The benchmark stock indices have opened this morning with modest gains after yesterday’s minor losses.
The Asian Development Bank has some bleak data to offer about developing Asian economies.
Join us as we follow the top business news through the day.
1:00 PM
Indian economy to shrink 9% in FY21: ADB
Yet another forecast about India’s 2020-21 growth rate.
PTI reports: “India’s coronavirus-battered economy will shrink by 9 per cent this fiscal, the Asian Development Bank (ADB) predicted on Tuesday saying growth outlook remains highly vulnerable to either a prolonged outbreak of the pandemic or a resurgence of cases.
This will be the first time in four decades that the Indian economic growth will contract.
In its Asian Development Outlook (ADO) 2020 Update, ADB forecasts a strong recovery for the economy in FY2021, with gross domestic product (GDP) growing by 8 per cent as mobility and business activities resume more widely.
“India imposed strict lockdown measures to contain the spread of the pandemic and this has had a severe impact on economic activity,” said ADB Chief Economist Yasuyuki Sawada.
Sawada further noted that “it is crucial that containment measures, such as robust testing, tracking, and ensuring treatment capacities, are implemented consistently and effectively to stop the spread of COVID-19 and provide a sustainable platform for the economy’s recovery for the next fiscal year and beyond.”
With lockdowns stalling private spending, ADB said GDP will shrink by 9 per cent in April 2020 to March 2021, sharply down from its June’s forecast of (-) 4 per cent.
“The growth outlook remains highly vulnerable to either a prolonged outbreak or a resurgence of cases, with the country now having one of the highest number of COVID-19 cases globally,” It said.
Other downside risks include increasing public and private debt levels that could affect technology and infrastructure investment, as well as rising non-performing loans caused by the pandemic that could further weaken the financial sector and its ability to support economic growth.
ADB joins a chorus of international agencies that have predicted a contraction in the Indian economy in the current fiscal.
S&P Global Ratings on Monday slashed its FY21 growth forecast for India to (-) 9 per cent, from (-) 5 per cent estimated earlier, saying that rising COVID-19 cases would keep private spending and investment lower for longer.
Last week, two other global rating agencies Moody’s and Fitch projected the Indian economy to contract 11.5 per cent and 10.5 per cent respectively in the current fiscal. However, Goldman Sachs has estimated the contraction at 14.8 per cent.
India Ratings and Research expects contraction at 11.8 per cent, while Crisil estimates the contraction at 9 per cent.
For the 2021-22 fiscal, S&P expects economic growth at 10 per cent.
ADB said Government initiatives to address the pandemic, including the rural employment guarantee program and other social protection measures, will aid rural incomes protecting the vulnerable people, but private consumption may continue to suffer.
Investment is also expected to contract as investors remain deterred by heightened risks and uncertainties. The fiscal deficit is expected to rise significantly in FY2020 as government revenues fall and expenditures rise.”
12:30 PM
‘Awareness of immunity driving chicken prices up’
Chicken prices at the farm gate across India have returned to pre-COVID-19 levels of ₹85-90 a kg, as consumption of poultry has risen again as an immunity booster to counter the virus , according to major poultry firms.
Following rumours in February linking poultry with COVID-19, chicken prices had crashed to ₹5-10 a kg, forcing poultry farmers to release the birds into the open as they could not afford their maintenance.
“March and April were the [worst],” said S. Vignesh, ED, Suguna Foods, a large poultry player in the south with a market share of over 16%. “Production was severely impacted as maize producers could not supply feed due to the lockdown and demand was [affected] following rumours,” he added. “So, prices had crashed to ₹5-10 a kg from ₹85-90 in December,” he said. “Farm gate prices have bounced back to pre-COVID-19 levels and demand has returned to 70% of the pre-pandemic time. “Chicken is now consumed at least twice a week because people have started taking it as source of protein and an immunity builder.”
12:00 PM
Oil slips as bleaker demand outlook weighs on sentiment
Demand remains a huge concern for oil investors.
Reuters reports: “Oil prices slipped on Tuesday as worries over slow recovery in global fuel demand were reinforced by warnings by major oil producers, but short-covering ahead of a meeting later this week of OPEC and its allies, known as OPEC+, limited losses.
Brent crude was down 5 cents, or 0.1%, at $39.56 a barrel by 0407 GMT, while U.S. West Texas Intermediate (WTI) crude futures were down 3 cents, or 0.1%, at $37.23 a barrel.
