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Today's top business news: Fitch says Indian economy to contract 5% in FY21, stocks rally ahead of F&O expiry, oil refiners ramp up demand, and more

Updates from the world of economy, markets, and finance

27 May 2020, 04:19 by The Hindu Net Desk

The benchmark indices opened the day with marginal losses as investors remained uncertain about the impact of the coronavirus pandemic and the ensuing lockdown.

They have since rallied heavily, up almost 3%

Join us as we follow the top business news through the day.

4:30 PM

Indian oil refiners ramp up demand

4:00 PM

Sensex rallies 996 points ahead of F&O expiry; Nifty tops 9,300

A bright day for stocks today, helped by investors adjusting to the expiry of monthly derivatives.

PTI reports: "The BSE Sensex rallied 996 points on Wednesday, led by massive gains in banking and IT stocks ahead of the expiry of monthly derivatives amid firm overseas cues.

After hitting a high of 31,660.60 during the day, the 30-share index settled 995.92 points or 3.25 per cent higher at 31,605.22.

Similarly, the broader NSE Nifty surged 285.90 points or 3.17 per cent to 9,314.95.

Axis Bank was the top gainer in the Sensex pack, soaring over 13 per cent, followed by ICICI Bank, HDFC Bank, IndusInd Bank and Bajaj Finance.

On the other hand, Sun Pharma, UltraTech Cement, Titan and Asian Paints were among the laggards.

Despite concerns over COVID-19, market participants preferred to accumulate stocks ahead of the expiry of May futures and options contracts, propelling benchmark indices, experts said.

Further, positive cues from most global markets and strong foreign fund inflows also enthused domestic investors, they said. Foreign portfolio investors purchased equities worth a net Rs 4,716.13 crore on Tuesday, provisional exchange data showed."

3:30 PM

COVID-19 to accelerate digital adoption in India; Jio helped spur internet usage, says Morgan Stanley

Here's Morgan Stanley on some of the likely unintended consequences of the coronavirus pandemic.

PTI reports: "The COVID-19 pandemic will accelerate digital adoption in India as increasing number of people shop online and small businesses digitise, Morgan Stanley said crediting Reliance Jio’s 4G telecom services for spurring the digital economy by propelling internet usage in the country.

In a 53-page report on ‘India’s Digital Economy in a Post-COVID-19 World’, Morgan Stanley said 2020 will likely see increasing online penetration in grocery and will put a few Super Apps into motion.

India’s total online shopper base at 30 per cent of its internet population is low when compared with 78 per cent in China and 70-plus per cent in the US.

Morgan Stanley projected India’s 670 million internet users to rise to 914 million by 2027 and online shoppers to jump to 590 million from 190 million in 2020. The average spend per online shoppers is also projected to nearly double to USD 318.

While in the past few years digital adoption in India has been evolving with increasing 4G adoption and rising internet penetration, the overall transactional base was still small.

“The launch of Reliance Jio’s 4G telecom services in September 2016 helped spur the digital economy in India as it propelled internet usage in the country, with fast, reliable, and cheap 4G services leading to significant growth in data usage (especially on music and video content),” it said.

Morgan Stanley said COVID-19 has relieved some apprehension relating to digital transactions. “We believe COVID-19 could accelerate the shift to online transactions (such as e-commerce and payments) and provide a tailwind to growth in India’s digital economy.”

Stating that a larger increase in its online shopping base is needed to drive growth in its digital economy, it said COVID-19 has the potential to do just that."

2:45 PM

Rupee settles 5 paise lower at 75.71 against US dollar

The bullish sentiment in domestic equities hasn't helped the rupee appreciate against the US dollar.

PTI reports: "The rupee depreciated 5 paise to settle at 75.71 (provisional) against the US dollar on Wednesday, as market participants were concerned about rising tensions between the US and China amid coronavirus pandemic.

Forex traders said rupee was trading in a narrow range as positive domestic equities, rising optimism about a potential coronavirus vaccine and a revival of business activities were offset by a flare-up in US-China tensions.

Moreover, strengthening of the American currency overseas also weighed on the domestic unit.

At the interbank forex market, the rupee opened strong at 75.72 and gained marginal ground to finally closed at 75.71, down 5 paise over its last close.

It had settled at 75.66 against the US dollar on Tuesday.

During the session, the local unit witnessed an intra-day high of 75.57 and a low of 75.74.

Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, rose by 0.17 per cent to 99.08."

2:00 PM

Bata sees demand revival by September

Bata India on Tuesday said while it anticipated only need-based shopping in the short-term, revival in demand is expected around the festive season beginning September this year.

