The benchmark indices have gotten off to a strong start this morning with gains of well over 1%
Another rating agency has projected that India's economy will witness a sharp correction this year.
Join us as we follow the top business news through the day.
India may need to pump $20 billion into coronavirus-hit state banks
Some initial details of the likely cost of the government's capital-injection plan for banks.
Reuters reports: "India may need to inject up to 1.5 trillion rupees ($19.81 billion) into its state-owned lenders as their pile of soured assets is expected to double during the coronavirus pandemic, three government and banking sources told Reuters.
The government initially considered a budget of around 250 billion rupees for bank recapitalisations but that has risen significantly, a senior government source with direct knowledge of the matter said, with loan defaults likely to rise as businesses take a severe hit from nationwide lockdowns to tackle the coronavirus.
“The situation is very grim,” the source said, adding that banks would require fresh funds soon.
All the sources asked not to be identified as the discussions are private. India's finance ministry did not respond to a request for comment during working hours on Wednesday.
The capital plans were still being discussed and a final decision could be taken in the second half of the fiscal year, a second government source said. India's fiscal year runs from April 1.
Indian banks were already saddled with 9.35 trillion rupees of non-performing assets at the end of September 2019, or roughly 9.1% of their total assets at the time.
Reuters reported earlier this month that bad loans would likely rise to 18-20% of total assets by the end of the fiscal year next March, as 20-25% of outstanding loans are considered at risk of default.
A nationwide lockdown entering its third month is expected to lead to a contraction in economic growth in the current financial year, according to several global rating agencies, which have also changed their outlook on the banking sector to negative. Economic recovery is likely to take a long time."
Loans to MSMEs may get ‘risk-free’ tag
The Reserve Bank of India (RBI) is likely to allow banks to assign zero risk weight for loans that will be extended to the micro, medium and small enterprises (MSMEs) under the ₹20 lakh crore economic package announced by the government earlier this month.
Also read: MSMEs will be the biggest casualty of COVID-19 in India: study
The Finance Ministry had requested the central bank to make these loans risk free, following an interaction with banks.
As a part of the package, a ₹3 lakh crore loan for the MSME sector was announced. This will be guaranteed by the National Credit Guarantee Trustee Company Limited (NCGTC) in the form of a Guaranteed Emergency Credit Line (GECL) facility.
Winding-up process to be delayed in absence of investors’ authorisation, says Franklin Templeton MF
Looks like investors in Franklin Templeton are set for a long-drawn struggle to get back their money.
PTI reports: "Franklin Templeton Mutual Fund, which closed six debt schemes, has said the winding-up process will be delayed in the absence of authorisation from investors and further steps will be possible only after seeking fresh approval from them.
It further said that investors who do not have an e-mail ID or mobile number registered with the fund house will not be able to participate in the voting process.
The date at which the voting would start has not been disclosed yet.
Over the next few days, the trustees will send a notice related to the voting process and unitholders’ meet to the participants in the six schemes being closed. The notice will be sent for each scheme separately, the fund house said in a letter to its distribution partners.
The voting activity and the unitholders meet will be an electronic exercise and it will be conducted separately for each of the six schemes.
Apart from the letter, the fund also issued answers to frequently asked questions (FAQs).
Investors are being asked to vote as schemes can be wound up only after repaying the amount due to the unitholders.
The steps to wind up the schemes include active monetisation of assets and return of the investment proceeds to the unitholders.
In the absence of authorisation, the winding-up process will be delayed as further steps will be possible only after seeking a fresh authorisation from the unitholders, Franklin Templeton MF said in the FAQs."
Rupee falls 19 paise to 75.90 against US dollar in early trade
The rupee is showing further weakness today despite the rally in domestic equities as foreign investors continue to desert Indian stocks.
PTI reports: "The rupee depreciated 19 paise to 75.90 against the US dollar in opening trade on Thursday tracking weak Asian currencies amid escalation of tension between the US and China.
Forex traders said rising US-China tension weighed on the local currency even as positive domestic equities and improving risk appetite supported the local unit.
The rupee opened weak at 75.90 at the interbank forex market, down 19 paise over its last close.
It had settled at 75.71 against the US dollar on Wednesday.
“Asian currencies are weak this Thursday morning after US President Donald Trump said he was working on a strong response to China’s proposed security law in Hong Kong,” Reliance Securities said in a research note.
It further said that currencies could track the local equities during the session amid optimism over the reopening of economies combined with monetary and fiscal support the respective economies.
On the domestic equity market front, the 30-share benchmark Sensex was quoting 321.01 points higher at 31,926.23 and the broader Nifty rose 84.40 points to 9,399.35.
Foreign institutional investors were net sellers in the capital market, as they sold equity shares worth Rs 334.74 crore on Wednesday, according to provisional exchange data."
S&P projects Indian economy to contract 5% in FY’21
After Fitch and Crisil, another major rating agency has projected an economic contraction in India this year.
PTI reports: "S&P Global Ratings on Thursday forecast Indian economy to contract 5 per cent in the current fiscal as the lockdown imposed to contain COVID-19 pandemic has curtailed economic activity severely.
“We have lowered our growth forecast for fiscal year ending March 2021 to a 5 per cent contraction... We currently assume that the outbreak peaks by the third quarter,” S&P said in a statement.
Earlier this week rating agencies Fitch and Crisil too had projected a 5 per cent contraction for the Indian economy.
“The COVID-19 outbreak in India and two months of lockdown -- longer in some areas -- have led to a sudden stop in the economy. That means growth will contract sharply this fiscal year. Economic activity will face ongoing disruption over the next year as the country transitions to a post-COVID-19 world,” S&P said in a statement.
Policymakers have grouped geographical zones into red, orange, or green categories based on the number of cases.
Areas currently classified as red zones are also economically significant, and the authorities could extend mobility restrictions.
“We believe economic activity in these places will take longer to normalize. This will have knock-on impacts on countrywide supply chains, which will slow the overall recovery... We expect varying degrees of containment measures and economic resumption across India during this transition,” S&P said."
Sensex rises over 200 points in early trade; Nifty tops 9,350
Equity benchmark Sensex jumped over 200 points in early trade on Thursday as index-heavyweights HDFC twins, Reliance Industries and ICICI Bank extended their gains ahead of May derivatives expiry.
After touching a high of 31,899.31 in opening session, the 30-share index was trading 259.92 points or 0.82 per cent higher at 31,865.14.
Similarly, NSE Nifty rose 81.20 points or 0.87 per cent to 9,396.15.
ONGC was the top gainer in the Sensex pack, rising around 3 per cent, followed by Tata Steel, L&T, HDFC Bank, ICICI Bank, IndusInd Bank and Axis Bank.
On the other hand, M&M, ITC, Infosys, Bajaj Auto, TCS and HCL Tech were among the laggards.