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A CFO with a midsized lender has pointed out the issues with monetary transmission. Almost 90 per cent of balance sheets of Indian banks on the liability side are from public deposits. Within that, 35-40 per cent is Casa, and the rest comprises term deposits on which banks commit a fixed rate of interest. Indian lenders are not too dependent on market funds like CDs or interbank borrowings, which are what really transmits policy rates. And then, banks have to compete with small savings instruments like Kisan Vikas Patra, NSC, PPF in savers' market. So, no matter how low the repo rate falls, loan rates won't drop fast.
MARKET CUES: Where do we stand.
 | Nifty futures on the Singapore Exchange traded 100 points higher at 7 am (IST) in signs that Dalal Street may attempt a rebound on Tuesday |
| On Friday, Nifty50 snapped a three-day winning streak and formed an indecisive Doji on the daily chart. On weekly charts, it formed a Hammer candle. Analysts said the market bias still remains negative. |
| In F&O charts, Nifty’s maximum Call open interest stood at 10,000 and 9,500 levels, while maximum Put open interest was at 9,000 and 8,500 levels. Options data indicated an immediate trading range between 8,800 and 9,300 levels. |
| Elsewhere in Asia, stocks rose for a second day despite escalating geopolitical risks, with Japan leading gains as the world’s third-largest economy reopens. Shares in Tokyo, Sydney and Seoul rose more than 1%. Hong Kong opened firmer, showing signs of stabilizing after weekend unrest. Shanghai had more modest gains. |
| Wall Street was closed on Monday to observe the Memorial Day weekend. On Sunday, Dow Jones futures rose 0.3% while S&P 500 futures and Nasdaq 100 futures climbed 0.3%. On Friday, US stocks closed mostly flat to wrap up a solid week of gains |
| Oil prices rose on Tuesday on clear signs that producers are sticking to commitments to cut crude supply as more cars get back on the road with coronavirus lockdowns easing around the world. WTI crude futures gained 2.3%, or 75 cents, to $34.00 a barrel, while Brent crude futures inched up 0.7%, or 23 cents to $35.76 |
| The rupee depreciated 34 paise to provisionally close at 75.95 against the US dollar on Friday as the RBI's rate cut move failed to cheer investor sentiment. |
| The dollar inched lower on Tuesday as growing optimism about a global recovery from the COVID-19 pandemic supported riskier currencies. Against a basket of currencies, the dollar was roughly where it ended last week. Australian and New Zealand dollars rose about 0.3%, but kept below last week’s highs The Japanese yen JPY= fetched 107.79 per dollar. |
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Airtel holding firm to sell shares… Bharti Telecom, the holding company of Bharti Airtel, will sell up to 2.75% stake in the telco to raise around $1 billion (nearly Rs 7,600 crore) through a block deal on Tuesday to become a zero-debt firm and be ready to infuse more funds in the listed entity if required. The buyers are likely to include global investors such as Fidelity, Segantii Capital and Norges Bank as well as local funds such as HDFC Mutual Fund, SBI Mutual Fund and Birla Mutual Fund, said a person familiar with the matter. Airlines take to skies amid chaos… India’s airlines flew only 532 flights and 39,231 passengers on Monday, which is over half of 830 flights approved by the government last week and a fifth of about 2,500 daily flights before the shutdown in March. Indigo alone operated about 240 flights on Monday. The day was also marked by uncertainty and chaos at airports as airlines, acting on last-minute instructions from the government, cancelled nearly half the flights that were supposed to depart leaving many irate passengers in the lurch. India to store oil in US reserves?... India is looking at storing some low priced US oil in facilities there as its local storage is full, oil minister Dharmendra Pradhan told a news channel. The plan could be similar to a move by Australia, which last month said it would build up an emergency oil stockpile initially by buying crude to store in the US Strategic Petroleum Reserve to take advantage of low oil prices. Pradhan said India had already filled its 5.33 million tonnes of strategic storage and parked about 8.5-9 million tonnes of oil on ships in different parts of the world, primarily in the Gulf. SIP of debt funds to offset equity hit… To offset poor equity returns, advisers are asking savers to buy debt SIPs. Liquid and ultra-short-term funds are prescribed for those with short-term goals. Those with a longer investment horizon should look at long-duration or gilt funds. SIPs in debt funds have been present since long, asset managers and distributors focused on SIPs in equity-oriented mutual funds. Inflows through such SIPs have stayed above Rs 8,000 crore per month for more than 16 months, with cumulative collections crossing Rs 1 lakh crore last financial year. | AND WHO'S |  |
Foreign funds flee Indian bonds… Foreign funds have slashed their holdings of India’s government bonds to the lowest in three years at Rs 76,700 crore amid dwindling returns, just as the nation embarks on a mammoth borrowing plan. Steep hedging costs have also diminished payoffs in one of Asia’s highest-yielding markets even as the rupee’s plunge by about 6% in 2020 further reduced the appeal of Indian debt. They have also reduced holdings of govt bonds to three-year low at about Rs 1.1 lakh cror,eor less than 2% of India’s total outstanding debt. Discretionary facing brisk downgrades… Ratings of consumer discretionary companies are looking increasingly dismal, with revenues for many in industries such as jewellery or automotive ancillaries set to slide by as much as 30% in FY21. And that bleak outlook is affecting their credit worthiness in the eyes of independent evaluators – credit rating firms. Of the negative 27 rating actions that India Ratings undertook between mid-April and mid-May, 53% concerned industries in the consumer discretionary segment – gems, jewellery and auto-parts makers. Eight ratings were downgraded, while 19 were either assigned a ‘negative outlook’ or placed under ‘negative’ rating watch.
Many offices switch off ACs… India’s white-collar employees will now be walking into offices that are either no longer air-conditioned or air-conditioned with a lot of conditions, and at extra cost. The fear of catching Covid-19 via airflow in centrally air-conditioned offices is changing a workspace feature. A large number of companies are not switching on central AC while in offices where air-conditioning is operational, new safety features are being added at 15-20% extra cost for major modifications.
Meanwhile...
Minimum wages may not rise... The government could defer mandatory increase in minimum wages for a year in a move that could result in an annual saving of Rs 7,500 crore for the private sector as well as central and state governments. The move is expected to impact more than 150 million workers. As per government estimates, 30% of the country's total workforce is covered under the Minimum Wage Act.
Private lender YES Bank will have to grapple with fresh allegation and evidence that indicates how its officials had misled retail investors to peddle perpetual bonds.
The DAY PLANNER | Q4 Earnings: Blue Dart | Torrent Pharma | Max Financials | Coromandel | JP Power |
| Japan March All Industry Activity Index (10.00 am) |
| ECB Financial Stability Review (06.30 pm) |
| US March House Price Index (06.30 pm) |
| US April New Home Sales (07.30 pm)
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