The shoemaker posted a close to 57% drop in net profit for the January-March 2020 quarter. Amid COVID-19-related uncertainties, the company has put on hold plans to open any new stores in the next three-six months; however, it has curated a new product line up ‘to stay relevant’, including washable footwear and antiviral masks. “I do expect us to go through a short phase where people will stick to essentials for example children outgrowing shoe size or replacement because of usage, sports shoes for training at home... the festivities as they come in September onwards, will be a big kick for us as a full industry,” Sandeep Kataria, CEO, Bata India, said.

Mr. Kataria added that over the last three weeks, the company had seen an uptick in demand with tier 3, tier 4 and tier 5 towns and in residential areas recovering faster. Bata India is also focussing on e-commerce to reach out to customers.

Future Retail to raise up to Rs 650 crore to reduce debt

The popular debt-ridden retailer is looking to raise funds to reduce debt on its balance sheet.

PTI reports: "Future Retail on Wednesday said its board has approved raising up to Rs 650 crore by issuing non-convertible debentures (NCDs) to pare debt.

The NCDs will be issued on private placement basis in one or more tranches, Future Retail said in a BSE filing.

The Board has also authorised the Committee of Directors to decide on matters and transactions relating to aforesaid proposed issuance and allotment of NCDs including but not limited to finalisation and approval of terms and conditions of issue, number of NCDs and timing of the issue from time to time, the filing said.

The funds will be used mainly for replacing the company’s existing high cost current or near term maturity debts requirements.

The move comes after Future Retail’s promoter Kishore Biyani defaulted on loans in March and its share price took a plunge.

Several rating agencies as Standard & Poor’s and Fitch have downgraded the credit ratings of Future Retail after the default.

Future Retail operates over 1,500 stores that cover over 16 million square feet of retail space in 400 cities. It has large format stores, Big Bazaar, its flagship chain besides small store neighbourhood retail chains, EasyDay Club and Heritage Fresh."

12:30 PM

Mukesh inducts son Anant in Jio Platforms board

Reliance Industries (RIL) chairman Mukesh Ambani has inducted his youngest son Anant Ambani as an additional director on the board of Jio Platforms Limited (JPL), a six-month-old digital firm, valued at over ₹5 lakh crore, with backing from marquee names such as Facebook, General Atlantic, Silver Lake, Vista and KKR, among others, as investors.

“Anant Ambani had been inducted on Jio Platforms board just before the lockdown began in March and the company got equity infusion of over ₹78,000 crore from global investors,” a source in the know of the development told The Hindu.

Mr. Anant, who had stayed away from family business so far, has joined Jio Platforms, which already has his elder brother Akash Ambani and sister Isha Ambani as board members.

Gold hits 2-week low on optimism around reopening of economies

The precious metal is losing demand as lockdown restrictions are eased all over the world.

Reuters reports: "Gold prices touched a two-week low on Wednesday due to optimism around reopening of several economies, but increasing Sino-U.S. frictions over Beijing's proposed security law for Hong Kong tempered losses.

Spot gold dipped 0.3% to $1,705.94 per ounce by 0502 GMT, after hitting its lowest level since May 13 of $1,703.40 earlier in the session. U.S. gold futures were down 0.6% to $1,695.80. On Tuesday, gold had dropped as much as 1.3%, to touch $1,707.10, a near two-week low.

“What we saw over the preceding 24 hours was a break of relatively meaningful support at about $1,715,” said DailyFx currency strategist Ilya Spivak.

“The positive story seems to be easing of restrictions and (that) there will be some sort of rebound in economic activity... but, there is (also) a lot of negativity. Tension between the U.S. and China is a huge risk.”

U.S. President Donald Trump said on Tuesday that Washington was working on a strong response to China's planned national security law for Hong Kong, adding it would be announced before the end of the week. Asian shares slipped on concerns about the rising Sino-U.S. tensions.

Despite the pullback in bullion prices, the outlook remains positive for gold, which is seen as a safe-haven asset during political and economic uncertainties, analysts said."

11:30 AM

Ola Electric acquires Netherland-based scooter-maker Etergo

Ola Electric Mobility on Wednesday said it has acquired Amsterdam-based electric scooter-maker Etergo, while also announcing its foray into the premium electric two-wheeler market.

The company in a statement said it would leverage Etergo’s design and engineering capabilities to build its smart electric two-wheeler for international and Indian markets. While the company did not share the financial details of the deal, according to industry estimates, Etergo was valued at about $80-85 million last year.

Bhavish Aggarwal, Founder & Chairman, Ola Electric, said, “The future of mobility is electric, and the post-COVID-19 the world presents an opportunity for us to accelerate the adoption of electric mobility globally.” He added that every year, almost twice the number of two-wheelers were sold across the world compared to cars. With electric, digitally connected capabilities, two-wheelers would further emerge as the most preferred urban mobility paradigm around the world and empower every consumer.

