crore in the oil-to-telecom conglomerate to help it pare debt.
This is KKR’s largest investment in Asia.
“This transaction values Jio Platforms at an equity value of ₹4.91 lakh crore and an enterprise value of ₹5.16 lakh crore. This is KKR’s largest investment in Asia and will translate into a 2.32% equity stake in Jio Platforms on a fully diluted basis,” the company said in a statement.
Sensex trades flat after gap down opening
The benchmark indices are down marginally at the moment as investors weigh the easing of lockdown measures.
IANS reports: "The BSE Sensex pared losses to trade on a flat note after opening 110 points lower on Friday.
The domestic indices opened on a negative note tracking weakness in the Asian indices amid growing US—China tensions.
At 9.31 a.m., the Sensex was trading at 30,945.91, higher by 13.01 points or 0.04 per cent from the previous close of 30,932.90.
It had opened at 30,822.78 and has so far touched an intra—day high of 30,965.81 and a low of 30,670.54 points.
The Nifty50 on the National Stock Exchange was at 9,106.70, higher by just 0.45 points from the previous close.
The market will also take cues from the media briefing of the Reserve Bank of India’s (RBI) Governor at 10 a.m."