WHO declares coronavirus outbreak a pandemic. IRDAI asks insurers to settle coronavirus-related claims quickly. Oil prices plunge more than 20% after OPEC deal failure. What record low oil prices mean for exporting and importing nations. Yes Bank Founder Rana Kapoor's wife, daughters charged by CBI. Bondholders of Yes Bank propose conversion of ?8,500cr ($1,148m) AT1 bonds into ?1,700cr ($229m) equity as part of new rescue plan. SBI lowers fixed deposit, lending rates in 10th cut this fiscal year. SBI to waive off charges for non-maintenance of average monthly balance on all savings bank accounts.
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On March 11th, the World Health Organisation (WHO) declared COVID-19 a global pandemic. The novel coronavirus (What is a Coronavirus?), which originated in a central Chinese wet market and began spreading about three months ago, has now spread to over 100 countries and infected more than 121,000 people.
What is a Pandemic?
A pandemic is declared when a new disease for which people do not have immunity spreads around the world beyond expectations. It has nothing to do with the characteristics of the disease; rather, it is about its geographic reach.
How is the World Coping with COVID-19?
China and South Korea have reported a decline in the number of new cases. But the list of infections and countries affected elsewhere is meanwhile growing in the rest of the world. Italy and Iran are particularly adversely affected. The US expects the number of cases in the country to increase in the coming days and has halted most flights from Europe. In India, the latest count puts it at 73 infected.
The World Health Organisation has declared COVID-19 a pandemic. What does this mean? Read this article for a deep dive into the matter.
The Insurance Regulatory and Development Authority of India (IRDAI) has asked insurers to settle all coronavirus-related claims expeditiously under existing health policies that provide for treatment of hospitalisation expenses.
"For the purpose of meeting health insurance requirements of various sections, insurers are advised to design products covering the costs of treatment for coronavirus," the regulator said in a circular.
As of today, there have been at least 58 confirmed cases of coronavirus infections in India. [Livemint]
Prisoners of Hope
A group of researchers have analysed temperature and latitude to predict potential spread and seasonality for COVID-19 and also identified a number of cities that may be at risk in the coming weeks. Here's a look.
Some $14trn has been wiped from world stocks this month. To put that into perspective, that’s equivalent to the nominal GDP of China, the world’s second-largest economy.
Who Let the Bears Out?
Stock markets around the world suffered staggering losses, in many cases recording their worst falls since the 2008 economic crisis; some recorded their worst weeks on record.
India, Japan, South Korea, Australia, Hong Kong, China, Europe, USA – the coronavirus economic fallout spared no one. Along with equities, oil prices tanked and bond yields have also plummeted.
The Fall of the Bulls
The longest-ever bull market for US stocks has ended. The Dow’s decline from its most recent peak crossed 20% on Wednesday, the threshold that defines a bear market. This officially ended US stocks’ 11-year bull market run, which began following the Great Recession and was the longest in history.
Meanwhile in India
Indian markets have been swinging wildly. On Friday, Indian stocks erased most of their losses incurred during a volatile session after a 10% crash in the main indices triggered a trading halt earlier in the day. This “circuit breaker” – the first time it has happened since 2009 – was followed by a dramatic swing. Sensex ended the day up 4.04% while Nifty was up 3.81%.
The volatility index surged 44% to its highest in over a decade.
A Roller Coaster Ride No One Asked For
It’s been a wild week for markets around the world. On Friday, Indian stock indices plummeted as soon as trading began – in fact, trading had to be actually halted for 45 minutes in the morning when both Sensex and Nifty hit the lower circuit. But following this, Indian indices staged a smart rebound, with Sensex rallying over 1,300 points and Nifty staging its biggest intraday recovery since September 2019 to reclaim 9,900 levels.
Nonetheless, the week ending March 13th remains one of the worst for Indian markets. On a weekly basis, Sensex was down 9.2%, while Nifty fell nearly 9%. [Moneycontrol]
V for Volatile
Volatility struck global markets too. In the US, the Dow ended a 11-year bull market run and fell 20% the past week. But on Friday, it rose more than 9% following President Donald Trump’s declaration of a national emergency over the coronavirus outbreak. [Business Insider]
European stocks, meanwhile, also closed in positive territory but on a weekly basis were down nearly 19%, the worst week for the pan-European Stoxx 600 since October 2008, with Thursday’s 11% plunge being its biggest one-day loss ever. [CNBC]
Are the Bears Back?
The bugles have been sounded alerting the beginning of a bear market – which, after more than a decade-long bull run, was long-feared nonetheless.
There is a silver lining, though. Bear markets usually don't tend to last as long bull markets. The typical bear market lasts just shy of a year and wipes out about 34% of the stock market's value. And despite the global panic about the coronavirus, analysts expect the pandemic to be largely contained in the coming weeks and the global economy to rebound later this year.
A Slippery Slope
Oil prices plunged more than 20% on fears of an all-out price war as Saudi Arabia slashed prices, reportedly gearing up to ramp up production above the 10 million barrel per day mark.
US West Texas Intermediate crude futures were down more than 20% at $32.90 per barrel as of 6:50 a.m. ET Monday, having earlier tumbled to a low of $27.34 per barrel.
