The benchmark stock indices have opened the first day of trading in 2021 on a positive note as the bull run continues into the new year.
Join us as we follow the top business news through the day.
2021 looks a lot like 2020
Poll-bound Assam’s MFI Bill, Congress’ loan waiver promise a ‘moral hazard’: Report
The microfinance industry continues to face regulatory risk.
PTI reports: “The passage of a Bill to control the microfinance industry and the Congress party’ loan waiver promise if voted to power in the April 2021 polls in Assam is a “moral hazard”, according to a report.
With West Bengal also headed for elections, the report by Kotak Institutional Equities warned that such loan waivers can have many adverse outcomes for the finance industry because the quantum of outstanding loans is much higher.
In Assam, the current Assembly has set aside RBI observations and passed a Bill to put more controls on the microfinance industry dealing with loan amount caps, prior registration and other operational restrictions, while the Congress party has promised loan waivers if voted to power.
“Either way, we see these developments setting a negative precedent in dealing with credit to relatively sensitive segments, and potentially creating a moral hazard,” the report, released on Monday, said.
The Assam Assembly passed the Micro Finance Institutions (Regulation of Money Lending) Bill, which in a way introduces a parallel set of regulations besides RBI’s rules governing the sector, it said, pointing to some specific provisions.
These include two lender cap for all borrowers and up to Rs 50,000 limit for borrower indebtedness for vulnerable segments and prior registration of lenders with the state agencies. They also include loan repayment to be made at the panchayat offices or public places designated by the deputy commissioners, and a three-month interest moratorium in events of floods or other natural calamities.
Though Assam contributes less than 1 per cent of advances for the system, a few lenders like Bandhan Bank and Ujjivan Small Finance Bank have higher proportion of reliance on the state, it said.
Pointing to past instances of credit culture deterioration on account of events such as the anti-CAA agitations last year, the brokerage said that as of September 30, advances where repayments were due for over 30 days stood at 18 per cent as against 5 per cent average for the system as a whole.
Assam’s Bill has some similarities to Andhra Pradesh’s 2011 law, which had plunged the entire industry into a crisis, the brokerage said pointing to the requirement like prior registration with the state and other operational restrictions.
Further, public statements by Assam Finance Minister Himanta Biswa Sarma also indicate a friction between the state government and the RBI regarding provisions of the Bill. We have also seen unwillingness to sign the industry code of responsible lending (CRL) by a part of the industry, it said.”
Housing.com ties up with Urban Company, Livspace to provide home renting related services
The popular real estate company expands its list of offerings.
PTI reports: “Realty portal Housing.com on Monday said it has tied with Urban Company, RentoMojo and Livspace to provide home renting related services for landlords and tenants in seven major cities.
Housing.com is part of News Corp and REA-backed Elara Technologies that also owns PropTiger.com and Makaan. In January last year, it entered into listing business of beds available with co-living operators.
In a statement, Housing.com said it has launched ‘Housing Edge’ as full stack rental and allied services platform. “These services for both, owners and tenants, include packages like online rent payment, online rental agreements, tenant verification, packing & moving, furniture rental, home interiors and home services,” Housing.com said. These services are available in Delhi, Bengaluru, Gurugram, Mumbai, Hyderabad, Chennai and Pune but plans are underway to offer these services in several other cities, it added.
Through this Housing Edge platform, the company has attempted to make the end-to-end process of renting and moving into a home simple and hassle free, said Dhruv Agarwala, Group CEO, Housing.com, Makaan.com & PropTiger.
Housing.com has tied up with brands such as Urban Company, RentoMojo, Livspace, HappyLocate and AuthBridge to widen its services.
Housing.com has partnered with RentoMojo to offer tenants a wide range of products, including furniture and home appliances, to rent. Its partnership with Urban Company will help customers in their home maintenance needs, including deep cleaning, plumbing and painting among many others. Livspace will help customers get access to professionally designed interiors.
