RBI Cuts Repo Rate by 25 bps, Renault-Fiat Chrysler Merger Collapses, Debt Mutual Fund NAV Crash, 5G in India and Other Top Business News Today

RBI cuts repo rate by 25 bps, third time in a row, changes stance to “accommodative”. NAVs of debt mutual funds crash on back of DHFL default. DHFL's default can expose INR1 L crore in borrowing. India to have 920 million unique mobile subscribers by 2025, including 88 million 5G connections. Govt's proposed base price for the auction of spectrum for 5G networks too high, says COAI. Renault-Fiat Chrysler merger collapses, French government blamed. Nitin Gadkari plans to infuse INR15,00,000cr in building a grid of highways, declares “rolling out stuck projects in 100 days” on priority list.

 

Moving on to the top Business news today: 

 

 RBI 

 

RBI cuts repo rate by 25 bps, third time in a row, changes stance to “accommodative”.

 
Third In A Row: The Reserve Bank of India (RBI), for the third time in a row, today cut the repo rate by 25 bps to 5.75%, changing its monetary policy stance to “accommodative” from “neutral”


In Unison: All six of the MPC members voted in favor of a 25 basis points cut.


As Expected: The move, much along expected lines, came as the growth in the gross domestic product (GDP) declined to a 21-quarter low to 5.8% in Q4FY19.


Every Action Has an Equal and Opposite Reaction: Following the announcement of the rate cut, the 10-year benchmark bond yield fell to 6.89% from 7% before the policy announcement. The Rupee strengthened to 69.28 per dollar from 69.36 earlier.


Read the second bi-monthly Monetary Policy Statement here

 

 DHFL 

 

NAVs of debt mutual funds crash on back of DHFL default. DHFL's default can expose INR1 L crore in borrowing.

NAVs of debt mutual funds crash on back of DHFL default. DHFL's default can expose INR1 L crore in borrow
Fear of Contagion: Several debt mutual funds, including those run by Tata, Reliance and UTI experienced a crash in their net asset values (NAVs) following a default in interest payment by private sector mortgage financier Dewan Housing Finance (DHFL).

 
Massive Slump: Two funds run by DHFL Pramerica MF witnessed their NAVs dip by around 50% in one day, while NAV of a fund run by Tata MF saw a crash of c. 30%.

 
Debt funds run by Reliance, Birla, UTI and DSP also witnessed substantial drop in their NAVs. 

 
We Are Exposed: As of 30th April, 165 schemes are exposed to DHFL with a cumulative exposure of INR5,336cr, of which 106 schemes have an exposure of more than 5% of assets.

 
Also This: Brokerage firm CLSA has reported that the recent INR1,000cr default by DHFL can expose INR1L crore in borrowing to the risk of default/haircuts, thereby forcing an intervention by the RBI. 

 
DHFL is likely to default on payment of INR1,150cr non-convertible debentures (NCDs) due to liquidity crunch. The report also added the default could also function to further aggravate the stress in the financial sector following the IL&FS crisis, leading to higher costs and polarisation of funds to better-rated NBFCs.
 
 
 TELECOM 
 
 
India to have 920 million unique mobile subscribers by 2025, including 88 million 5G connections. Govt's proposed base price for the auction of spectrum for 5G networks too high, says COAI.

 
As per global telecom industry body GSMA, India is expected to have 920 million unique mobile subscribers by 2025, including 88 million 5G connections.

 
FYI: India had close to 750 million unique subscribers at the end of 2018.

 
Over this period, India alone is expected to generate almost a quarter of the world’s new mobile subscribers.

 
Unaffordable: Cellular Operators Association of India (COAI) has said that the government's proposed base price for the auction of spectrum for next-generation 5G networks is too high (more than even global discovered prices), and will be a "serious impediment" to the uptake of 5G in India

 
5G networks are seen as vital for emerging technologies like self-driving cars and artificial intelligence.

 
We Oppose the Move: The Department of Telecommunications (DoT) plans to oppose the sale of airwaves, held by telcos during the insolvency resolution process. 

 
This move is likely to make Aircel and Reliance Communications less attractive to buyers and hit their lenders.
 
 
As per DoT, the spectrum belongs to the government and it does not come under the definition of property of the telco. 

 
Government is the licensor of the airwaves and is the only one authorized to sell it through auctions. 

 
More on the matter here.
 
 
 INFRA 
 

Nitin Gadkari plans to infuse INR15,00,000cr in building a grid of highways, declares “rolling out stuck projects in 100 days” on priority list.

 
Go-Getter: Union Minister Nitin Jairam Gadkari, in his first interview to PTI after taking charge of Ministry of Road Transport and Highways and Ministry of Micro, Small & Medium Enterprises (MSME)  said the mission ahead was to further propel the country's economic growth through concerted efforts, be it in highways or MSME.


According to plans, the work taken up will be worth at least INR15L cr in highways, and will include building 22 green expressways, rolling out all stuck projects in the next 100 days and creating a 'grid of roads' at par with the power grid.

 
Goals: According to Gadkari, the priority for him will be "rolling out all stuck highway projects that include many of the IL&FS projects within 100 days".

 
His aim is to take the highway building target to 40 km a day from the present 32 km per day.

 
Additionally, the BJP leader said his endeavour would be to globalise khadi and his new ministry, MSME’s products through joint ventures. He was also keen on mass-scale honey production besides promoting products such as Moringa.
 
 
 MERGER 


Renault-Fiat Chrysler merger collapses, French government blamed.

 
Collapsed: Fiat Chrysler has withdrawn its proposed €33bn merger with Renault on Wednesday, after an intervention from the French government, which is also Renault’s biggest stakeholder. 

 
Renault has said that its Board was unable to press ahead with the deal because the representatives of the French government had requested a postponement of the vote.

 
Bruno le Maire, the French Finance Minister stated on Thursday that the government wanted guarantees over Renault jobs, a headquarters in Paris and corporate governance. According to him,  the French state had engaged constructively with all partners in the negotiations, but that agreement had not been reached on all the government’s conditions for a deal.

 
The Other Side: Fiat Chrysler stated on Wednesday, “it has become clear that the political conditions in France do not currently exist for such a combination to proceed successfully."

 
Shares in Renault fell nearly 7% in Paris on Thursday after the proposal was withdrawn. Fiat Chrysler stock dropped 1.6% in Milan.

 
The deal would have created the world's third-largest car-maker, only behind Volkswagen and Toyota.
 
 
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