International benchmark Brent crude futures were down nearly 20% to $36.30 per barrel. Brent futures were down more than 30% at their lows. [CNBC]
Let's Step Back
At a recent OPEC plus meeting in Vienna, Russia did not agree to OPEC's proposal for an additional production cut of 1.5 million barrels per day (mbpd), amid a slump in demand following the Covid-19 outbreak.
Prices are expected to witness more volatility, given Russia’s geo-strategic play in denying the production cut benefits to US shale oil producers and Saudi Arabia increasing production.
Considering that every dollar per barrel drop in crude prices reduces India’s import bill by ?10,700cr ($1,142m) on an annualized basis, India only stands to gain from the global crude war. Click link for the full scoop. [Livemint]
It’s Simply Never Simple
Brent futures recently dropped to $36 per barrel, falling nearly 30% in a single session. And as it happens every time oil prices experience significant shifts, some countries stand to lose while others stand to gain.
This time around, though, it might not be as simple as that. While record low oil prices – provided they sustain – could decrease oil exporting nations’ profits and make winners of oil-importing nations, a host of international factors have complicated the outlook.
For starters, the past few years have been tumultuous for globalisation and trade, thanks to the brutal trade wars, especially the one between the US and China. Secondly, China, the world’s second-largest economy, has been seeing its growth decelerate. Similar slowdowns have plagued other emerging economies like India. Thirdly, and probably most crucially, the coronavirus outbreak, which originated in central China, has spread across the world, decimated demand and slashed growth forecasts.
Due to these reasons, lower oil prices might not signify rosy prospects for importing nations, which may see gains offset by impact from the COVID-19 fallout. [ToI]
Following extensive questioning for over 15 hours by the Enforcement Directorate (ED), Yes Bank Founder Rana Kapoor was arrested on Sunday on charges of money laundering. The Central Bureau of Investigation (CBI) also filed an FIR against Rana Kapoor on March 8th over suspicious transactions between Yes Bank, DHFL and companies owned by Kapoor’s daughters.
Rana Kapoor's wife and daughter have also been named as accused in an alleged bribery case.
Light at the End of the Tunnel?
Bondholders of Yes Bank have come up with a settlement offer involving a partial writedown of bonds as well as shares.
The new rescue plan proposes the conversion of ?8,500cr ($1,148m) Additional Tier 1 (AT1) bonds into ?1,700cr ($229m) equity. It will also see several mutual funds holding bonds participating in the infusion of equity capital to revive Yes Bank. [ET Markets]
The RBI had earlier said that it would work on a revival plan, as part of which AT1 bonds will be written down "permanently, in full". Equity holdings, though heavily diluted, were not to be written down according to the plan. However, this announcement did not bode well with the investor community and the industry at large, considering that the move will raise borrowing costs for banks and make capital raising tougher in the near future.
The Cabinet has approved the RBI-proposed reconstruction plan for Yes Bank. The plan will be led by SBI, with other participants including HDFC, ICICI, Axis Bank, Kotak Mahindra Bank, RK Damani, Rakesh Jhunjhunwala and the Azim Premji Trust, which will invest a total ?12,000cr ($1.6bn).
SBI had previously said it will invest ?7,250cr ($978m) in the troubled private lender. HDFC and ICICI Bank said they will invest ?1,000cr ($134m) each, while Axis Bank said it will put in ?600cr ($80m).
Finance Minister Nirmala Sitharaman announced the decision after a Cabinet meeting on Friday. SBI will have to retain a minimum 26% stake in Yes Bank for three years, as per the RBI plan. As for the other investors, they will have to keep three-fourths of their holdings for three years. [ET Markets]
End to the Bar
“The notification with details of the reconstruction plan will be released as soon as possible," Sitharaman said. She added that the moratorium that was imposed on March 5th (which limited cash withdrawals to ?50,000 ($675) per person) will be lifted within three working days after the scheme is notified. [Livemint]
Down, Down, Down
The SBI has reduced its fixed deposit (FD) rates for certain tenors and marginal cost of funds-based lending rates (MCLR) across various tenors.
Its second reduction in a month, the country’s largest lender said retail term deposits would be slashed by 10 to 50 basis points for a few tenors. FDs maturing between 7 days to 45 days will offer an interest rate of 4.50% as against 4% earlier.
Meanwhile, the one-year MCLR has been reduced by 10 basis points to 7.75% from 7.85% earlier. This is the SBI’s 10th consecutive cut in MCLR in the current fiscal. [BS]
"Satisfied Customer is the Best Source of Advertisement”
India's largest public sector lender announced that it will waive off charges for non-maintenance of average monthly balance (AMB) for all of its 44.51cr savings bank accounts.
Currently SBI savings bank customers are required to maintain average monthly balance of ?3000, ?2000 and ?1000 in metro, semi urban and rural areas respectively and the bank used to levy a penalty of ?5 to ?15 plus taxes on non-maintenance of average monthly balance.
"We believe this initiative would empower our customers towards banking with SBI and boost their confidence in SBI," said officials. [Livemint]
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