The Indian benchmark stock indices are up this morning on positive global cues.
The RBI Governor has defended the central bank’s decision to not go all-out in using monetary instruments to tackle the economic crisis.
Join us as we follow the top business news through the day.
1:30 PM
Silver imports may fall as investors book profit
India’s silver imports are likely to fall by more than 40% from a year ago to the lowest level in eight years, with investors booking profit by selling stocks after local prices rallied to a record high this month, leading importers said.
Lower imports by the world’s biggest silver consumer could weigh on global prices that have risen more than 50% so far in 2020. “Investors who bought silver at higher levels got an opportunity to exit after a long time. For some, even after a decade,” said Chirag Thakkar, CEO of Amrapali Group Gujarat, a leading silver importer.
Their selling will reduce import requirement for 2020 to 3,000 tonnes, the lowest since 2012, he said.
India imported 5,598 tonnes of silver in 2019, according to data compiled by Refinitiv GFMS. The country fulfils most of its silver requirement through imports.
1:00 PM
PSBs to need capital up to Rs 2.1 trillion over next 2 years; govt support to continue: Moody’s
An estimate of what it would take to get PSBs back on their feet after the pandemic.
PTI reports: “Public sector banks will need external capital of up to Rs 2.1 trillion over the next two years and the most likely source to plug this shortfall will be government support, Moody’s Investors Service said on Friday.
According to Moody’s, the sharp slowdown in India’s economic growth, exacerbated by the virus outbreak, will hurt the asset quality of public sector banks (PSBs) and drive up credit costs.
“We expect to see PSBs’ already weak capital buffers to be depleted, with Rs 1.9 trillion – Rs 2.1 trillion (USD 25 billion – USD 28 billion) in external capital needed over the next two years to restore loss-absorbing buffers,” Moody’s Vice President and Senior Credit Officer Alka Anbarasu said.
PSBs dominate India’s banking system, meaning any failure could jeopardize financial stability, Anbarasu added.
“As such, we expect government support will remain forthcoming,” she said.
In a report titled ‘Coronavirus fallout will leave banks with capital shortages again’, Moody’s said asset quality will deteriorate, led by retail and small business loans.
According to Moody’s, Indian economy will contract sharply in fiscal year ending March 2021 (fiscal 2020) before returning to growth, though modestly, in fiscal 2021.
“As a result, formation of new non-performing loans (NPLs) will accelerate substantially, driven by the retail and micro, small and medium enterprises (MSME) segments.
“Although one-time loan restructuring allowed by the Reserve Bank of India (RBI) will prevent a sudden increase in NPLs. NPLs and credit costs will increase in the next two years, hurting PSBs’ already weak profitability and depleting their capitalization,” it said.
It said, banks will face large capital shortfalls again as credit costs rise. Of the total capital requirement amount, PSBs will need about Rs 1 trillion to build loan-loss provisions to about 70 per cent of NPLs, which will leave them with enough capacity to grow loans 8-10 per cent annually, faster than the 4 per cent in fiscal 2020.
Moody’s said to maintain financial stability, government will continue to provide capital support for PSBs.
Uncertainty surrounding India’s economic recovery as well as the ongoing clean-up of balance sheets are making it difficult for most PSBs to raise equity capital from markets.”
12:30 PM
FPIs turn net buyers in June quarter; invest $4 billion in Indian equities
Is the tide turning for Indian equities?
PTI reports: “After pulling out massive funds in March quarter, foreign investors pumped in nearly USD 4 billion in Indian equities in the three months ended June on attractive valuations, lifting of lockdown curbs and the government’s efforts to kickstart economic activity, says a Morningstar report.
Besides, foreign portfolio investors’ (FPIs) assets in Indian equities too surged after a sharp fall in the previous quarter. The value of their investments in Indian stocks climbed significantly during the quarter ended June 2020.
This was largely on the back of robust net FPI inflows, coupled with a strong recovery in the country’s equity markets.
As of the quarter ended June, the value of FPI investments in Indian equities stood at around USD 344 billion, which is considerably higher than the USD 281 billion registered in the preceding quarter, a spike of almost 23 per cent.
“During the quarter ended June, FPIs were net buyers in the Indian equity markets to the tune of USD 3.91 billion, which was in sharp contrast to the net outflow of USD 6.38 billion recorded in the previous quarter,” according to the Morningstar report.
FPIs started the quarter on a sombre note as they were net sellers to the tune of USD 903 million in April. They made a comeback in the subsequent months of May and June as they pumped net assets worth USD 1.93 billion and USD 2.89 billion, respectively, into the Indian equity markets.
After an exodus of foreign investments to the tune of USD 8.4 billion in the month of March, the net flows stabilised somewhat in April. Although such investors continued with their cautious stance and were net sellers through the month, the amount of net outflow came down significantly.
“What contained the pace of net outflow were the measures announced by the government and the RBI periodically to revitalise the sagging economy — and India performed better in containing the aggressive spread of COVID-19,” the report read.”
12:00 PM
Income Tax refunds worth ₹88,652 crore issued to 24.64 lakh taxpayers
The Income Tax department on Friday said it has issued refunds worth ₹88,652 crore to over 24 lakh taxpayers so far this fiscal.
