Wholesale Inflation eases to 2.26% in February. US Federal Reserve cuts rates to zero. Government considering $1.6bn rescue package for aviation industry. RBI likely to cut rates in the upcoming MPC meeting. S&P lowers India's growth forecast to 5.2% in 2020. Fitch Ratings cuts India's growth forecast to 5.1% for FY21. SEBI adopts measures to check short selling, curb volatility.
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Wholesale inflation stood at 2.26% in February, Government data showed today. In the previous month, wholesale inflation (the rate of increase in wholesale prices determined by the Wholesale Price Index) had stood at 3.1%.
Separate data last week showed consumer inflation was at 6.58% last month. The RBI has a medium-term goal of containing retail inflation at 4% with a margin of 2% on either side. [NDTV Profit]
How to Flirt with Bears
Less than two weeks after it announced an emergency rate cut, the US Federal Reserve announced its second emergency easing, pushing its target interest rate down to zero.
The Fed’s emergency intervention is aimed at propping up the American economy as it prepares for an escalating coronavirus crisis. What began in China and hampered the world’s second-largest economy has since spread westward, with Europe being the new COVID-19 epicentre. Italy and Spain have unleashed national lockdowns while other countries have instituted restrictions of other kinds to contain the virus.
The consequences of COVID-19’s spread were already palpable in the US, considering the wild volatility markets suffered last week. Furthermore, the 11-year-long bull run enjoyed by Wall Street – the longest in the country’s history – ended Wednesday and markets are flirting with bears. The Fed hopes zero-level rates will shore up markets and avoid a recession. But will it be enough? [CNN Business]
“Extraordinary times require extraordinary action,” European Central Bank President Christine Lagarde said as she launched new bond purchases worth €750bn ($821bn) at an emergency meeting yesterday. This is the latest move by Brussels in its bid to stop a pandemic-induced financial rout shredding the Eurozone’s economy. [Reuters]
The Reserve Bank of Australia has cut interest rates to a record low of 0.25% and said it would buy Australian government bonds in its first-ever quantitative easing programme and provide a three-year funding facility to provide cheap loans for Australian banks.
In resorting to quantitative easing, the Central Bank has turned a direction it didn’t even during the Great Recession and the 9/11 terrorist attacks. [The Guardian]
On Wednesday, the US Federal Reserve rolled out its third emergency credit programme in two days. This new facility will offer “support for the flow of credit to households and businesses” by ensuring the $3.8tr money market mutual fund industry can sell its holdings of US Treasury bonds and other high quality assets at full value if investors ask to withdraw their cash. [Reuters]
The Reserve Bank of India will also buy bonds in the open market for a total of ?10,000cr ($1.3bn) on Friday to try to keep all market segments liquid and stable.
"With the heightening of COVID-19 pandemic risks, certain financial market segments have been experiencing a tightening of financial conditions as reflected in the hardening of yields and widening of spreads," the RBI said in a statement. [NDTV Profit]
To relieve the ailing aviation industry, India is reportedly planning a rescue package worth as much as $1.6bn. The coronavirus pandemic has hurt the sector as flights have been cancelled and air travel halted in light of new restrictions imposed by governments around the world to contain the virus's spread. [Reuters]
Today, a three-judge bench of the Supreme Court held that no further objections would be allowed against payable dues of telecom companies. Additionally, it said that no self-assessment by the companies themselves would be entertained.
However, the apex court also said that it would consider the Solicitor General’s plea seeking reasonable time on the next date.
“All dues as per our judgement will have to be paid, including interest and penalty. The Solicitor General had filed a plea seeking reasonable time, we will consider this plea on the next date,” the court order stated. [Moneycontrol]
You Know You Want To
Want to read a brief background of the AGR dues controversy and how much each telco owes the Government according to the Supreme Court and the companies themselves? Read this article.
Light at the End of the Tunnel?
The possibility of the RBI cutting rates in the next MPC meeting to be held from March 31st to April 3rd is only getting stronger as Central Banks across the globe have undertaken rate cuts to provide liquidity to their respective economies.
"I'm not ruling out any possibility on the rate cut. We are estimating the impact of Covid-19 and we will give our growth estimates in MPC. India is relatively insulated from the global value chain, but there will be some impact," RBI Governor Shaktikanta Das said in a press conference held recently.
However, only time will tell if a rate cut would be able to uplift investor sentiments dampened by the bloodbath in the stock market on fears of the coronavirus outbreak. [Moneycontrol]
S&P Global Ratings has lowered India's economic growth forecast to 5.2% from earlier projected 5.7% for 2020, stating the global economy is entering a recession amidst the coronavirus pandemic.
The news comes shortly after Moody's Investors Service lowered India's economic growth forecast for 2020 to 5.3% from 5.4%. [Livemint]
Amidst the rising cases of coronavirus, most brokerages have begun trimming earnings estimates for India Inc. for the next financial year 2020-21 (FY21).
For instance, analysts at Jefferies suggest that the markets are already pricing in a 15% drop in earnings given the current valuations. Within Nifty 100, they believe, 63% stocks, including HCL Technologies, Infosys, ITC, Hero MotoCorp, Marico and Petronet, are building in a higher earnings downgrade of over 20%.
The earnings cut potential for select companies in the auto, energy, financials, industrial, materials and metals, technology and the utility sector could be higher between 25-45%, it added. [BS]
After Moody's and S&P, Fitch Ratings cut India's growth forecast to 5.1% from 5.6% for FY 2020-21, saying the coronavirus outbreak is likely to hit business investment and exports. [Moneycontrol]
Rules of the Games
The RBI has released guidelines for regulating payment aggregators and payment gateways, detailing
The guidelines come nearly six months after it first proposed regulating these entities in a discussion paper.
Here's a quick look at the guidance:
I'm Watching You
Market regulator SEBI has rolled out measures to make short-selling of stocks difficult in order to counter the market volatility triggered by the coronavirus outbreak.
It has lowered the limit of positions that can be taken in the futures and options market, increased margin requirements and capped derivatives exposure as it looks to counter volatility and short-selling triggered by the coronavirus pandemic.
SEBI has brought down market wide position limit - the maximum number of open positions in F&O contracts of a particular underlying stock. [BBG Quint]
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