The Nifty and the Sensex opened the day on a flat note as gains in IT stocks were offset by concerns over the new mutated coronavirus strain.
Join us as we follow the top business news through the day.
The rise of Robinhood trading in 2020
Higher delinquencies in credit card, loans against property segments in retail lending: Report
Yet another cost of the economic lockdown.
PTI reports: “Retail credit has experienced an increase in serious delinquencies, with loans against property and credit cards being the most affected segments, a report by a credit information bureau said on Wednesday.
As of August-end, the loans overdue for over 90 days in the credit card segment were 0.51 per cent up from the year-ago period at 2.32 per cent, while the same for the loans against property was 0.34 per cent up at 3.96 per cent, Transunion Cibil said.
“Credit cards delinquency rates reflected the wider economic slowdown, salary cuts and job losses caused by the pandemic. Further, credit cards often have a lower payment priority, with consumers choosing to pay other credit accounts first,” the bureau said.
For LAP, a product generally used by small businesses as working capital finance, delinquencies had already been on the rise prior to COVID-19.
It, however, said that the delinquency picture is “complicated” and will take time to emerge as the lagged effect of financial conditions, relief programs supported by lenders, and shifts in payment priorities of consumers play out.
It can be noted that the Reserve Bank had announced a moratorium on loan repayments for six months ending August 2020, under which a loan account cannot be termed as a non-performing asset (NPA) for non-payment.
The central bank had later introduced a loan restructuring scheme across all categories for borrowers impacted by the pandemic. However, bankers have been saying that there has not been a high amount of requests for loan recasts.
The bureau said in the case of auto loans and personal loan segments, there has been an improvement from a delinquency perspective.
From a lending institution perspective, retail loans extended by non-bank finance companies (NBFCs), which typically take riskier loan bets, reported a 0.49 per cent increase in delinquencies in August as compared with the year-ago period, while the same improved 0.28 per cent for state-run lenders and 0.10 per cent for their private sector counterparts.
It said the shape of recovery in retail-credit markets will be very much influenced by the ability to contain the spread of the pandemic along with consumer and lender resiliency.
Retail advances growth for the system slowed to 2.5 per cent in August (compared with the year-ago period of August 2019), as against 8.9 per cent in May this year and 16.7 per cent in February, it said.
The deceleration in balances growth is more pronounced for private banks and NBFCs, it said.
Demand for retail credit has been growing lately and in November, retail credit demand (as measured by inquiry volumes) was back to almost 93 per cent of the levels observed in November 2019, it said.
PSU banks saw the biggest rebound in inquiries in the unlock phase, as they were early in recommencing operations than their peers, while private banks have witnessed a positive growth in inquiry volumes for the first time in November 2020 since February, it said.”
Companies hopeful of economic recovery in 2021 but cautious about COVID-19 pandemic
Business outlook for the coming year.
PTI reports: “Sanitaryware makers to manufacturers of consumer durables remain optimistic about an economic revival in 2021 but cautious as the risk of COVID-19 pandemic still exists, officials said on Wednesday.
Many companies across sectors are looking to make their balance sheets strong after they have experienced market disruptions in the current calendar year due to the raging global coronavirus outbreak, they said.
Firms ranging from tourism, food and beverage sectors to sanitaryware industry are focusing on the health and hygiene segment and strengthen their digital presence to overcome the challenges, the officials said, adding that the economic revival is expected in the second half of the next year, they said.
“Despite the major blow in the economy in 2020 due to the pandemic, 2021 seems to be the year of redemption and we can expect the economy to not only recover but also to show significant signs of growth,” Roca Bathroom India managing director KE Ranganathan said.
Revenue from some of its brands has reached 90-100 per cent of the pre-COVID levels, while sales from the touchless and hygiene products have gained momentum and the company has also forayed into the safe-essentials segment, he said.
Jaquar Group director and promoter Rajesh Mehra said reduced home loan rates and attractive payment schemes will boost the pent up demand in the market for home-building related segments in 2021.
He, however, said markets will only be able to recover in the second half of 2021.
The COVID-19 pandemic has changed the scope and range of home appliances and help the sector evolve from conventional to smart products, consumer durable goods maker Panasonic said.
“We continue to stay invested, as we look for green shoots to serve our customers. We have introduced Miraie, which is powered by the internet of things and artificial intelligence. It is our connected living platform that has been developed in-house for our appliances.