Housing.com’s tie-up with AuthBridge, which provides identity management and verification products, will help home/PG owners easily verify the identity and do background checks (including criminal records) of their potential tenants and avail of the Tenant Police Registration Services.
Similarly, the partnership with HappyLocate will allow consumers to get quality packers and movers services.
“These strategic partnerships will truly help Housing Edge become a one-stop-shop for tenants and landlords,” said Mani Rangarajan, Group COO, Housing.com, Makaan.com and PropTiger.
Housing.com is a real estate advertising platform that offers verified listings for new homes, resale homes, rentals and co-living spaces.”
Fitch Solutions revises forecast for Indian rupee to average at Rs 75.50/USD for 2021
Positive news for the rupee bulls.
PTI reports: “Fitch Solutions on Monday said it has revised its forecast for the Indian rupee to average stronger at Rs 75.50 to a US dollar in 2021, from Rs 77/USD.
For 2022, it revised the forecast to Rs 77 to a US dollar, from Rs 79 previously, to account for a stronger 2021 forecast.
“We expect the rupee to trade only slightly weaker over the near term from current levels,” it said in a note.
It saw depreciatory pressure on the rupee due to worsening terms of trade from rising oil prices, further monetary easing, and bouts of risk-off sentiment being partially offset by the US dollar weakness and central bank foreign exchange intervention to combat imported inflation.
“Over the longer term, the overvaluation of the rupee in real terms and higher inflation in India vis-à-vis the US should exert weakening pressure for the rupee,” it said.
The Indian rupee averaged Rs 74.10 to a US dollar in 2020.
“We expect the rupee to only trade marginally weaker in 2021, and have revised our average forecast to Rs 75.50 to a US dollar, from Rs 77.00/USD to account for the effect of extended US dollar weakness,” Fitch said.
From a technical perspective, the rupee is holding below its resistance level of Rs 72.50 to a dollar as well as trend resistance.
“This suggests that the rupee will likely weaken, similar to 2019, when the rupee displayed such a pattern,” it said.
With India having a crude oil import dependence of more than 80 per cent of its needs, rising global oil prices driven by a global economic recovery in 2021, will see a worsening of the nation’s terms of trade, and put depreciatory pressure on the rupee.
Fitch sees Brent crude oil to average USD 53 per barrel in 2021, versus the 2020 year-to-date average of USD 43.18.
It also expects another 50 basis point cut in benchmark interest rates by the Reserve Bank of India (RBI), which will also exert some downward pressure on the rupee.
“That said, two factors will partially offset the depreciatory pressure on the rupee. First, loose US fiscal and monetary policy will likely continue exerting downside pressure on the US dollar into 2021, which would partially offset rupee weakness.
“Second, the RBI, with a foreign exchange reserve position of USD 578 billion as of December 2020, representing an import cover of around 19 months, will likely intervene to prevent excessive rupee weakness to manage imported inflation to reduce the risk of high inflation derailing India’s recovery in 2021,” according to Fitch.
It forecast inflation to average 4.1 per cent over FY 2022-23 (April 2022 – March 2023) and FY2023/24.
“Food and fuel prices tend to heavily impact inflation in India. A poor growing season can easily cause a surge in headline inflation. Rising global fuel prices along with a global demand recovery will also drive up fuel inflation,” it added.”
BSNL to test local gear prior to 4G bid
BSNL will test the quality of Indian telecom equipment before letting indigenous manufacturers participate in the 4G tender to be floated by it, according to a notice by the company.
BSNL had floated a 4G tender worth ₹9,300 crore for procurement of telecom equipment in March but it was cancelled later due to multiple reasons, including an allegation from Indian companies that the state-run firm’s project does not comply with preferential market access norms and was inclined towards foreign companies.
Asian factories bounce back from COVID-19 hit, tighter controls cloud outlook
Uncertain still looks over economies.