Both contracts ended slightly lower the previous day.
“Sentiment in oil markets remained gloomy due to bleak demand outlook by oil producers and as a resurgence in COVID-19 cases in many countries fuelled concerns over slower pick-up in global fuel demand,” said Chiyoki Chen, chief analyst at Sunward Trading.
“Brent and WTI are likely to stay between $35 and $40 a barrel until U.S. demand for heating oil starts picking up as the peak driving season has ended,” he said.
Major oil industry producers and traders are forecasting a bleak future for worldwide fuel demand, due to the pandemic’s ongoing assault on the global economy, with OPEC downgrading its oil demand forecast and BP citing demand might have peaked in 2019.
World oil demand will tumble by 9.46 million barrels per day (bpd) this year, the Organization of the Petroleum Exporting Countries (OPEC) said in a monthly report, more than the 9.06 million bpd decline expected a month ago.
Worries over an increase in global supply after Libyan commander Khalifa Haftar committed to ending a months-long blockade of oil facilities also dented risk appetite.
“Still, some investors moved to cash in profitable short positions ahead of the OPEC+ meeting,” said Hiroyuki Kikukawa, general manager of research at Nissan Securities.
Investors look to the joint ministerial monitoring committee (JMMC) by OPEC+ on Thursday to discuss compliance with deep cuts in production, although analysts do not expect further reductions to be made despite Brent prices falling below $40 per barrel in recent days.
Concerns over supply disruptions in the United States from an impending storm also provided some support.
Energy companies, ports and refiners raced on Monday to shut down as Hurricane Sally grew stronger while lumbering toward the central U.S. Gulf Coast, the second significant hurricane to shutter oil and gas activity in the past month.
“Still, the support is limited as oil prices came off quickly after the first hurricane passed, with energy companies being able to make proper preparations ahead of time,” Sunward’s Chen said.
Meanwhile, China’s crude oil throughput in August rose from a year ago, reaching the second-highest on record, as refineries worked to digest record imports brought in earlier this year.”
11:30 AM
GST compensation due to States is ₹1.51 lakh crore
The GST collection during April-August declined on account of the COVID-19 induced lockdown, and the compensation due to States stands at over ₹1.51 lakh crore, Minister of State for Finance Anurag Singh Thakur said on Monday.
The provisional GST compensation due to States and Union Territories (UTs) for 2020-21 was highest for Maharashtra at ₹22,485 crore, followed by Karnataka (₹13,763 crore), Uttar Pradesh (₹11,742 crore), Gujarat (₹11,563 crore) and Tamil Nadu (₹11,269 crore).
The total provisional GST compensation due to 31 States and UTs for 2020-21 put together stands at ₹1,51,365 crore, as per data shared in a written reply to a question in the Lok Sabha.
Mr. Thakur said the issue of pending compensation and future course of action to meet the shortfall was discussed in the 41st GST Council meeting on August 27 wherein States were given two options to meet their GST compensation shortfall for current fiscal year from market borrowing.
11:00 AM
Apple’s market cap beats that of the FTSE-100 index
10:40 AM
Rupee rises 15 paise to 73.33 against US dollar in early trade
The bullish sentiment in stocks has helped the rupee this morning.
PTI reports: “The rupee strengthened by 15 paise to 73.33 against the US dollar in opening trade on Tuesday as weak American currency and positive domestic equities strengthened investor sentiment.
At the interbank forex market, the domestic unit opened at 73.33 against the US dollar, registering a rise of 15 paise over its previous close.
On Monday, the rupee had settled at 73.48 against the US dollar.
Forex traders said news related to coronavirus vaccine and sustained foreign fund inflows aided to positive sentiment.
“Global risk sentiment is holding up on hopes of a vaccine becoming available by the end of 2020. US equities ended the session with gains of around 1 per cent,” said Abhishek Goenka, Founder and CEO, IFA Global.
Meanwhile, retail inflation softened slightly to 6.69 per cent in August as price rise in some food items eased.
“Domestic consumer prices rose 6.69 per cent in August, lower than market expectations but still higher than the RBI upper limit of its tolerance band of 4-6 per cent. Since a higher print was already expected, the bond market should take the data in its stride,” Goenka said.
The dollar index, which gauges the greenback’s strength against a basket of six currencies, fell 0.18 per cent to 92.88.
