The benchmark stock indices have opened the day with moderate gains after suffering losses for four consecutive sessions.
The Centre's finance seem to be in a precarious situation with a report pointing to far greater dependence on external financing and a burgeoning deficit.
Join us as we follow the top business news through the day.
S&P 500 sees sharp drop in announced buybacks
Sensex rallies 748 points; RIL, HDFC Bank sparkle
After falling sharply yesterday, the benchmark indices made a strong recovery today.
PTI reports: "Domestic equity benchmark Sensex soared 748 points on Tuesday, led by massive buying in index majors Reliance Industries and HDFC Bank amid heavy foreign fund inflows and a positive trend in global equities.
The BSE Sensex settled 748.31 points or 2.03 per cent higher at 37,687.91, while the NSE Nifty rallied 203.65 points or 1.87 per cent to 11,095.25.
Reliance Industries was the top gainer in the Sensex pack, surging around 7 per cent.
HDFC Bank jumped nearly 4 per cent after the RBI approved the appointment of Sashidhar Jagdishan as Managing Director and CEO of the bank for a period of three years.
Maruti, Axis Bank, HDFC, ICICI Bank and Bajaj Finance also finished with gains.
On the other hand, Tech Mahindra, IndusInd Bank, HCL Tech, UltraTech Cement and Infosys were among the laggards.
According to traders, stock-specific action in index-heavyweights drove the markets higher. Further, strong foreign fund inflows and positive cues from global markets cheered investors.
Exchange data showed that foreign institutional investors purchased equities worth Rs 7,818.49 crore on a net basis on Monday.
Bourses in Shanghai, Hong Kong, Tokyo and Seoul ended with significant gains.
Stock exchanges in Europe were also trading on a positive note in early deals.
Global oil benchmark Brent crude was trading 1.61 per cent lower at USD 43.44 per barrel.
In the forex market, the rupee settled 3 paise down at 75.04 against the US dollar."
Sony's profit increases as people stay at home playing video games
Japanese electronics and entertainment company Sony Corp. said on Tuesday that its April-June profit jumped 53% as its video game and other online businesses thrived with people staying home due to the coronavirus pandemic.
Tokyo-based Sony reported a 233 billion yen ($2.2 billion) profit for the last quarter, up from 152 billion yen the year before.
Sony warned that its movies division would likely suffer for two or three years due to delays in film projects and limits to theater seating because of the pandemic.
Consumer demand for electronics products has also plunged, including sales of digital cameras, TVs and other gadgets, according to Sony.
Worst seems to be over, farm sector to cushion virus impact on economy, says FinMin report
The worst seems to be over and the agriculture sector will provide a cushion for the coronavirus -hit economy this fiscal as there are prospects of good monsoon, Finance Ministry said in a report on Tuesday.
India is well on the path of recovery from a trough in April, ably supported by proactive Government and Central Bank policies , the Macroeconomic Report for July, released by the Economic Affairs Department said.
“With India unlocking, the worst seems to be over for the economy as high-frequency indicators recovered in June 2020 from unprecedented troughs in April; however, risks on account of rising COVID-19 cases and intermittent State lockdowns remain,” it said.
Rupee settles 3 paise down at 75.04 against US dollar
The rupee has recovered a major part of its opening losses with help from the rally in stocks.
PTI reports: "The rupee pared some of its initial losses and settled 3 paise down at 75.04 (provisional) against the US dollar on Tuesday, even as domestic equity market was trading with significant gains.
The rupee opened weak at 75.13 at the interbank forex market, then pared some of its early losses to settle at 75.04 against the US dollar, down 3 paise over its previous close of 75.01 against the greenback.
During the session, the domestic unit witnessed an intra-day high of 74.85 and a low of 75.17 against the American currency.
Forex traders said, while positive equity market and foreign fund inflows supported the rupee, factors like weak Asian currencies and rising COVID-19 cases dragged down the local unit.
Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, fell 0.08 per cent to 93.46.
On the domestic equity market front, the 30-share BSE benchmark Sensex was trading 665.77 points higher at 37,605.37 and broader NSE Nifty rose 179.45 points to 11,071.05.