Reuters reports: “Asian factory activity expanded moderately in December thanks to robust demand in regional giant China, business surveys showed on Monday, but the prospect of tougher coronavirus curbs clouded the outlook for the recovering sector.
Manufacturing activity expanded in Japan, South Korea and Taiwan, according to PMI surveys, the latest indication that manufacturers in the region continue to bounce back from the damage caused by the COVID-19 pandemic last year.
But a slowdown in China’s factory activity growth underscores the challenges the region faces as rising cases globally force many countries to reimpose curbs on economic activity, clouding the outlook for exports.
China’s Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) fell in December to 53.0 – its lowest level in three months – but stayed well above the 50-level that separates growth from contraction.
“External demand was likely impacted by the continued global spread of COVID-19 and reimplementation of lockdowns,” HSBC’s China economist Erin Xin said in a research note.
The reading, which was lower than November’s 54.9, fell roughly in line with the official gauge of factory activity that showed activity moderating at a high level.
Elsewhere in the region, output stabilised in Japan for the first time in two years, while India’s factory sector ended a rough 2020 on a stronger note as manufacturers boosted production to meet rising demand.
The final au Jibun Bank Japan PMI rose to a seasonally adjusted 50.0 in December from the previous month’s 49.0, ending a record 19-month run of declines.
“Japanese manufacturers signalled a broad stabilisation in operating conditions at the end of a tumultuous year,” said Usamah Bhatti, an economist at IHS Markit.”
Fresh produce e-platform Otipy to raise USD 10 mn in 2021
The fundraising binge in markets continues unabated.
PTI reports: “Social e-commerce platform for fresh produce Otipy on Monday said it is planning to raise USD 10 million this year to expand its presence in the country.
To empower more resellers and further build its business across India, Otipy is in active discussions to raise USD 10 million in 2021, the company said in a statement.
Otipy has already raised USD 2 million in 2020 from Inflection Point (IP) Ventures and the Smile Group.
“We have a history and deep understanding of fresh produce that we have leveraged to build a social commerce model that creates earning opportunities for women and stores, helps farmers, and provides fresher, more nutritious produce to consumers at a lesser price,” Otipy Founder Varun Khurana said.
Khurana further noted that “in the last 8-9 months, we have built a robust platform in the fresh produce category supporting over 2,500 women and stores as resellers and are witnessing a phenomenal response from customers in Delhi NCR. We now plan to further expand this market in other cities as well.” These community leaders/resellers earn a commission of up to 10 per cent for all group sales, the highest across all social commerce brands in India, the company claimed.
Otipy is already catering to over 5,000 daily orders from one lakh consumers in Delhi and NCR.
Otipy also plans to extend its platform to other categories and has already launched specific dairy, grocery products on the platform.
The fresh grocery category in India stands at USD 200 billion, of which less than 1 per cent accounted for online grocery.”
‘Tatas likely to be serious bidder for AI’
As the bidding process for Air India’s disinvestment enters its next phase in the coming week, the Tatas are expected to emerge as a serious bidder for the carrier.
For, with Air India (AI) they could potentially become a significant player in the aviation sector by consolidating AirAsia India and Vistara with Air India, analysts said.
The winning bidder for Air India will also acquire its profit-making and low-cost subsidiary, Air India Express.
“No Indian carrier so far has filled the void created by the closure of Jet Airways,” said Jitender Bhargava, aviation author and former executive director of Air India.
“India needs a strong carrier that can have significant presence in international routes. The Tatas have that potential,” he added.
Tata Motors shares gain over 3% after December sales data
Revival of fortunes continues at Tata Motors.
PTI reports: “Shares of Tata Motors on Monday gained over 3 per cent after the firm reported a 21 per cent increase in total vehicle sales in the domestic market in December.
The stock jumped 3.51 per cent to Rs 193 on the BSE.
On the NSE, it gained 3.48 per cent to Rs 193.
