The benchmark stock indices are up strongly this morning as the government continues to ease lockdown restrictions.
Unemployment rate in May hit a high as lockdown restrictions forced businesses to cut their workforce.
Join us as we follow the top business news through the day.
US companies expected to default at record rate
Sensex soars 879 points as India begins to unlock; Nifty tops 9,800
The benchmark stock indices surprised everyone with their bull run today.
PTI reports: "Equity benchmark Sensex surged 879 points on Monday, driven by gains in Reliance Industries, HDFC twins and TCS as investor optimism heightened after the government began the process of unlocking the economy.
Positive cues from global markets too buoyed investor sentiment here.
After skyrocketing 1,250 points during the day, the 30-share index settled 879.42 points or 2.57 per cent higher at 33,303.52.
Similarly, NSE Nifty surged 245.85 points or 2.57 per cent to finish at 9,826.15.
Bajaj Finance was the top gainer in the Sensex pack, rising around 11 per cent, followed by Titan, Tata Steel, SBI, M&M, HDFC, IndusInd Bank and Reliance Industries.
On the other hand, Sun Pharma, Nestle India and UltraTech Cement were among the laggards.
According to Narendra Solanki, Head- Equity Research (Fundamental), Anand Rathi, Indian markets started the week on a positive note following upbeat Asian market peers and the sentimental positive news of ‘Unlock-1’ and hopes of economy gradually opening up took hold.
“The market further rallied in the afternoon session with much broad-based buying seen in both large and mid cap stocks tracked by respective indices,” he added."
Govt. rejects Flipkart’s proposal for entering food retail sector
The Department for Promotion of Industry and Internal Trade (DPIIT) has rejected Walmart-backed Flipkart ’s proposal seeking approval for entry to the food retail sector citing a regulatory issue, an official said on Monday.
The government permits 100% foreign direct investment in food retail for food produced and manufactured in India.
Last year, the company had set up a new local entity — Flipkart Farmermart — to focus on food retail in India, and had applied for requisite licences from the government.
Flipkart Group CEO Kalyan Krishnamurthy, at that time had said that the move an important part of the company’s efforts to boost Indian agriculture as well as food processing industry in the country.
Rupee settles 8 paise higher at 75.54 against US dollar
The rupee, which began a strong rally this morning, managed only to trim gains through the rest of the day.
PTI reports: "The rupee appreciated 8 paise to provisionally close at 75.54 against the US dollar on Monday supported by optimism over the government’s reopening plan for the domestic economy.
Forex traders said foreign fund inflows, weak American currency and positive domestic equities also boosted investor confidence.
The rupee opened at 75.32 at the interbank forex market, pared some gains, and finally settled at 75.54 against the US dollar, up 8 paise over its last close.
It had settled at 75.62 against the US dollar on Friday.
During the day, the local unit witnessed an intra-day high of 75.29 and a low of 75.60.
The government on Saturday said a phased exit would begin on June 1 from the over-two-months-long nationwide lockdown.
On the equities front, the 30-share BSE benchmark Sensex was quoting 957.09 points higher at 33,381.19 and broader Nifty rose 244.75 points to 9,825.05.
Foreign institutional investors were net buyers in the capital market, as they bought equity shares worth Rs 1,460.71 crore on Friday, according to provisional exchange data."
India’s fuel demand recovery gathers pace in May; sales almost double compared to April
The easing of lockdown restrictions is having a positive effect on fuel demand.
PTI reports: "India’s fuel demand recovery gathered momentum in May as easing of lockdown restrictions helped nearly double the sales when compared with the previous month, according to preliminary data available from state-owned fuel retailers.
The demand is set to rise further as more curbs on transport and industrial activities have been lifted in the fifth phase of the nationwide lockdown imposed to curb the spread of coronavirus. Lockdown 5.0 begins from June 1.
