The benchmark stock indices have opened the day with minor gains after the significant recovery yesterday.
The rupee is expected to post further gains as the RBI seems happy to let the rupee reap the gains of a weakening dollar.
Join us as we follow the top business news through the day.
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Sensex ends 185 points higher; Nifty tops 11,500
A day of modest gains for stocks.
PTI reports: "The BSE Sensex jumped 185 points on Wednesday, tracking gains in Reliance Industries, M&M and Infosys amid a largely positive trend in global markets and sustained foreign fund inflows.
After starting on a choppy note, the BSE benchmark ended 185.23 points or 0.48 per cent higher at 39,086.03.
The broader NSE Nifty climbed 64.75 points or 0.56 per cent to close at 11,535.
Mahindra and Mahindra (M&M) was the top gainer in the Sensex pack, rallying around 6 per cent, followed by PowerGrid, Tata Steel, IndusInd Bank, Reliance Industries, HCL Tech, ONGC and Infosys.
On the other hand, Bajaj Auto, Asian Paints, Sun Pharma, HDFC and Nestle India were among the laggards.
According to traders, despite opening on a choppy note, domestic equities turned positive tracking firm cues from most global markets.
Bourses in Tokyo and Seoul ended with gains, while Shanghai and Hong Kong settled in the red.
Stock exchanges in Europe were trading on a positive note in early deals.
Further, sustained foreign fund inflows helped retain the buying momentum, traders said.
Foreign institutional investors bought equities worth a net Rs 486.09 crore on Tuesday, exchange data showed.
Meanwhile, global oil benchmark Brent crude was trading 0.04 per cent higher at USD 45.60 per barrel.
In the forex market, the rupee depreciated 16 paise to end at 73.03 against the US dollar."
Tesla announces plans to sell up to $5 billion in new stock shares
A day after its 5-for-1 stock split took effect, Tesla announced plans on Tuesday to sell up to $5 billion worth of common shares.
The electric car and solar panel maker said in a filing with securities regulators that it intends to sell up to 10.03 million shares and use the proceeds for unspecified general corporate purposes.
The sales would be made from time to time and Tesla says the actual amount of the offering can’t be determined at present.
The stock would be sold through 10 different brokerage houses, and each would get a 0.5% commission.
Tesla shares closed on Tuesday down 4.7% to $475.05. The filing with the U.S. Securities and Exchange Commission came before the markets opened. Any stock sales would likely dilute the value of current shareholders’ investments.
Economic growth will turn positive by Q1FY22: EACPM member Shah
The call for radical structural economic reforms is getting louder.
PTI reports: "Economic growth will come into positive territory only by March or June quarter 2021, but India will have to turn the crisis into an opportunity by introducing reforms, Nilesh Shah, a part-time member of the Economic Advisory Council to the Prime Minister, said on Wednesday.
Shah, who is the managing director of Kotak Mahindra Asset Management Company, attributed the surge in equity markets to the optimism they get by looking at the future and not at the data of the past.
India’s GDP contracted 23.9 per cent year-on-year (yoy) in the June 2020 quarter, which saw COVID-19 lockdowns, making the country one of the worst performers across the world during the pandemic.
At the current level, it looks like March 2021 quarter or June 2021 quarter will show y-o-y positive GDP growth, Shah said speaking at a webinar organized by professional networking platform Linkedin.
He hinted that GDP will be hit by the pandemic for two years but stressed that we need to take advantage of the challenging situation, just the way we did in 1991 during the forex crisis which put the growth momentum in a new orbit.
Shah said companies want to shift out of China and that India ought to roll out the red carpet for them and also cut the red tape.
The cost of logistics, which makes Indian goods uncompetitive at the global level, has to be reduced. Besides, the cost of power has to go down as subsidized supply to farmers makes it expensive for the industry to get electricity, he said.
Drawing from mythology, Shah compared the condition of an entrepreneur in the Indian context with that of the character Abhimanyu in Mahabharata and said the market forces are akin to the Kauravs while the role of Pandavs is played by the regulation, infrastructure support and policies.
Commenting on the surge in markets, he said while the past is about lockdowns, the future is about reforms which will change the growth orbit of India and markets are reading into the same.