Tata Motors on Friday reported a 21 per cent increase in total vehicle sales in the domestic market to 53,430 units in December.
The company had sold 44,254 units in the domestic market in the same month last year, Tata Motors said in a regulatory filing.
Domestic passenger vehicle (PV) sales stood at 23,545 units last month as against 12,785 units in December 2019, up 84 per cent, it added.”
Indian shares hit all-time high as country approves COVID-19 vaccines
Indian shares scaled new peaks on January 4, kicking off the first trading week of the new year, as investor sentiment was upbeat after the country gave emergency use approval to two coronavirus vaccines over the weekend.
The blue chip NSE Nifty 50 index rose 0.48% to 14,085.45 and the benchmark S&P BSE Sensex rose 0.40% to 48,058.70 by 0454 GMT.
India, which has the second-highest number of coronavirus infections in the world, on January 3 approved for emergency use two coronavirus vaccines – one developed by AstraZeneca and Oxford University and the other by Bharat Biotech.
The vaccine approvals and the nationwide vaccine delivery trial run being carried out without any major glitches were positives, said Gaurav Garg, head of research at Capital Via Global Research in Indore.
“More details (on India’s vaccination plans) are coming out…it might take only 6-10 months for everybody to get vaccines,” Mr. Garg added.
Rupee surges 21 paise to 72.90 against US dollar in early trade
A good start to the year for the rupee.
PTI reports: “The rupee appreciated by 21 paise to 72.90 against the US dollar in opening trade on Monday supported by sustained foreign fund inflows and weakness of the American currency in the overseas market.
Traders said hopes of COVID-19 vaccine also improved sentiments.
India”s drugs regulator on Sunday approved Oxford COVID-19 vaccine Covishield, manufactured by the Serum Institute, and indigenously developed Covaxin of Bharat Biotech for restricted emergency use in the country, paving the way for a massive inoculation drive.
At the interbank forex market, the domestic unit opened at 72.93 against the US dollar and inched higher to 72.90 against the greenback, registering a rise of 21 paise over its previous close.
On Friday, the rupee had settled at 73.11 against the American currency.
Meanwhile, the dollar index, which gauges the greenback”s strength against a basket of six currencies, fell 0.24 per cent to 89.72.
“An improving global economic outlook as COVID-19 vaccines are rolled out, rock-bottom US interest rates and ongoing Fed bond purchases have dented the dollar”s appeal,” Reliance Securities said.
Further, “most Asian currencies were trading stronger against the greenback this morning and could lend support to the domestic unit,” it added.
On the domestic equity market front, the benchmark BSE Sensex and the broader NSE index touched fresh record-high levels in early deals. The 30-share BSE benchmark Sensex was trading 224.28 points higher at 48,093.26, and the broader NSE Nifty was up 74.85 points at 14,093.35.
Foreign institutional investors were net buyers in the capital market as they purchased shares worth Rs 506.21 crore on a net basis on Friday, according to provisional exchange data.
Brent crude futures, the global oil benchmark, advanced 1.06 per cent to USD 52.35 per barrel.”
Reliance, BP commit to pay for any shortfall in KG-D6 production to buyers
Reliance Industries Ltd. and its partner BP Plc. of U.K. have committed to pay in cash for any natural gas volumes they are unable to deliver to customers from the next wave of discoveries in the eastern offshore KG-D6 block.
According to draft gas sales and purchase agreement (GSPA) Reliance and BP have shared along with price discovery bids for incremental gas from the R-Cluster fields in KG-D6 block, the sellers will reimburse buyer money equivalent to gas sourced from alternate source to make up for any volumes they are unable to deliver.
The buyer on his part will be obliged to offtake the committed gas volumes or pay for it (take or pay).
The volumes not taken but paid for can be taken in subsequent quarters, the GSPA said.
These ship or pay and take or pay obligations will be waived in the event of force majeure events such as any act of God like earthquake and floods, fire, epidemic, acts of war, strike and lockouts, delays due to government/ regulatory actions and court orders.