Petrol sales in May declined by 36.5 per cent to 1.59 million tonne as compared to the year-ago period, but were up from 9,73,000 tonne sold in April. In April, petrol sales declined 61 per cent.
Diesel sales fell by 31 per cent to 4.81 million tonne in May from a year earlier. In April, they had fallen by 56.5 per cent at 3.25 million tonne.
With most airlines grounded, jet fuel (ATF) sales fell 85 per cent to 9,600 tonne in May.
The only fuel that showed growth was LPG as the government dole of free cooking gas cylinders to poor households fired up consumption by 13 per cent to 2.3 million tonne from the year-ago period, the data showed."
Gulf currency pegs to remain despite oil price slump, says S&P
As concerns rise over the ability of oil-producing countries to defend their currencies, S&P sees no reason to worry.
Reuters reports: "The six nations of the Gulf Cooperation Council will maintain their pegged currencies despite a fall in oil prices, S&P Global Ratings said on Monday.
The ability of Gulf countries to defend their currencies' pegs, to the dollar in most cases, has come under scrutiny as historically low oil prices and the fallout from the coronavirus pandemic have pressured their economies.
Kuwait, Qatar, the United Arab Emirates and Saudi Arabia have strong levels of reserves to weather shocks, while Bahrain and Oman have a lower level of external liquid assets, S&P said.
But the ratings agency believes Bahrain and Oman's wealthier neighbours would provide financial support in times of stress if needed, similar to a $10 billion aid package pledged to Bahrain by Kuwait, Saudi Arabia and the UAE in 2018.
“We believe that should the currencies of lower-rated Bahrain and Oman come under significant pressure, higher-rated sovereigns would provide financial support to prevent contagion to their own financial markets,” S&P said.
Wealthier Gulf countries may also step in to advance foreign policy interests, it added.
S&P said that while a floating exchange rate can act as a shock absorber for small open economies by helping exports and domestic demand and output, the benefits in many cases for the GCC are limited because their non-hydrocarbon export base is small.
“We note, however, that a currency devaluation would increase the local currency value of U.S. dollar-priced oil- and gas-related revenues. This would improve government fiscal balances as long as governments are able to contain their spending, which may not be so easy given the inflationary aspects of such a devaluation,” it said."
Lockdown extension to have deep impact on Indian economy, says report
One more research note that cautions the government about the economic cost of further extending the lockdown.
PTI reports: "The extension of the lockdown by the government will have a deep impact on the economic activity, a foreign brokerage said, sharply cutting India’s GDP forecast for this financial year to a contraction of 2 per cent.
The estimate has been arrived at with the assumption that the lockdown will extend till mid-July and a restart of the economy will get stretched to August, analysts at Bank of America Securities said.
It can be noted that the RBI also expects the economy to contract in FY21 (2020-2021), but has not given a level to it. Some analysts have pegged the contraction as high as 5 per cent.
The central government has been reopening parts of the economy, while continuing with the lockdown in COVID-19-affected parts of the economy, which contribute over 60 per cent of the GDP.
“The government has extended the nationwide lockdown to June 30 with further relaxations (as Unlock 1.0). We estimate that a month’s slowdown will cost 1-2 percentage points of GDP and the six week restart to shave off 0.60 per cent,” its analysts wrote.
It now expects the GDP to contract by 2 per cent, 0.70 per cent wider than the previous estimate.
The brokerage was quick to add that if the lack of a vaccine forces the government to continue with the semi-lockdown phase, the economy will contract by as much as 5 per cent."
Online gaming companies see 24% spurt in traffic
Online gaming companies have seen a 24% spurt in traffic, as working professionals and students turned to online games for entertainment and social connect amid the nationwide lockdown due to COVID-19, according to a recent report by Maple Capital Advisors.
The report ‘Gaming – India Story’ forecasts a compounded annual growth rate of 32% for the gaming industry in India to $3.7 billion by 2024 due to the growth of digital infrastructure and substantial rise in quality and engaging gaming content. Currently, the sector is valued at $930 million, up from $360 million in 2015.