Foreign institutional investors were net buyers in the capital market as they purchased shares worth Rs 7,818.49 crore on Monday, according to provisional exchange data."
Diageo full-year sales plunge as demand in bars, restaurants dries up
The global lockdown's adverse impact on liquor consumption has affected the finances of the world's largest liquor manufacturer.
Reuters reports: "Diageo Plc, the world's largest spirits maker, reported a bigger-than-expected decline in underlying net sales on Tuesday as demand for its whisky, vodka and gin fell in all markets except North America.
The Johnnie Walker whisky maker reported an 8.4% drop in organic sales for the year ended June 30, larger than the 7.3% fall analysts had expected, company supplied estimates showed.
This marks the company's worst annual sales performance in more than a decade, according to Bernstein analysts.
Diageo shares were down 6.2% in early trading and was the biggest loser on the FTSE. The stock is down nearly 10% this year, better than the FTSE's 20% decline over the same period.
By region, organic sales in Asia fell the most, dropping 16% due to the impact of coronavirus-related closures of alcohol outlets and bars in India and Thailand, while in China demand was hit by the absence of the Chinese New Year.
The company's Latin America, Africa and Europe and Turkey markets also posted double-digit falls in sales, mainly due to disruptions to supply chains and fewer social occasions due to the pandemic.
North America was the only bright spot, with sales rising 2%, reflecting strong demand for tequilas and ready-to-drink beverages at supermarkets and alcohol stores, the company said.
Chief Financial Officer Kathryn Mikells said the strong results in North America, its biggest market by revenue, was because 80% of Diageo's sales came from retail stores, in contrast to other markets, where bars and restaurants make up most of the sales.
“The outbreak of COVID-19 presented significant challenges for our business, impacting the full year performance,” Chief Executive Officer Ivan Menezes said in a statement.
The company, which also makes Tanqueray Gin, Smirnoff Vodka and a wide range of scotch whiskey, said it was still unable to provide specific outlook for the year, after abandoning a full-year forecast in April. Its 4.5 billion pound ($5.9 billion) capital returns programme remains suspended."
Valuation of Asian shares rises to decade high on stimulus support
The boom in stocks despite deteriorating corporate earnings is causing valuations to rise.
Reuters reports: "The valuation of Asian shares surged to a more than 10-1/2-year high in July, Refinitiv data showed, as record-low interest rates and abundant government stimulus helped offset worries over the economic impact of the COVID-19 pandemic.
MSCI's broadest index of Asia-Pacific shares rose 4.29% last month, recording its fourth straight monthly gain. The index's 12-month forward price-to-earnings (P/E) ratio was at 16.15, the highest since December 2009, the data showed.
Meanwhile, MSCI's gauge of stocks across the globe climbed 5.14% in July, lifting its P/E ratio to 19.65, the highest since at least June 2003.
Lower interest rates, stimulus support from regional governments and retail investors' increased participation in stock markets have bolstered the valuation of regional indexes this year, analysts said.
Hopes that vaccines against the COVID-19 disease might be ready by the end of the year also supported the risk-on trade in regional markets.
China's benchmark stock index surged 10.9% in July, recording its best monthly rise since February 2019, and topped regional gains.
Simona Gambarini, markets economist at Capital Economics, said the higher P/E ratios of mainland China equities, which have been driven higher by a government-sanctioned wave of retail speculation, do not yet suggest signs of trouble.
“One reason why we wouldn't put too much emphasis on high P/E ratios in general is that earnings are distorted by the impact of the pandemic, which has been very large but will probably also prove short lived,” Gambarini said.
New Zealand, India and Malaysia shares were the most expensive in the region, with P/E ratios of 32.93, 20.36 and 18.11, respectively.
Taiwan equities hit a record high of 13,031.7 in July and gained about 9% last month, the biggest monthly rise after China."
RBI gives nod for Sashidhar Jagdishan as Puri’s successor at HDFC Bank
The Reserve Bank has confirmed the name of Sashidhar Jagdishan to succeed Aditya Puri as the chief executive and managing director of HDFC Bank, two sources said on Tuesday.