Asian stocks rise after Wall Street hits new high
The bull run in stocks continues into the new year.
PTI reports: “Asian stock markets rose Monday on 2021”s first trading day, boosted by optimism about the rollout of coronavirus vaccines after Wall Street ended the year on a new high.
Market benchmarks in Shanghai, Hong Kong, Seoul and Sydney advanced. Tokyo declined.
Optimism about vaccines has countered concern about rising infection numbers in the United States and some other countries and conflict over economic aid in Washington, said Stephen Innes of Axi in a report.
Traders are “perhaps a bit over-eager” but believe vaccines will “provide the ultimate economic kick-start, offering a massive booster shot to corporate profits,” said Innes.
The Shanghai Composite Index gained 0.3per cent to 3,481.98 and the Hang Seng in Hong Kong gained 0.3per cent to 27,308.63.
The Nikkei 225 in Tokyo was off 0.4per cent at 27,344.87 after Prime Minister Yoshihide Suga announced the government is considering declaring a state of emergency for Tokyo and three surrounding prefectures due to surging virus caseloads.
Suga asked restaurants and bars to close by 8 p.m. and said it would be difficult to restart a controversial travel promotion program that was suspended last month.
He also said the government would expedite approval of coronavirus vaccines and begin providing injections in February.
The Kospi in Seoul rose 2per cent to 2,930.38 and Sydney”s S&P-ASX 200 added 0.2per cent to 6,661.10. Singapore and Jakarta also advanced.
On Wall Street, the benchmark S&P 500 index rose 0.6per cent to a high of 3,756.07 on Thursday, its final trading day of 2020. It ended the year up 16.3per cent, or a total return of about 18.4per cent with dividends.
The Dow Jones Industrial Average rose 0.7per cent to a record 30,606.48. The Nasdaq composite added 0.1per cent to 12,888.28.
Vaccine development by U.S., European and Chinese producers has helped investor optimism that a return to normal might be closer after the global economy”s worst decline since the 1930s.
The United States and Britain have approved Pfizer Inc.”s vaccine and Britain approved a second vaccine from AstraZeneca and Oxford University. The Chinese government has approved its first domestically developed vaccine. Others are being tested.
Governments might not throw as much stimulus at their economies as they did last year, but policy is “still at a very loose setting,” which supports stock prices and lending, said Kerry Craig of JP Morgan Asset Management in a report.
“Investors should look through the bumpier start to the new economic cycle and focus on the improved earnings outlook,” Craig said.
In energy markets, benchmark U.S. crude gained 56 cents to USD49.08 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose 12 cents on Thursday to USD48.52. Brent crude, used to price international oils, added 67 cents to USD52.47 per barrel in London. It rose 17 cents the previous session to USD51.80.
The dollar declined to 102.99 yen from Thursday”s 103.27. The euro rose to USD1.2258 from USD1.2211.”
The dilemma in home loans: fixed or floating interest rate?
The decision to choose between a floating rate and fixed rate home loan has always been an important one for borrowers. This topic has been discussed widely and if you do a Google search, you will get some inputs on this. Having said that, it needs a proper perspective. First, let’s get the basics clear.
Floating rate means that the interest rate you are paying now is a function of the rate environment today. Subsequently, as interest rates in the economy move up or down, the rate you pay will move up or down accordingly.
Hence the name ‘floating’ i.e. it floats with some reference benchmark. A fixed rate home loan is a tricky term. While from the name it seems that the interest rate is fixed, there may be a clause in fine print that the loan provider may raise the rate at some point, triggered by some development.
This may be referred to as the so-called fixed or floating-fixed rate home loan, where the interest rate is not as fluctuating as floating, but may fluctuate under certain conditions. Then there is the fixed rate loan, which may be referred to as proper fixed or fixed-fixed rate loan, provided you go through the document or consult a legal professional.