He said high capital flows, low oil prices , a good monsoon are among the factors which can make one hopeful about the future and added that the market is looking ahead with optimism.
Shah said Indian IT stocks are fairly priced and not over-expensive and added that the technology companies will be able to flourish in the future as well if they tap into the digital opportunity.
He said the mutual fund industry is targeting a four-times growth in the number of those investing, to 10 crore people from the present 2.5 crore in the next five to six years."
Rupee settles 16 paise lower at 73.03 against US dollar
Choppy trading in stocks didn't help the rupee's cause.
PTI reports: "The rupee depreciated 16 paise and settled at 73.03 (provisional) against the US dollar on Wednesday tracking muted domestic equities and strengthening American currency.
At the interbank forex market, the rupee opened on a weak note at 73.10, witnessed a volatile trading session and finally closed at 73.03 against the greenback, down 16 paise over its previous close of 72.87.
During the session, the domestic unit touched an intra-day high of 72.90 and a low of 73.13 against the American currency.
On Tuesday, rupee had rallied 73 paise to breach the 73-mark against the US dollar on Tuesday, supported by liquidity-boosting measures announced by the Reserve Bank of India. It had settled at 72.87.
Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, rose 0.26 per cent to 92.58.
On the domestic equity market front, the 30-share BSE benchmark Sensex was trading 157.53 points higher at 39,058.33 and broader NSE Nifty gained 48.75 points to 11,519.
Foreign institutional investors were net buyers in the capital market as they purchased shares worth Rs 486.09 crore on Tuesday, according to provisional exchange data.
Brent crude futures, the global oil benchmark, rose 0.88 per cent to USD 45.98 per barrel."
Data | India's GDP was on a downward slope even before COVID-19 wreaked havoc
Even before the COVID-19 outbreak, which led to a shutdown of the economy and made way for the worst contraction of India's GDP in decades in the April-June quarter, the economy was already witnessing a slowdown.
Decelerating GDP growth, significant decrease in industrial output, fall in tax revenues and a massive reduction in power demand were all recorded well before the impact of the lockdown was recorded.
GDP growth has been on a constant downward slope since Q4 FY17, and slowed to a 11-year-low of 3.1% in Q4 FY20. The nationwide lockdown due to COVID-19 began in the last week of that quarter.
Loan moratorium ‘extendable to two years’, says Solicitor General in Supreme Court
Solicitor General Tushar Mehta, appearing for the Union government and Reserve Bank of India, informed the Supreme Court on Tuesday that loan moratorium introduced during the pandemic lockdown “is extendable to two years”.
While appearing before a Bench, led by Justice Ashok Bhushan, Mr. Mehta was asked whether the moratorium, which was to expire on August 31, had been extended. “It is extendable to two years,” he replied.
Mr. Mehta was referring to two circulars issued by RBI on August 6. An 82-page affidavit filed by the Ministry of Finance said the circulars have devised a framework, which not only allowed concessions in interest rates but also “permits lenders to allow moratorium of up to two years, irrespective of current six-month moratorium ending on August 31”.
India's August gold imports doubles y/y to hit 8-month peak- govt source
The easing of lockdown measures has helped boost gold imports.
Reuters reports: "India's gold imports in August nearly doubled from a year ago to the highest level in eight months on an improvement in investment demand and as some jewellers restocked after New Delhi eased lockdowns, a government source said on Wednesday.
The world's second-biggest consumer of the precious metal imported around 60 tonnes of gold in August, up from 32.1 tonnes a year ago, the source said. The source asked to remain anonymous since he is not authorised to speak to the media.
In value terms, August imports surged to $3.7 billion from $1.37 billion a year ago, he added."
Amazon's new offerings make India centre of fintech push
Amazon is expanding its footprint in India, this time through various fintech services.
Reuters reports: "Amazon.com Inc has added insurance and even gold to its menu of financial services in India, to expand its customer base and attract more subscribers to its Prime loyalty programme in a battleground growth market.
The push ramps up competition as financial technology (fin-tech) rivals and their deep-pocketed foreign backers struggle for profitability in a predominantly cash-based economy where about 190 million adults do not have bank accounts.