The government has emphasised on providing tax related services to taxpayers without any hassles during COVID-19 pandemic and to that end has been clearing up pending tax refunds.
This include personal income tax (PIT) refunds amounting to ₹28,180 crore issued to over 23.05 lakh taxpayers and corporate tax refunds amounting to ₹60,472 crore to over 1.58 lakh taxpayers during this period.
11:30 AM
Apple’s market cap tops GDP of nations
11:00 AM
Rupee surges 11 paise to 74.91 against U.S. dollar in early trade
The rupee surged 11 paise to 74.91 against the U.S. dollar in opening trade on Friday tracking positive domestic equities and weak American currency.
At the interbank forex market, the domestic unit opened at 74.96 against the U.S. dollar, gained further ground and touched 74.91 against the U.S. dollar, registering a rise of 11 paise over its previous close.
It had settled at 75.02 against the U.S. dollar on Thursday.
Forex traders said positive trend in the equity markets and weak American currency supported the rupee.
The dollar index, which gauges the greenback’s strength against a basket of six currencies, fell 0.15% to 92.65.
10:40 AM
Oil climbs for third straight week, buoyed by producers holding back output
Tight supply is helping the oil market make steady gains despite demand concerns.
Reuters reports: “Oil prices rose in early trade on Friday, on track for a third straight week of gains, buoyed by major oil producers’ efforts to hold back output amid concerns about the economic recovery from the coronavirus pandemic.
U.S. West Texas Intermediate (WTI) crude futures inched up 8 cents, or 0.2%, to $42.90 at 0158 GMT, on course for a 2% rise for the week.
Brent crude futures rose 16 cents, or 0.4%, to $44.07, heading for a weekly rise around 0.5%.
Both benchmark contracts fell around 1% on Thursday on economic concerns after weekly U.S. jobless claims came in higher than expected.
Meanwhile, an internal report by the Organization of the Petroleum Exporting Countries and allies, showed the group known as OPEC+ was focused on ensuring that members who had overproduced against their commitments would cut their output, as flagged following an OPEC+ meeting on Wednesday.
Reuters reported that OPEC+ found some members would need to slash output by 2.31 million barrels per day to make up for their recent oversupply.
“They’re really focusing on the compliance from OPEC members. They’ve called out Iraq and Nigeria for not complying. That’s all been very good for supporting prices,” said Louis Crous, chief investment officer at BetaShares Capital, an exchange-traded fund provider in Australia.
The internal report flagged demand risks, showing OPEC+ expects oil demand in 2020 to fall by 9.1 million bpd, 100,000 bpd more than in its previous forecast.
And it found if a prolonged second wave of infections hits China, India, Europe and the United States in the second half of the year, demand could fall by 11.2 million bpd in 2020.
“My expectation would be demand continues to be quite a bumpy recovery,” said Lachlan Shaw, National Australia Bank’s head of commodity research.
Analysts said they could see Brent holding near $45 a barrel but did not expect the market to push much higher in the near term.
“It’s difficult to see conviction either way. From a seasonal perspective, you’d probably anticipate things to weaken a bit,” Shaw said.”
10:20 AM
‘Lockdown led to surge in sewing machine demand’
The COVID-19-led lockdown has forced several people to diversify into areas of work that weren’t their core focus, according to an official of Usha International.
This is one of the reasons for an increase in the sales of home sewing machines. People have taken up sewing either as an hobby or to make a living, he said.
“The global pandemic affected consumer behavior as they juggled household chores, along with office work and other commitments. Yet, they found time to pick up sewing as a creative outlet to deal with the stress, by making masks, PPE kits to home decor,” Parveen Kumarr Sahni, senior VP, Sewing Machines Business, Usha International told The Hindu.
10:00 AM
Indian shares jump as Wall St rally supports upbeat mood
A good start to the day for stocks helped by global peers.
PTI reports: “Indian shares clocked broad-based gains on Friday and were on course to end the week with a 2% gain, as global investor sentiment was boosted by a tech-driven rally that lifted the Nasdaq to a record closing high.
Every stock on India’s NSE Nifty 50 index was trading higher on Friday, led by a roughly 0.7% jump each in conglomerate Reliance Industries Ltd and HDFC Bank Ltd .
The Nifty 50 hovered around a recent five-month high, rising 0.84% to 11,407.25 by 0355 GMT, while the S&P BSE Sensex was 0.81% higher at 38,531.13.
Other Asian stock markets also bounced following Wall Street’s lead as investors bet technology stocks would ride out the crisis triggered by the COVID-19 pandemic.”
9:30 AM
Monetary arsenal must be kept dry for use: Das
RBI Governor Shaktikanta Das had emphasised that although there was headroom for further monetary policy action, the ‘arsenal’ has to be kept dry and used judiciously for promoting growth, which has been hit hard by the COVID-19 pandemic, according to the MPC minutes released on Thursday.
All the six members of the Monetary Policy Committee (MPC) had opted for status quo and left interest rates unchanged.
“It would be prudent at this stage to wait for a firmer assessment of the outlook for growth and inflation as the staggered opening of the economy progresses, supply bottlenecks ease and the price reporting pattern stabilises,” Mr. Das said, as per the minutes.
The Governor noted that low capacity utilisation amid subdued domestic and external demand was likely to delay revival of investment.