On the domestic equity market front, the 30-share BSE benchmark Sensex was trading 141.59 points higher at 38,898.22, and the broader NSE Nifty advanced 43 points to 11,483.05.
Foreign institutional investors were net buyers in the capital market as they purchased shares worth Rs 298.22 crore on a net basis on Monday, according to exchange data.
Brent crude futures, the global oil benchmark, fell 0.08 per cent to USD 39.58 per barrel.”
10:20 AM
‘Developing Asia’ to shrink for first time in nearly six decades: ADB
The economic impact of the pandemic brings the Asian growth story to a halt.
Reuters reports: “The coronavirus pandemic will cause economic output in “developing Asia” to shrink for the first time in nearly six decades in 2020 before it bounces back next year, the Asian Development Development Bank said on Tuesday.
“Developing Asia”, which groups 45 countries in Asia-Pacific, is expected to contract 0.7% this year, the ADB said, forecasting the first negative quarterly figure since 1962. The ADB’s previous forecast in June had reckoned on 0.1% growth.
For 2021, the region is forecast to recover and grow 6.8%, still below pre-COVID-19 predictions, the ADB said in an update of its Asian Development Outlook report. The updated forecasts show the damage brought by the pandemic was greater than previously thought, with about three-quarters of the region’s economies forecast to slump this year.
“Most economies in the Asia and Pacific region can expect difficult growth path for the rest of 2020,” ADB Chief Economist Yasuyuki Sawada said in a statement. “The economic threat posed by the COVID-19 pandemic remains potent, as extended first waves or recurring outbreaks could prompt further containment measures,” Sawada said.
While the pandemic remains the biggest downside risk to the region’s outlook, Sawada said in a separate media briefing ”worsening geopolitical tensions” that include the trade and tech war between U.S. and Beijing, could also dent growth.
China, where the coronavirus surfaced in December, is seen bucking the trend as the ADB kept its 2020 growth forecast at 1.8%. The world’s second largest economy is expected to rebound strongly to 7.7% in 2021, the ADB said.
India’s economy is expected to contract 9.0% this year, ADB said, a far worse outcome than the 4.0% contraction previously forecast, ADB said. But it also expected India to bounce back with 8.0% growth next year. As the pandemic took a toll on Southeast Asian economies, the sub-region is projected to suffer a 3.8% slump this year, before picking up next year.
Latest forecasts suggest a more protracted “L” shaped recovery for “developing Asia”, Sawada said. Depressed demand and lower oil prices allowed the ADB to keep its inflation forecast for developing Asia at 2.9%, and it is predicted to slow further to 2.3% in 2021.”
10:00 AM
Indian shares open higher on inflation data, IT boost
A good start to the morning for the stock indices that were lackluster yesterday.
Reuters reports: “Indian shares opened higher on Tuesday, after data showed the country’s annual retail inflation eased slightly in August, with gains in IT stocks also offering support.
The blue-chip NSE Nifty 50 index rose 0.48% to 11,494.70 and the benchmark S&P BSE Sensex 0.50% to 38,950.43 by 0350 GMT.
India’s retail inflation in August of 6.69% was lower than the 6.73% recorded in July, though it remained above the upper end of the Reserve Bank of India’s (RBI) medium-term target for the fifth straight month.
In domestic trading, the Nifty IT index jumped 0.84%, with IT major Tata Consultancy Services Ltd rising as much as 1.4%.
Broader Asian markets were up on positive China industrial data and optimism around COVID-19 vaccines, with eyes on the U.S. Federal Reserve’s two-day policy meeting that starts later in the day.”
9:30 AM
Govt. looks to spend ₹2.35 lakh crore more
The Centre has sought Parliament approval for a gross additional expenditure of ₹2.35 lakh crore, including ₹20,000 crore for recapitalisation of public sector banks, for 2020-21.
Finance Minister Nirmala Sitharaman tabled the first batch of Supplementary Demands for Grants for this financial year in the Lok Sabha on Monday.
Out of the ₹2.35 lakh crore gross additional expenditure, the proposals involving net cash outgo add up to almost ₹1.67 lakh crore. The rest of the money will come either through savings or reallocation of funds allocated to other ministries.
The supplementary demand for grants is needed for government expenditure over and above the amount for which Parliamentary approval was already obtained during the Budget session.
