Good Morning!
A vibrant bond market can offer the panacea for the deeper issues that have bogged down India's financial sector. Economy watchers say the government needs to take the lead in creating a corporate bond market. That would require adequate credit, interest and currency derivatives of the requisite kinds to hedge against risks. Once they are in place, the government can issue fresh equity in existing and new state-owned vehicles to help them raise funds by issuing bonds that RBI can purchase. That will help such vehicles invest in corporate and NBFC bonds to finance infrastructure. Once such a large supply of bonds start trading, investors, including foreign ones, would join in and the cycle will kick off.
MARKET CUES: Where do we stand
- Nifty futures on the Singapore Exchange traded some 40 points higher at 7 am (IST) in signs that Dalal Street is likely to build on Wednesday’s rally
- In Wednesday's session, Nifty took support at its 50-day moving average, whose value stood at 9,006 at close. The NSE barometer also closed above its 20-day moving average, which analysts said is a positive signal.
- Nifty moved above its major hurdle in the 9,150-9,180 zone on Wednesday and formed a bullish candle on the daily chart. The index broke out of the falling trend line on the daily chart, which is a positive sign. Going forward, Nifty’s resistance is placed in the 9,500 – 9,600 zone.
- Elsewhere in Asia, stocks mostly climbed as investors weighed continued signs of economies reopening against the increase in Sino-American tensions over Hong Kong. Australian equities saw the bulk of gains, with Japanese shares also climbing. South Korean stocks hit session highs after the country’s central bank cut rates to a record low. Hong Kong opened modestly lower after the Trump administration said it could no longer certify its political autonomy from China.
- Major US stock benchmarks roared higher Wednesday, despite the battered state of the US economy and rising tensions between Beijing and Washington as investors focused on efforts to reopen more states for business. Dow advanced 553 points, or 2.2%, to cross past the 25,000 mark to 25,548, while the S&P500 rose 44.36 points, or 1.5%, and the Nasdaq 72.14 points, or 0.8%
- Oil prices fell in early trade on Thursday after U.S. crude, gasoline and heating oil inventories all rose more than expected, dousing hopes of a smooth recovery in demand from coronavirus lockdowns. WTI crude futures fell 3%, or 97 cents, to $31.84 a barrel while Brent crude slipped 2.3%, or 78 cents, to $33.96.
- The rupee depreciated 5 paise to settle at 75.71 against the US dollar on Wednesday, as market participants were concerned about rising tensions between the US and China amid coronavirus pandemic.
- The dollar held its own on Thursday as rising Sino-U.S. tension put crushing pressure on the Chinese yuan. The Chinese unit, a barometer of US-China relations, hit a record low of 7.1966 per dollar in offshore trade. The Aussie and kiwi backed off two-month highs. The euro rose to an eight-week peak.
LOOK WHO'S
- Firms that gave pay hikes amid crisis… In the midst of a storm of job losses, pay cuts and deferred increments, a bunch of companies have held firm. HUL, Asian Paints, Johnson & Johnson, HCCB, Flipkart, Myntra, CSS Corp, BharatPe, BSH Home Appliances and Inflexion Point Ventures are among those that have chosen to hike salaries, make variable payouts and promote employees even in these tough times. Compensation experts said the concerns they showed during the crisis will have a lasting impact on employee goodwill.
- Banks, MFs rejig Rs 75K cr debt… Banks and mutual funds have rejigged close to Rs 70,000 crore of securitised instruments in the last one month as millions of individuals who borrowed to buy homes, cars, and two-wheelers did not service the loans. Cash flows from these securities have been adjusted in a manner so that the changes would neither qualify as default in the books of these institutional investors, nor adversely affect the net asset values.
- Japan doubles stimulus… Prime Minister Shinzo Abe doubled Japan’s stimulus measures as he looked to deliver on his bold promise to keep businesses and households afloat with the world’s biggest virus-response package. On Wednesday, his cabinet approved a 117 trillion yen ($1.1 trillion) worth of measures that included financing help for struggling companies, subsidies to help firms pay rent and several trillion yen in healthcare assistance and support for local economies.
- Govt to speed up 4G sales… The government is speeding up plans to auction 4G spectrum worth more than Rs 4 lakh crore. An inter-ministerial note being drafted is likely to be presented to the Cabinet as early as next month, the person said. Bharti Airtel and Reliance Jio Infocomm, India’s top two telcos, have been pushing for an early 4G spectrum sale given the surge in demand for data and voice services, and to buy back airwaves in circles where their permits are expiring next year.
| AND WHO'S |  |
- Suzuki boss expects big hit on Maruti… Suzuki Motor chairman Osamu Suzuki expects the impact of the Covid-19 pandemic in India to be more drawn out than initially expected, said Citi, citing a post-earnings conference call he held with investors on Tuesday in Japan. The Indian subsidiary has orders for 100,000 vehicles, Suzuki said. Supply chain challenges have been addressed and domestic production is expected to be in the range of 60,000 units for June. That implies MSIL will be working at 30% capacity utilisation based on the current installed capacity of about 180,000 units a month. Maruti Suzuki India accounts for over half of SMC’s global sales by volume.
- Templeton to hold e-voting to wind up six schemes… Franklin Templeton is set to begin an electronic voting process for winding up six debt mutual fund schemes, seeking to bring down the curtains on a move considered unprecedented in a country where retail savers’ preference for financial assets is of much recent vintage. Unit holders in these schemes will have a three-day window to participate in the e-voting process, and they will also get an opportunity to participate in a meeting of investors via video conferencing.
- IT firms seek free hand for layoffs… The Indian IT industry has asked states to extend labour law relaxations to the services industry, arguing that it would help the $191 billion sector, chiefly reliant on global customers, to cope with the 'severe economic downturn' caused by the Covid-19 virus outbreak. Industry lobby Nasscom has sought furloughs and temporary layoff of surplus employees, relaxing daily and weekly work-hour limits, allowing women to work at night from home and a self-declaration regime to comply with government rules.
Meanwhile...
Reliance Gen Life up for sale... Lenders of Reliance General Insurance are in talks with global funds and strategic investors to sell 100% in the insurance company owned by the debt-ridden Anil Ambani group. Investment bank JM Financial has been appointed to look for buyers for the company, valued at about ?4,000 crore, said four people with direct knowledge of the matter.
The DAY PLANNER
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