“In India, with over 570 million people on the Internet, of whom over 85% are on mobile, gaming and streaming has been a popular form of engagement. In these lockdown times, we see this consumption has grown at least 20-30% despite significant impact on live sports, a big driver of fantasy sports gaming,” Pankaj Karna, founder and MD, Maple Capital Advisors, said.
Why Fed easing fails to boost US consumer prices
Hotel stocks rally up to 19% as govt lifts curbs on operations from June 8
Hotel stocks have rallied today on the back of the overall bullish trend in the market and the gradual easing of lockdown restrictions.
PTI reports: "Hotel stocks on Monday zoomed up to 19 per cent after the government said opening of hotels, restaurants and other hospitality services and shopping malls will start from June 8.
Chalet Hotels jumped 19.16 per cent, EIH Associated Hotels 13.96 per cent, Indian Hotels Company Limited 11.38 per cent, EIH 9.93 per cent and Taj GVK Hotels & Resorts soared 8.38 per cent on the BSE.
Lemon Tree Hotels also jumped 4.74 per cent to Rs 18.80 -- its upper circuit limit.
The home ministry on Saturday said ‘Unlock-1’ will be initiated in the country from June 8 under which the nationwide lockdown effectuated on March 25 will be relaxed to a great extent, including opening of shopping malls, restaurants and religious places, even as strict restrictions will remain in place till June 30 in the country’s worst-hit areas.
Unveiling the phased reopening, which the home ministry termed as ‘Unlock-1’, the guidelines said opening of hotels, restaurants and other hospitality services and shopping malls will start from June 8."
Maruti records 86% slump in May sales at 18,539 units
The country’s largest carmaker Maruti Suzuki India (MSI) on Monday reported a 86.23% decline in total sales at 18,539 units in May.
The company had sold 1,34,641 units in May last year, MSI said in a statement.
Domestic sales declined by 88.93% to 13,888 units last month, as against 1,25,552 units in May 2019, it added.
The company exported 4,651 units last month, down 48.82% from 9,089 units in May 2019, MSI said.
Stocks up over 3% in morning session
Ashish Rukhaiyar reports from Mumbai:
Indian equity benchmarks gained more than 3% during the first half of the trading session on Monday as investor sentiments received a boost as government eased lockdown restrictions with a positive trend in Asian markets acting as a catalyst.
At 12 noon, the Sensex was up 1,044 points or 3.22% to trade at 33,468. The gains were primarily led by financials such as Bajaj Finance, State Bank of India, Axis Bank, and HDFC which featured among the top gainers.
The overall market breadth was quite strong with over 1,700 stocks gaining ground as against only around 425 that declined. The broader Nifty was up 303 points or 3.17% at 9,884.
The India VIX index, however, was also up a little over 2% during the afternoon session. Market participants attributed the gains to the phased lifting of lockdown restrictions that is expected to revive economic activity.
Meanwhile, Asian markets were also trading strong with Hang Seng up over 3% while the benchmarks of Japan, South Korea, Taiwan, Indonesia and China all gaining ground.
Indian manufacturing output falls further in May, rate of job cuts accelerates: PMI
Things have only gotten worse in the country's manufacturing sector in May despite the gradual easing of lockdown restrictions.
PTI reports: "The country’s manufacturing sector activity recorded another sharp deterioration in business conditions during May as new orders placed with producers continued to fall after April’s record contraction, leading firms to cut jobs at the quickest pace on record, a monthly survey said on Monday.
The headline seasonally adjusted IHS Markit India Manufacturing Purchasing Managers’ Index (PMI) stood at 30.8 in May, up from 27.4 in April, pointing to another substantial decline in the health of the country’s manufacturing sector, albeit one that was slightly softer than recorded in April.
In April, the index had slipped into contraction mode, after remaining in the growth territory for 32 consecutive months. In PMI parlance, a print above 50 means expansion, while a score below that denotes contraction.