“A connected ecosystem is expected to gain focus as we step into the new year,” Panasonic India and South Asia president and CEO Manish Sharma said.
McDonald’s operator in north and east CPRL head Robert Hunghanfoo said consumer sentiments have remained good during the festive season, while avoiding large gatherings and contactless experience have become a norm.
“Customers are exploring options that reassure safety or are ordering online. We will continue to focus on implementing measures that will help them when it comes to dining-in, take-away or ordering McDelivery,” he said while talking about the business prospect in 2021.
For the travel and tourism industry, the current year began on an ominous note and the lockdown brought all kinds of mobility to a standstill.
“The biggest insight was that passengers today are not just looking for timely and convenient travel experience but have started giving significant weightage to hygiene, sanitisation, and social distancing. Travel gradually gaining momentum and will grow in 2021,” IntrCity RailYatri CEO and co-founder Manish Rathi said.”
Watch | Bitcoin hits all-time high
Bitcoin traded above $20,000 for the first time on December 16, 2020. It jumped 4.5% to move as high as $20,440. Bitcoin has gained more than 170% this year.
Bitcoin is a cryptocurrency launched in 2009. It was created by an unknown person or group using the alias Satoshi Nakamoto. Nakamoto wanted to create a currency that could “resist unpredictable monetary policies and banking regulations”.
Bitcoin transactions are made with no middle men. Marketplaces here are called ‘cryptocurrency exchanges’. It allows people to buy or sell bitcoins using different currencies. It can be used to buy merchandise anonymously.
Economic recovery, demand revival spark 2021 hopes for steel sector
Greenshoots in the steel sector.
PTI reports: “Recovering economy, sprouting demand and improving prices raise hopes for the country’s battered steel sector as it steps into the new year after pandemic-induced disruptions turned 2020 into a “disaster” for the industry.
As the sector experiences signs of better times, the apex body of domestic steel makers, ISA, expects good days ahead and surely no more outbreak like that of coronavirus infections.
The Indian steel industry grappled with tough times in running their operations as well as witnessed a sharp plunge in demand for steel soon after the coronavirus pandemic and subsequent lockdowns disrupted overall economic activities.
Adverse market conditions forced steelmakers to cut down their operations by up to 50 per cent in April. There was a shortage of manpower as many workers migrated to their native places amid the lockdown as well as limitations on the number of staff working at an office or site after gradual unlocking.
The nationwide lockdown came into force in late March and the relaxations began in a phased manner only in June.
While terming 2020 as a “catastrophe” for the steel industry, Indian Steel Association (ISA) Deputy Secretary-General Arnab Hazra said there is a revival in demand now which will continue to grow in 2021.
“We are expecting good days ahead and no more outbreak of any virus like corona in the future. Year 2020 was a disaster, we expect no more disaster. This will save us from further disruption,” he said.
The outlook for the sector is turning positive and the industry expects the government will spend more on infrastructure in the new year, which will have a multiplier effect on demand, Hazra said, adding that the demand will show resilience to reach to pre-COVID level in 2021.
In 2019, the demand was around 100.2 million tonne (MT) and that will fall to 81 MT in 2020, he noted. Helped by government spending and demand coming from steel-intensive sectors, the overall steel demand is expected to reach 100 MT in 2021.
“Demand is clearly visible and going forward is expected to become stronger which augurs well for the industry in 2021,” he said.
JSW Steel Joint Managing D Seshagiri Rao said, 2020 is the worst year in the last 70 years and that the unprecedented pandemic has had a devastating impact on the world economic growth. Even though the overall steel demand is expected to fall in 2020, the industry is experiencing improvement in realisation and margins, he added.
According to Rao, the company’s expansion plans and inorganic growth through acquisitions are expected to come to fruition by the end of March 2021 coinciding with a rebound in economic activity.
JSW Steel’s priority is to leverage the availability of additional capacities to meet the incremental demand that would arise due to economic rebound to create value to stakeholders, he said.
State-owned SAIL’s Chairman Anil Kumar Chaudhary said that from the third quarter of the ongoing fiscal, the market has started improving and will continue to do better in the next fiscal year.
The growth in the auto sector, infrastructure and construction, white goods and agri equipment will aid the steel demand in India, he said.
Things are improving in the domestic and the international prices are on the rise. Domestic prices are governed by the international prices whether they are of steel or iron ore, Chaudhary said.
