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Weak rupee, credit crisis worries drag equity market down 3% over week

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SENSEX NIFTY MARKET

Mumbai, Sep 22 : Persistent depreciation in the Indian rupee and high crude oil prices coupled with concerns over credit crisis dragged the key equity indices three per cent lower on a weekly basis during September 17-21.

The week started on a negative note, both in the domestic and global markets, primarily owing to the US announcement of fresh tariffs on Chinese imports.

This was the third consecutive week that saw fall in the Indian equity market.

The stock exchanges were, however, closed on September 20 on account of Muharram.

A major slump hit the market on Friday afternoon, with the S&P BSE Sensex losing over 1,100 points, only to partially recover from the lows minutes later. Analysts described it as a panic sell-off across the board, specifically in the banking and finance space, as there were concerns over credit risk.

“Firesale of financial units by IL&FS for repaying its CPs (commercial papers) added fuel to fire,” said Mustafa Nadeem, CEO, Epic Research.

Infrastructure Leasing and Financial Services (IL&FS), which defaulted on its commercial paper obligation earlier this year, missed payments again on Friday. This increased concerns of a credit crisis among the investors.

On a weekly basis, the Sensex closed at 36,841.60 points, lower 1,249.04 points or 3.28 per cent from its previous close.

Similarly, the wider Nifty50 of the National Stock Exchange on Friday closed at 11,143.10 points, down 372.1 points or 3.23 per cent from the previous week’s close.

“Indian markets remained in bear grip right from the beginning of the week, largely weighed down by a weakening rupee, escalation in trade war and rise in crude oil prices,” said Prateek Jain, Director of Hem Securities.

He added that investor’s sentiments were further weakened by the announcement of merger of three public sector banks — Bank of Baroda, Vijaya Bank and Dena Bank.

“On Friday, towards the fag-end of the week, traders and investors witnessed a highly catastrophic market driven by a sharpfall in the NBFC sector,” Jain said.

In terms of investments, provisional figures from the stock exchanges showed that foreign institutional investors sold scrips worth Rs 2,674.12 crore, while the domestic institutional investors bought Rs 1,782.63-crore stocks in the truncated week.

According to National Securities Depository (NSDL) figures, foreign portfolio investors (FPIs) divested Rs 2,231.37 crore, or $306.04 million, in the equities segment during the week ended September 21.

On the currency front, the Indian rupee closed at 72.20 a US dollar on Friday recovering 35 paise from the previous week’s close of 71.85.

On Tuesday, it touched an all-time low of 72.91 per greenback.

The top sectoral gainer was oil and gas, while the major losers were realty, infrastructure and finance counters, said Deepak Jasani, Head of Retail Research at HDFC Securities.

The top weekly Sensex gainers were ONGC (up 6.88 per cent at Rs 180.10); Power Grid (up 3.62 per cent at Rs 200.20); Tata Steel (up 3.15 per cent at Rs 624.55); Tata Consultancy Services (up 2.94 per cent at Rs 2,103.80); and Vedanta (up 2.66 per cent at Rs 229.70 per share).

The major losers were Yes Bank (down 27.79 per cent at Rs 227.05); Tata Motors (DVR) (down 7.44 per cent at Rs 131.85); Axis Bank (down 5.69 per cent at Rs 599.40); Maruti Suzuki (down 5.44 per cent at Rs 8,039.55); and State Bank of India (down 5.39 per cent at Rs 270.05 per share).

(Ravi Dutta Mishra can be contacted at [email protected])

Business

Comprehensive plan prepared for BSNL’s revival: Government

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BSNL

New Delhi, Feb 17 (IANS) The government is making all efforts to make state-run BSNL robust and financially viable again and has prepared a comprehensive plan for its revival, an official said on Sunday, on the eve of a nationwide strike called by the employees unions over their demands.

BSNL employees and officers have given a three-day country-wide strike call from February 18 to highlight their long-pending issues, including allotment of 4G spectrum to the telecom major and wage revision for the workforce.

“All efforts are being made, and will continue to be made, to make BSNL robust and financially viable,” a Communications Ministry statement said.

“The main demands of the All India Unions and Associations of Bharat Sanchar Nigam (AUAB) include benefits to executives under the 3rd Pay Revision Committee (PRC) with 15 per cent fitment and to non-executives as per the 8th wage negotiations w.e.f. 1.1.2017, allotment of 4G spectrum to BSNL, revision of pension for BSNL retirees w.e.f. 1.1.2017 and delinking of same with pay revision for PRC implementation, and deduction of payment of pension contribution by BSNL on actual basic pay instead of on the highest level of the pay scale.

“Government wishes to re-emphasize that it will continue to engage with the BSNL management and representatives of the unions and associations, to support their reasonable demands, and to guide the organization towards a revival,” it said.

Noting that the Department of Telecommunications (DOT) is taking “positive steps” regarding each of these demands, the ministry said the issue of alloting 4G spectrum to BSNL is being referred to telecom regulator TRAI “to recommend on the issue of administrative allocation, quantum, price and appropriate frequency band”.

“Further action will be taken on receipt of the said recommendation. In parallel, a comprehensive proposal for revival of BSNL has been prepared, which will be taken up for consideration by competent authorities very soon.”

It also noted that a Coordination Committee comprising senior officers of the DoT, BSNL management, and representatives of AUAB is already working in this regard.

“Representatives of AUAB have also held meetings with the DOT Additional Secretary in which they have been duly apprised of the progress being made in relation to their demands,” the statement said.