To boost online payments, Amazon launched its Amazon Pay digital wallet in 2016. It has since introduced a credit card, signed up to a state-backed payments network, and processes payments for movie and flight tickets as well as telephone and utility bills.
It began offering auto insurance in July and gold investment products in August - both a first for Amazon.
Its U.S. fin-tech efforts have been modest by comparison, stymied in part by merchant reluctance to use services offered by their biggest retail rival.
In India, however, where it has over 100 million registered users, Amazon is better placed to use financial services to win subscribers to its annual $13 Prime plan which offers faster shipping and music and video streaming, tech executives said.
To that end, the company aspires to make Amazon Pay the country's payment method of choice, said Mahendra Nerurkar, head of Amazon Pay in India, which has signed up 4 million merchants.
“Apparently Chinese fashion designers are leaving the back pockets off jeans because no one uses them anymore (for wallets),” Nerurkar told Reuters. “We would love to make that happen in India.”
India's digital payment market is set to more than double in value to $135 billion by 2023 from 2019, showed a study by professional services firm PwC and Indian lobby group ASSOCHAM.
A ban on high-value currency notes in late 2016 amplified a digital payment drive in India, with Amazon joined in the sphere by Alphabet Inc's Google, Walmart Inc's PhonePe, and Paytm, backed by SoftBank Group Corp.
Later prospective entrants have faced tougher regulatory scrutiny. Facebook Inc's WhatsApp, which boasts over 400 million users in India, has been awaiting approval to offer payment services for over two years as regulators wrestle with new data-localisation rules.
Yet for incumbents, profit has been elusive. Paytm, also backed by Alibaba Group Holding Ltd, has booked losses running into the hundreds of millions of dollars. PhonePe has said it hopes to turn profitable by 2022.
Indeed, profit margins in the digital payments business are generally thin, so to make money, Amazon may have to rely on services such as lending and insurance, industry watchers said."
‘MSMEs need extension of moratorium’
The Consortium of Indian Associations (CIA) has called for extension of loan moratorium, waiver of interest on such loans and complete waiver of statutory payments till March 2021.
Failure to do so would lead to 80% of its members representing micro, small and medium enterprises (MSMEs) turning defaulters in the next three months, CIA Convenor K.E. Raghunathan said in a statement.
The CIA has been urging the RBI to extend the moratorium period, which ended on August 31, as most MSME units had remained inactive for the last five months. However, the central bank was yet to respond, he said.
“Most of our members are experiencing severe cash flow and expressed their inability to meet salary, statutory expenses, machine maintenance and supplier payments among other issues. It is in times like these, they require handholding to regain strength and to conduct business in a conducive manner to create more jobs,” he said.
Auto wholesales rise, firms eye demand
Vehicle despatches by major automobile makers Maruti Suzuki, Hyundai Motor India and Hero MotoCorp. to dealers saw growth last month. This was in anticipation of healthy consumer demand in the upcoming festive season.
Market leader Maruti Suzuki on Tuesday said its wholesale sales in the domestic market grew 20.2% to more than 1.16 lakh units, from 97,061 units in August 2019. Sales of mini segment cars including Alto and S-Presso saw a whopping 94.7% jump to 19,709 units, while compact segment cars such as WagonR, Swift, Celerio, Dzire, Ignis and Baleno grew 14.2%. Sales of utility vehicles such as Gypsy, Ertiga, S-cross, Vitara Brezza and XL 6 rose 13.5% to 21,030 units.
Similarly, Hyundai Motor posted an almost 20% increase in domestic sales to 45,809 units last month as compared with 38,205 units in August 2019.
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Rupee skids 25 paise to 73.12 against US dollar in early trade
The rupee is witnessing a modest loss this morning with the weak sentiment in stocks.
PTI reports: "The rupee depreciated 25 paise to 73.12 against the US dollar in opening trade on Wednesday tracking muted domestic equities and strengthening American currency.
At the interbank forex market, the rupee opened on a weak note at 73.10, then fell further to 73.12, registering a fall of 25 paise over its last close.
On Tuesday, rupee had rallied 73 paise to breach the 73-mark against the US dollar on Tuesday, supported by liquidity-boosting measures announced by the RBI. It had settled at 72.87.
Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, rose 0.02 per cent to 92.35.
“The US dollar has strengthened overnight, as a result of some profit-taking on short USD trades,” said Abhishek Goenka, Founder and CEO, IFA Global.
On the domestic equity market front, the 30-share BSE benchmark Sensex was trading 8.89 points lower at 38,891.91 and broader NSE Nifty slipped 1.70 points to 11,468.55.
Foreign institutional investors were net buyers in the capital market as they purchased shares worth Rs 486.09 crore on Tuesday, according to provisional exchange data.
Brent crude futures, the global oil benchmark, rose 0.72 per cent to USD 45.91 per barrel."
Indian central bank's loosening of rupee reins likely to aid more gains
The RBI seems happy to let the rupee reap the benefits of a weakening dollar.
Reuters reports: "India's central bank appears to have stopped trying to rein in the rupee to help exports, letting the currency drift to a six-month high and raising expectations it will gain further, analysts and market participants said.
Dollar-buying intervention by the Reserve Bank of India (RBI) in recent months has made the rupee one of the worst-performing Asian currencies in 2020, despite massive dollar inflows into stock markets and for corporate fundraising.
The RBI has kept the rupee weak to help exporters and made large interest rate cuts to support the economy as the coronavirus pandemic curbs activity, but inflation risks are now putting it in a bind.
The government's decision to sharply increase market borrowing while the economy and public finances are under strain is driving up bond yields, which move inversely to prices.
Dollar weakness, foreign direct investment and stock market inflows, meanwhile, have all added to the rupee's strength.
Traders and analysts say while the central bank can intervene to tamp down yields, it doesn't have much scope to restrain the rupee without fuelling inflation at a later point.
“I think it's highly tactical. For now, yes, the RBI is happy to allow some appreciation as it's running out of space to do unsterilised intervention,” said A. Prasanna, chief economist at ICICI Securities Primary Dealership.
The RBI typically removes excess rupee supply in the banking system from its foreign exchange interventions by selling bonds.
In recent months, however, the RBI has been unable to sell bonds on the open market, and has instead bought them to combat rising yields.
It has been using a strategy inspired by the U.S. Federal Reserve's 'Operation Twist' programme: buying long-end and selling short-end debt to manage market yields and supporting the government's record borrowing plans."
Indian shares subdued as China border tensions weigh
A flat opening for the indices on rising geopolitical tensions.
Reuters reports: "Indian shares were little changed on Wednesday, pressured by banking stocks, as heightened tensions at India's disputed border with China countered upbeat global sentiment.
The blue-chip NSE Nifty 50 index was up 0.02% at 11,473.10, while the benchmark S&P BSE Sensex slipped 0.06% to 38,877.73 as of 0354 GMT.
India's foreign ministry on Tuesday evening accused China of further “provocative actions” on the disputed Himalayan border while commanders from both sides were holding talks on Monday to defuse tensions between the countries.
In Mumbai, the Nifty bank index fell 0.61%, while the Nifty auto index was down 0.46%. Power Grid Corporation of India Ltd was the top laggard on the Nifty.
Broader Asian markets were higher following buoyant U.S. manufacturing indicators and a rally in U.S. technology companies. MSCI's broadest index of Asia-Pacific shares outside Japan gained 0.25%."
Appliance makers bet on festive season sales
Reeling from the significant drop in spending amid the pandemic, consumer-focussed brands are betting on the festive season to help recover losses of the past few months. Seeing steady growth post the lockdown, the brands expect an uptick of up to 30% in business, led by home and kitchen appliances on the back of work-from-home trends and strong demand from semi-urban and rural markets.
“Driven by a gradual uptick in demand for value-based products, we are expecting steady growth. We are hopeful the festive season will help recover losses incurred in the past few months,” Suguru Takamatsu, divisional head, CSD, CE, Panasonic India, said.
Festive sales, in general, account for 35-40% of annual business for most consumer durable firms.
Panasonic saw 10% growth in July, as opposed to a contraction in May, owing to pent-up demand, first-time buyers and rising rural contribution due to a favourable monsoon.