“Looking at this, we think domestic demand will continue to be strong in the fourth quarter. Overall, this (financial) year should be good despite the pandemic in the first quarter and also the fact that we lost a lot of money in Q1. Q4 will also be good.
“Financial year 2021-22 should also be a good year for the industry because the demand has already started picking up and this buoyancy will remain,” he said.
Electrosteel Steels Limited’s CEO Pankaj Malhan said in the last few months since the lockdown was lifted, things have improved and steel demand has started increasing as economic and manufacturing activity is starting to gain pace.
He also said that construction activity is also getting back to pre-COVID levels slowly and that the industry is bullish on the price of steel for the next two quarters.
“Plus, we are expecting that the government will announce favourable proposals in the (upcoming) Union Budget which will help the steel industry in terms of arresting the increasing price and shortage of iron ore which is a primary raw material for the steel industry by not only capping its price but also by stopping exports at a time when the domestic industry is facing a shortage,” he said.
Rashtriya Ispat Nigam Ltd (RINL) Chairman and Managing Director P K Rath said “the pace of recovery of the market and surge in demand of steel in the third quarter has raised the hope of closing the year on a better note. Our priorities will be definitely commissioning and stabilising the forged wheel plant and ramping up the plant production to its rated capacity.
JSPL Managing Director V R Sharma said the passing year was globally one of the most challenging years for the industry as well as mankind due to the COVID-19.
Some steel companies scaled-down production of their operations some had to close their plants, he added.”
‘Centre to set up development finance entity in 3-4 months’
The government plans to set up a Development Finance Institution (DFI) in the next three to four months with a view to mobilise the ₹111 lakh crore required for funding of the ambitious national infrastructure pipeline, according to Financial Services Secretary Debasish Panda.
“We need a development financial institution as infra financing needs patient capital, and banks are currently not suited for lending for long-term projects which do not generate any cash for years,” he told PTI.
Even deepening the bond market with regard to infrastructure financing was a matter receiving the Centre’s attention and there was a need to do something more in order to have a robust bond market for infrastructure financing, he said.
“To provide funding, to enhance credit rating of projects, a DFI is needed, and we are actively working on it, and soon such an institution will be in place. We are in the process of finalising details such as shareholding of the government and whether such a body will be formed through a statute.
FDI growth story to ‘go well’ in 2021 too
Easing down of FDI restrictions is helping India’s cause.
PTI reports: “The high growth story of foreign direct investments into India will “go well” in the new year too as there is a growing interest among overseas investors about the country amid the government’s continuing reform measures to further improve the business climate.
With relaxed FDI norms, defence production will be among the areas that will be looked at for fresh overseas investments in the months ahead while easing compliance burden of businesses will be a priority area.
Irrespective of the global slowdown and the COVID-19 pandemic, FDI into India recorded a significant jump, according to Secretary in the Department for Promotion of Industry and Internal Trade (DPIIT) Guruprasad Mohapatra.
Facebook’s huge investment in Mukesh Ambani’s Jio Platform helped India receive around USD 43.5 billion FDI during the January-September 2020 period and going ahead, the bullish trend is expected to continue.
“There was a global slowdown. We also thought that the growth patterns of FDI in India, which was very very encouraging, might decline post-COVID. But the decline has not happened and the FDI continues to grow well and now the general revival is there in the economy. I do not have any anxieties now, it (FDI growth) should go well in 2021,” Mohapatra told PTI.
In the wake of the COVID-19 pandemic, the government imposed a nationwide lockdown in late March to curb spreading of infections and the move had also severely impacted economic activities.
The government has relaxed FDI norms in sectors such as defence production and that is also one of the areas “which one will look forward to”, Mohapatra said.
According to him, some big ticket investments will keep happening as “overall there is an interest in India’s growth story” particularly now because the worst part of the pandemic is over.
After taking a lot of steps to significantly improve the ease of doing business, Mohapatra said, now the government is working to reduce compliance burden of businesses.
“This is a priority of the government. Every compliance which is a burden needs to be removed and this includes de-criminalisation of civil wrongs,” he emphasised.
In the World Bank’s Doing Business report released last year, India’s ranking improved 14 places to the 63rd position among 190 economies. The country was at the 77th spot in the previous year.
Among several areas, the government has relaxed FDI norms in coal mining, contract manufacturing, and single-brand retail trading.