Mr. Jagdishan, currently working as the ‘change agent’ of the largest private sector lender and head of finance, has been with the bank since 1996, and the appointment will put an end to one of the most keenly watched successions in the banking industry.
Mr. Puri is widely credited with building the bank from scratch and leading it for the last 25 years to be the second largest by assets and also the most valued lender by investors. Mr. Puri retires on October 20.
The Reserve Bank of India (RBI), which was given a list of candidates in an order of priority, conveyed its approval to Mr. Jagdishan’s name late last evening, the sources said.
Manufacturing facilities working at up to 70% capacities amid pandemic: Asian Paints
India Inc continues to operate below capacity as the lockdown impact ensues.
PTI reports: "Asian Paints on Tuesday said its manufacturing facilities are working at up to 70 per cent capacities due to the impact of COVID-19 pandemic and resultant lockdowns.
The company said its business has picked up progressively in tier 2, 3, 4 cities where the demand conditions were better, while in metros and some tier 1 cities, the pace of recovery is slow.
“All the operations which were disrupted since early March 2020 have seen resumption since early May, 2020. The company has been able to open all manufacturing plants after taking requisite Government permissions, Asian Paints said in a regulatory filing.
The permissions are for running the plants across all the businesses to a limited capacity or even to a full capacity in some geographies, it said, pointing out that manufacturing facilities of the company are working at approximately 60-70 per cent levels.
Asian Paints business divisions include decorative, home improvement and industrial operations.
The business in India saw improvement in demand conditions over May and June after a complete washout in April, 2020, it said.
The company has re-opened approximately 95 per cent of sales offices with full precautions on safety, social distancing and hygiene drills and it is continuously monitoring the situation and will resume operations in remaining workplaces basis the situation and necessary government permissions.
“July has been challenging in terms of sporadic lockdowns across various states. Till now the indications seem to be positive and the company believes that it will tide through this crisis by focusing on its core strengths, understanding the changing customer requirements and fulfilling these requirements through innovative market approach,” the company said.
Asian Paints had reported a 67.32 per cent decline in consolidated net profit to Rs 219.61 crore for the first quarter ended June 30, due to complete washout of business in April.
The company had posted a net profit of Rs 672.09 crore during April-June quarter of the previous fiscal.
Its revenue from operations was down 42.74 per cent at Rs 2,922.66 crore during the quarter under review as against Rs 5,104.72 crore in the same period previous fiscal.
Shares of Asian Paints were trading 1.67 per cent higher at Rs 1,733.35 apiece on the BSE."
Moody’s upgrades Yes Bank ratings
Moody’s Investors Service has upgraded Yes Bank’s long-term foreign currency issuer rating to B3 from Caa1. It has also upgraded the bank’s long-term foreign and local currency bank deposit ratings to B3 from Caa1, and its foreign currency senior unsecured MTN program rating to (P)B3 from (P)Caa1.
Sweden escapes economic brunt of virus
Rupee declines 16 paise to 75.17 against US dollar in early trade
The positive sentiment in stocks isn't spilling over into the currency market at the moment.
PTI reports: "The rupee depreciated 16 paise to 75.17 against the US dollar in opening trade on Tuesday tracking weakness in Asian peers even as domestic equities started on a positive note.
The rupee opened weak at 75.13 at the interbank forex market, then lost further ground and touched 75.17 against the US dollar, down 16 paise over its previous close of 75.01.
Forex traders said, while firm start of the equity market and foreign fund inflows supported the rupee, factors like weak Asian currencies and rising COVID-19 cases dragged down the local unit.
“Asian currencies were weak against the US dollar this morning and weighed on the domestic unit,” Reliance Securities said in a research note.
Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, fell 0.07 per cent to 93.48.
On the domestic equity market front, the 30-share BSE benchmark Sensex was trading 356 points higher at 37,295.60 and broader NSE Nifty rose 100.30 points to 10,991.90.
Foreign institutional investors were net buyers in the capital market as they purchased shares worth Rs 7,818.49 crore on Monday, according to provisional exchange data.
Brent crude futures, the global oil benchmark, fell 0.79 per cent to USD 43.80 per barrel.