11:00 AM

Rupee slips 8 paise to 75.74 against US dollar in early trade

The flat sentiment in domestic equities didn't help as US-China tensions weighed on the value of the rupee.

PTI reports: "The rupee depreciated 8 paise to 75.74 against the US dollar in opening trade on Wednesday as market participants were concerned about rising tensions between Washington and Beijing in the wake of the coronavirus pandemic.

Forex traders said rupee was trading in a narrow range as rising optimism about a potential coronavirus vaccine and a revival in business activity was offset by the escalation of US-China tension.

Moreover, strengthening of the American currency overseas and muted opening of domestic equities also weighed on the local unit.

The rupee opened weak at 75.72 at the interbank forex market and then fell further to 75.74, down 8 paise over its last close.

It had settled at 75.66 against the US dollar on Tuesday.

“Asian currencies were weak this Wednesday morning amid escalation of tension between the US and China. Offshore yuan was weak by 0.3 per cent and Korean won also weak by 0.3 per cent,” Reliance Securities said in a research note."

10:40 AM

Reliance Industries’ rights entitlement commands 7% premium on Day 4

The de-materialised trading of Reliance Industries Ltd. - Rights Entitlement (RIL-RE) continued to draw strong demand on day four on Tuesday with an average premium of more than 7% over the intrinsic value.

While the oil-to-telecom behemoth RIL’s ₹53,125 crore mega rights issue opened for subscription by shareholders last week, it became the first issue where eligible shareholders got the rights entitlements (REs) in demat, which could be traded on the stock exchanges.

RIL-REs, on an average, commanded a premium of ₹12.07 on Tuesday, over 7% premium over the intrinsic value, according to stock exchange data.

Indian economy to contract 5% in FY21, says Fitch Ratings

Fitch goes into details of what's likely to impede India's growth in the coming quarters.

PTI reports: "Fitch Ratings on Tuesday forecast the Indian economy to contract 5 per cent in the current fiscal on account of slump in economic activities following a “very severe” lockdown that has lasted much longer than expected.

In its Global Economic Outlook (GEO) for May, Fitch projected growth to rebound to 9.5 per cent in 2021-22 and an estimated 3.9 per cent growth in 2019-20.

The forecast of 5 per cent contraction is sharp decline from 0.8 per cent growth projected by the global rating agency in late April.

“The biggest contribution to the downward revision in global GDP for 2020 comes from EM (emerging markets) excluding China, where we now see GDP falling by 5 per cent in India and Russia and by 6-7 per cent in Brazil and Mexico,” Fitch said.

This reflects the surge in coronavirus infections from mid-April and measures taken to contain the outbreak, it added.

“The biggest revision by far has been for India, where the virus outbreak has prompted a very severe lockdown that has lasted much longer than expected,” the rating agency said.

It predicted two consecutive quarters of contraction or negative year-on-year growth in current fiscal -- (-)2.7 per cent in April-June and (-)12.4 per cent in July-September. This compares to 1.2 per cent estimated growth in January-March."

10:00 AM

Sensex surrenders opening gains, drops over 60 points; Nifty near 9,000 level

Stocks have made a choppy start to the day.

PTI reports: "Equity benchmark Sensex turned volatile after jumping over 200 points in early trade on Wednesday tracking mixed cues from global markets and uncertainty over the impact of easing lockdown restrictions.

After touching a high of 30,825.18 in opening session, the 30-share index gave up all of its gains to trade 63.21 points or 0.21 per cent lower at 30,546.09.

Similarly, NSE Nifty fell 13.70 points or 0.15 per cent to 9,015.35

M&M was the top laggard in the Sensex pack, falling around 2 per cent, followed by UltraTech Cement, Titan, Asian Paints and Bajaj Finance.

On the other hand, Kotak Bank, ICICI Bank, L&T, Axis Bank, Hero MotoCorp and HDFC Bank were among the gainers.

In the previous session, the BSE barometer declined 63.29 points or 0.21 per cent to end at 30,609.30, while the broader Nifty closed 10.20 points or 0.11 per cent down at 9,029.05.

Foreign portfolio investors purchased equities worth Rs 4,716.13 crore in the capital market on Tuesday, provisional exchange data showed.

According to experts, market participants were unsure about the extent of pain in the Indian economy as COVID-19 cases continued to rise as the end day of the lockdown neared.

In the next few days, market is likely to trade range-bound with a zig-zag fashion as traders will prefer not to carry forward their open positions on uncertainty in the global markets, they said."