The DPIIT is also looking at easing the norms in areas like AVGC (Animation, Visual Effects, Gaming and Comics).
Foreign direct investment equity inflows into India crossed the USD 500 billion milestone between April 2000 to September 2020, strengthening the country’s credentials as an investment destination.
About 29 per cent of the FDI came through the Mauritius route. It was followed by Singapore (21 per cent), the United States, the Netherlands, Japan (each 7 per cent) and the United Kingdom (6 per cent). The other big investors have been from Germany, Cyprus, France and Cayman Islands.
Since 2015-16, FDI inflows have been recording significant growth. In that fiscal, the country received FDI worth USD 40 billion, an increase of 35 per cent over the previous year.
In 2016-17, 2017-18, 2018-19 and 2019-20, FDI stood at USD 43.5 billion, USD 44.85 billion, USD 44.37 billion and USD 50 billion, respectively.
The key sectors which attracted the maximum FDI include services segment, computer software and hardware, telecommunications, trading, construction development, automobile, chemicals, and pharmaceuticals.
Although FDI is allowed through the automatic route in most of the sectors, in certain areas such as telecom, media, pharmaceuticals and insurance, government approval is a must for foreign investors.
Under the government approval route, a foreign investor has to take prior approval of the respective ministry or department whereas for the automatic route, an overseas investor is only required to inform the Reserve Bank of India (RBI) after an investment is made.
At present, FDI is prohibited in as many as nine sectors. They are lottery business, gambling and betting, chit funds, nidhi company, real estate business, and manufacturing of cigars, cheroots, cigarillos and cigarettes using tobacco.
In April this year, the government made prior approval mandatory for foreign investments from countries that share land border with India to curb “opportunistic takeovers” of domestic firms following the COVID-19 pandemic, a move which was aimed at restricting FDI from China.”
U.S. financial body to invest $54 mn in India to support critical infrastructure projects
An American financial corporation has announced an investment of $54 million in India to support the development of critical infrastructure projects in the country in the wake of the COVID-19 pandemic.
India has been one of the fastest growing countries in the past three decades, but has suffered from significant infrastructure deficit, holding back further growth, especially in the wake of COVID-19, the U.S. International Development Finance Corporation (DFC) said on December 22.
The DFC said it would invest $54 million in equity for the National Investment and Infrastructure Fund (NIIF) in India to support the development of critical infrastructure projects. This is part of NIIF’s final round of fund-raising.
NIIF will work to mobilise capital to support economic growth and address critical development challenges in the country, according to a statement.
Gold inches higher on hopes of further U.S. stimulus
Further momentum for the yellow metal.
Reuters reports: “Gold prices edged higher on Wednesday as grim U.S. consumer and housing data bolstered hopes for further stimulus to support an economic recovery from the pandemic-induced slump.
Spot gold rose 0.2% to $1,863.83 per ounce by 0027 GMT, while U.S. gold futures fell 0.1% to $1,868.10. * A new coronavirus strain in the UK has caused several countries around the world to shut their borders to Britain and drugmakers to scramble to test their COVID-19 vaccines against it.
Weekly COVID-19 infections rose by the highest since the pandemic began, with the United States reporting the most number of cases for any single country, the World Health Organization said on Tuesday.
U.S. Congress passed a massive COVID-19 aid and government funding package overnight aimed at bolstering the nation’s battered economy.
Data on Tuesday showed U.S. consumer confidence dropped to a four-month low in December, while U.S. existing home sales also fell in November.
The U.S. economy grew at a record pace in the third quarter, the Commerce Department said, revising up its estimate for gross domestic product. * U.S. President-elect Joe Biden said his administration would put forward another COVID-19 relief package next year, including a new round of stimulus payments.
The European Union is ready to continue negotiations with Britain past the end of the year, sources said after an update on Brexit by the bloc’s negotiator, Michel Barnier. * SPDR Gold Trust the world’s largest gold-backed exchange-traded fund, said its holdings fell 0.20% to 1,167.53 tonnes on Tuesday from 1,169.86 tonnes on Monday.
Silver rose 1% to $25.38 an ounce. Platinum rose 0.5% to $1,007.11 and palladium gained 0.2% to $2,318.12.”