It pointed out that the BSNL management has appealed to its employees not to resort to any agitation at this critical juncture when the organization is engaged in “sincere and serious efforts” to protect and enhance the company’s market share, “and when any disruption in services can only adversely impact the interests of BSNL and its customers, employees and other stakeholders.”

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Rupee weakened against $ in choppy weekly trade

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India Rupee

Mumbai, Feb 17 (IANS) In a choppy week’s trade, the Indian currency weakened against the US dollar to close above the 71 a dollar mark on Friday, owing to a sharp rise in crude oil prices, turmoil in the equity markets and uncertainty around the US-China trade relations.

In what could translate into further trouble for the domestic currency, analysts see an upward move of 6 to 7 per cent in the Brent crude prices in the coming week.

The rupee lost heavily towards the end of the week – over 70 paise in the last three trading session – as traders reacted to the sanction on Venezuela and production cut by OPEC and Saudi Arabia.

Sajal Gupta, Head Fx & Rates Edelweiss, said “technically … crude now looks set for another 6-7 per cent rise” which would mean that the rupee was likely to depreciate further in the coming sessions. “And if Rs 71.80 per dollar is broken, we can head towards Rs 72.50 mark.”

Among other factors impacting the currency, Gupta said, with crude and dollar index giving breakout, rupee would remain under pressure. Trade deficit data released on Friday post market was also not very encouraging with monthly deficit touching almost 15 billion dollars.

“Political tensions would also remain heightened with key leaders vowing strong retaliation in wake of the biggest terror attack in the Kashmir valley.”

Explaining the factors which has caused volatility, Anindya Banerjee of Kotak said the currency markets largely depend on the capital flows … and right now the fear of a possible retaliation by the government in response to the Pulwama attack is having an affect.

“The context of the whole event is also important because (Lok Sabha) elections are around the corner,” Banerjee said.

Also, the currency losing against the dollar and rising crude oil prices was a double whammy for the bond markets, he added.

On the global front, discussing the factors affecting the currency, Banerjee said, the Chinese economy was very fragile right now and moreover investors were looking for developments in the US-China trade talks.

However, Gurang Somaiya, currency analyst, Motilal Oswal, felt that the rupee was protected from any major weakness as “Foreign Institutional Investment (FII’s) came around good”, especially in February.

According to data from the bourses, FII has seen inflows worth Rs 1,096 crore in February.

India on Friday revoked the Most Favoured Nation Status (MNS) of Pakistan and has warned that more stern actions will follow the attack in Pulwama. Additionally, equity markets have declined for 6 straight sessions showing weak investor sentiments.

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Business

Reliance Group reaches agreement with 90% of lenders

“Unlike Zee/Essel Group promoters – where there are about 25 lenders — the Anil Ambani Group has only nine lenders at promoter level. Some of the key lenders are — Templeton MF, DHFL Primeamerica MF, Indiabulls MF, IndusInd Bank and Yes Bank.

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Mumbai, Feb 17 (IANS) The Anil Ambani-led Reliance Group has reached an in-principle “standstill understanding” with more than 90 per cent of its lenders, the company said on Sunday.

A Reliance Group statement said that as per the understanding reached, 90 per cent of its lenders will not enforce security and will not sell any of the shares pledged by the promoters till September 30, 2019, on account of lower collateral cover or reduced margin caused by recent unprecedented fall in share prices.

The Anil Ambani Group will pay the principal and interest to the lenders as per the scheduled due dates specified in the loan agreements, it said.

“We are grateful to our lenders for believing in the intrinsic and fundamental value of our companies, and granting their in-principle approval to standstill arrangements,” a Reliance Group spokesperson said.

“The Reliance Group has also informed the lenders that it has appointed investment bankers to place a part of its direct 30 per cent shareholding in Reliance Power Ltd to target institutional investors.

“Roadshows by the investment bankers will commence during the next week,” the statement said.

Value of the promoter stake in Reliance Power, before the unprecedented fall in share prices, was more than Rs 2,500 crore, and would clear more than 65 per cent of the total promoter borrowings, it added.

Earlier this month, the Reliance Group said a few non-banking finance companies (NBFCs), substantially L&T Finance and certain entities of Edelweiss Group, have invoked the pledge on listed shares of the Group and made open market sales of the value of approximately Rs 400 crore during February 4-7.

The market capitalisation of the three companies were badly impacted due to the open market sales.

Reliance Infrastructure Ltd holds 40 per cent equity in Reliance Power and “even after placement of its holding by the promoters, majority stake and control remains with Anil Ambani Group”, the statement said.

“Unlike Zee/Essel Group promoters – where there are about 25 lenders — the Anil Ambani Group has only nine lenders at promoter level. Some of the key lenders are — Templeton MF, DHFL Primeamerica MF, Indiabulls MF, IndusInd Bank and Yes Bank.

“Also, unlike Zee/Essel Group promoters — where Indian Mutual funds have lent Rs 7,000 crore — the Anil Ambani Group has only Rs 1,000 crore borrowings from Indian mutual funds,” it added.

According to Reliance, Franklin Templeton comprises 90 per cent of the mutual fund (MF) exposure, and has publicly supported the Anil Ambani Group promoters, saying: “In our view, the transaction remains adequately covered, and we continue to engage with ADA Group to decide the future course of action.”

“Primeamerica MF and Indiabulls MF, with combined exposure less than Rs 100 crore, are being paid off in full before March 31, 2019,” the statement said.

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