“The latest PMI data suggested that Indian manufacturing output fell further in May. This result is particularly poignant given the record contraction in April which was driven by widespread business closures,” said Eliot Kerr Economist at IHS Markit.
As per the survey, weaker demand drove output lower following April’s record decline. Consequently, firms cut staff numbers at the quickest pace since data collection began over 15 years ago.
“The further reduction in May highlights the challenges that businesses might face in the recovery from this crisis, with demand remaining subdued while the longevity of the pandemic remains uncertain,” Kerr noted."
Businesses are running out of cash to pay expenses
Rupee jumps 32 paise to 75.30 against US dollar in early trade
The bullish sentiment in domestic equities has helped the rupee appreciate against the US dollar.
PTI reports: "The rupee appreciated 32 paise to 75.30 against the US dollar in opening trade on Monday supported by the government’s reopening plan for the domestic economy.
Forex traders said foreign fund inflows, weak American currency and positive opening of domestic equities also boosted investor confidence.
The rupee opened at 75.32 at the interbank forex market and then gained further ground to touch 75.30, up 32 paise over its last close.
It had settled at 75.62 against the US dollar on Friday.
The government on Saturday said a phased exit would begin on June 1 from the over-two-months-long nationwide lockdown.
Announcing the new guidelines, the home ministry said a complete lockdown would continue till June 30 in areas identified as COVID-19 containment zones across the country, but restrictions would be lifted in a phased manner at other places after the ongoing fourth phase.
Reliance Securities in a report said Asian currencies have more or less started with gains against the US gollar supported by less severe response from US President Donald Trump."
India's May jobless rate at 23.48%
An estimate of the unemployment rate among Indians last month.
Reuters reports: "India's unemployment rate in May rose to 23.48%, marginally lower from 23.52% in April, according to data released by the Centre for Monitoring Indian Economy (CMIE) on Monday, reflecting the impact of coronavirus pandemic.
India has reported 190,535 coronavirus cases, with 5,394 deaths.
India's infrastructure output, contributing nearly 40% in industrial production, contracted 38.1% in April from a year earlier, the worst performance in years, government data showed on Friday.
Why the humble FD is the best choice now
Over the course of the past one month, I received many more queries on debt investments than usual. If you think this happened solely because of the Franklin India debt fund fallout, that isn’t the case.
There were questions on buying gilts, gilt funds, going for Bharat Bond ETFs, buying bank AT1 bonds and why not fixed deposits in Yes Bank! The chief reason for all these questions is actually the low interest rate scenario prevailing in bank deposits and post office small savings scheme.
The search for higher rates has begun! But in the process, it is important not to choose options that are ill-suited to your risk profile.
Indian shares surge over 2% as lockdowns ease further
The Nifty and the Sensex have made a strong start to the week as investors are enthused by the easing of lockdown measures.
Reuters reports: "Financial stocks led Indian shares higher on Monday, as the country geared up to further open its economy after a months-long lockdown to curb the spread of the novel coronavirus.
The NSE Nifty 50 index was up 2.46% at 9,817.45 by 0350 GMT, helped by a broadly stronger mood to Asian markets, while the S&P BSE Sensex gained 2.44% to 33,206.18.
The Nifty 50 rose nearly 6% over the previous week led by a rally in beaten-down banking stocks.
The Nifty bank index rose 3.9%, while the financial index gained 3.6%.
India permitted restaurants, malls and religious buildings to reopen from June 8 but extended lockdowns in high-risk zones until June 30 as a record high number of cases were detected nationwide on Saturday.
The reopen plan comes as data on Friday showed the domestic economy grew at 3.1% in the January-March quarter, its slowest pace in at least eight years.
Meanwhile, MSCI's broadest index of Asia-Pacific shares outside Japan rose 2% as progress on opening up economies helped offset jitters over riots in U.S. cities."