Cairn Energy wins investment treaty arbitration against India over tax dispute: sources
Cairn Energy has wonan international arbitration case against the Indian government over a tax dispute, ending one of the most high profile disputesin the country, two sources with direct knowledge of the matter told Reuters.
Cairn in March 2015 filed a formal dispute against a demand for more than $1.6 billion from the Indian tax department that dates back to the 2007 listing of its then Indian operation.
US zombie companies at record peak
Rupee slips 6 paise to 73.90 against US dollar in early trade
The rupee once again mirrored stocks in the morning session.
PTI reports: “The rupee depreciated 6 paise to 73.90 against the US dollar in opening trade on Wednesday in line with weaker Asian peers amid concerns over a new coronavirus strain.
Traders said the domestic unit is weak tracking tepid cued from most regional currencies on concerns that a infectious new coronavirus strain could slow down the prospects of a global economic recovery.
At the interbank forex market, the domestic unit opened at 73.89 against the US dollar, then inched lower to 73.90 against the greenback, registering a fall of 6 paise over its previous close.
On Tuesday, rupee had settled at 73.84 against the American currency.
Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, fell 0.24 per cent to 90.43.
“…the US dollar continued to find safe haven demand as the new coronavirus variant in the UK could disrupt the economic recovery,” Reliance Securities said in a research note.
Further, Asian currencies were trading flat to weak this Wednesday morning and could weigh on sentiments, the note added.
On the domestic equity market front, the 30-share BSE benchmark Sensex was trading 180.09 points higher at 46,186.78 and the broader NSE Nifty advanced 51.15 points to 13,517.45.
Foreign institutional investors were net buyers in the capital market as they purchased shares worth Rs 1,153.00 crore on a net basis on Tuesday, according to provisional exchange data.
Brent crude futures, the global oil benchmark, fell 1.44 per cent to USD 49.36 per barrel.”
Elon Musk says he had once reached out to Apple for acquiring Tesla
Silicon Valley billionaire Elon Musk said on Tuesday he reached out to Apple Inc Chief Executive Officer Tim Cook “during the darkest days of the Model 3program” to discuss the possibility of the iPhone makeracquiring Tesla Inc for a tenth of its current value.
“He refused to take the meeting”, said Musk, CEO of electric-car maker Tesla, replying to a Twitter chain whichcited a Reuters story on Apple looking to produce a passengervehicle by 2024 with a new battery technology.
During 2017 and 2018, Tesla struggled to ramp up high volumeproduction of the Model 3 sedan, with Musk at the time informinginvestors the company was mired in “production hell” because ofproblems with automated production systems at its batteryfactory in Reno, Nevada.
However, Tesla overcame the problems and has since racked upa string of quarterly profits. The electric automaker became oneof the most valuable companies to join the S&P 500 when itbecame part of the widely followed stock index on Monday.
Indian shares flat, IT gains offset worries over new virus strain
A slow start to the day for stocks.
Reuters reports: “Indian shares were little changed in early trade on Wednesday, as a rally in IT stocks countered weak global investor sentiment over fresh COVID-19 related restrictions after a new strain of the coronavirus swept through the UK.
The NSE Nifty 50 index was up 0.09% at 13,475.10 by 0348 GMT, while the benchmark S&P BSE Sensex inched 0.06% higher to 46,053.20.
U.S. stock futures fell after President Donald Trump indicated he might not sign the $900 billion bipartisan relief package just a day after Congress passed it.
Investors globally are concerned over the new coronavirus strain in the UK which has led to new travel restrictions and fresh round of lockdowns.
In Mumbai, IT stocks extended gains with the Nifty IT index rising as much as 1.46%.
Shares of Wipro Ltd rose as much as 3.65%, after the IT services provider on Tuesday signed a $700 million deal with METRO AG to manage METRO AG’s units in Germany and Romania.
Infosys Ltd advanced over 2% in early trade after it signed a partnership with Daimler AG on Tuesday.
Meanwhile, Reuters on Tuesday reported that India is likely to approve Oxford/AstraZeneca’s coronavirus vaccine for emergency use by next week.”
CII, FICCI to seek a pause on wage code
Representatives of industry bodies, including those from CII and FICCI, will hold a meeting with the Labour Ministry’s top brass on Thursday to make a case for holding back implementation of new definition of wages, which would increase social security deductions and reduce the take-home pay of workers.
A source said lobbyists feared this would result in a major cut in take-home salaries and also place a burden on employers.