Meanwhile, the number of cases around the world linked to COVID-19 has crossed 1.82 crore and in India, the number of infections touched 18,55,745."
Manufacturing contracts for fourth straight month: July PMI
India’s manufacturing sector activity contracted at a slightly faster pace in July as demand conditions remained subdued amid prolonged closures, following which firms reduced both staff numbers as well as purchasing activity, a monthly survey showed on Monday.
The headline seasonally adjusted IHS Markit India Manufacturing Purchasing Managers’ Index (PMI) stood at 46 in July, down from 47.2 in June.
This is the fourth straight month of contraction for the Indian manufacturing sector. In April, the index had slipped into contraction mode, after remaining in growth territory for 32 consecutive months. In PMI parlance, a print above 50 means expansion, while a score below that denotes contraction.
Indian shares inch higher; U.S. manufacturing data props sentiment
Some respite for Indian stocks after four straight sessions of losses.
Reuters reports: "Indian shares opened higher on Tuesday after four sessions of losses, led by auto and financial stocks after strong U.S. manufacturing data lifted global sentiment, though gains were capped by fears over rising coronavirus cases at home.
The NSE Nifty 50 index rose 0.17% to 10,910.50 by 0400 GMT, while the S&P BSE Sensex was 0.15% higher at 36,996.35.
An industry gauge released overnight indicated U.S. manufacturing activity accelerated to its highest level in nearly 1-1/2 years in July, lifting Asian shares.
In Mumbai trading, shares of automakers Hero MotoCorp Ltd and Maruti Suzuki India Ltd were among the top gainers on the Nifty 50 index, rising as much as 1.9% and 1.1%, respectively.
The Nifty financials index rose 0.71%, with ICICI Bank Ltd and Axis Bank Ltd gaining over 1% each.
Meanwhile, coronavirus cases in the world's second-most populous country jumped to over 1.80 million by Monday morning, including 38,135 deaths, health ministry data showed. The country has the world's third highest caseload after the United States and Brazil.
IT stocks were largely unchanged after reports U.S. President Donald Trump on Monday signed an executive order preventing federal agencies from contracting or subcontracting foreign workers, mainly those on H-1B visa."
Share of external financing of fiscal deficit soars to 4.5% in Q1 this fiscal: Report
Some very worrying news on the fiscal front.
PTI reports: "The share of external financing has jumped to 4.5 per cent in Q1 FY21 from 1.6 per cent in the same quarter last fiscal, which in terms of the quantum has skyrocketed by 325 per cent Y-o-Y, says a report analysing the fiscal numbers of the government.
The government has run 83 per cent of its borrowing target as of June, according to official numbers released on July 31, due to the impact of the pandemic that crippled the economy.
The massive spike in the share of external source of funding the fiscal deficit comes even as it has been continuing financing primarily through domestic sources -- as much as 96 per cent, according to an analysis by CARE Ratings.
“The share of external financing in the current financial year has jumped from 1.6 per cent as of Q1 of FY20 to 4.5 per cent in Q1 of the current fiscal. In terms of the quantum of external financing, this is a massive 325 per cent higher year-on-year during the first quarter,” says the report without quantifying the actual numbers.
When it comes to domestic financing of the fiscal deficit too, there has been a near 50 per cent increase in Q1 year-on-year. Domestic financing is mainly met through market borrowing, which has touched as much as 83 per cent so far, which is a full 117 per cent increase over the same period last fiscal, says the report.
The higher dependence on debt is due to the lockdown which created an unprecedented financial stress for the government due to the sharp decline in income and an increase in expenditure.
However, in an encouraging sign, despite the massive revenue shortfalls there has been an increase in capex.
The fiscal deficit in Q1 stood at Rs 6.62 lakh crore, which is 53 per cent more than a year ago; and as a percentage of the budget estimates it is 83 per cent as of June 2020 as against 61 per cent a year ago.
Government’s total expenditure has risen 13 per cent in Q1 led by an increase in capex; and of this revenue expenditure accounted for 89 per cent, which is up 11 per cent Y-o-Y.
The total capex has jumped a full 40 per cent in Q1, in spite of its income falling 47 per cent."
