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This is a roundup of the top stories of the day.
1. Government Seeks Review Of RBI’s Balance Sheet
Amid a stand-off between the government and the Reserve Bank of India, a senior government official has denied seeking capital from the central bank’s balancesheet. The official, however, confirmed that the government is looking for a review of the framework which governs the RBI’s balance sheet.
- The comments may not signal an end to the very public battle between the government and the central bank over a host of issues, but could signal the Finance Ministry’s willingness to discuss a key point of dispute between the two sides.
- In response to reports that the government is seeking Rs 3.6 lakh crore in capital from the RBI’s balance sheet, Subhash Chandra Garg, secretary in the Department of Economic Affairs, said that this is not the case.
- The government is only seeking a review of the Economic Capital Framework adopted by the RBI, Garg said in a series of tweets on his official account.
- The framework determines the amount of contingency and revaluation reserves held by the central bank.
Only proposal under discussion is to fix appropriate economic capital framework of RBI.— Subhash Chandra Garg (@SecretaryDEA) November 9, 2018
Lot of misinformed speculation is going around in media. Government’s fiscal math is completely on track. There is no proposal to ask RBI to transfer 3.6 or 1 lakh crore, as speculated. (continued...).— Subhash Chandra Garg (@SecretaryDEA) November 9, 2018
2. Easier Banking Regulation, In Public (Or Government) Interest?
Cleaner, healthier banks are in public interest. Pushing back that process of repair of bank balance sheets may be in government’s interest, writes Ira Dugal.
- An unprecedented Rs 2.11 lakh-crore package has proved to be inadequate to repair public-sector bank balance sheets.
- The insolvency code has been one of this government's major achievements. Why, then, the reluctance to allow it to work across sectors?
- A dilution of Basel norms will reduce the need for recapitalisation of government-owned banks. But it will also send out an adverse message.
3. Equity Mutual Fund Inflows Rise
Inflows into equity mutual funds, including equity-linked savings schemes, hit an eight-month high in October aided by new fund offers and the popularity of systematic investment plans.
- Total equity inflows rose 13 percent over the previous month to Rs 12,622 crore in October, according to data released by the Association of Mutual Funds in India.
- The mutual fund industry witnessed a total inflow of Rs 35,529 crore compared with an outflow of Rs 2.3 lakh crore in September.
- “A combination of factors is behind the making of these numbers. First, the month gone by saw a lot of one-time fund offers—close to Rs 3,000 crore of funds were raised. Second, a rising SIP book of around Rs 8,000 crore,” said Radhika Gupta, chief executive officer of Edelweiss AMC.
4. Indian Markets Resume Decline
Indian equity benchmarks declined on the first full trading session of Samvat 2075 paced by losses in Bharti Airtel Ltd., Infosys Ltd., Tata Consultancy Services Ltd. and Reliance Industries Ltd.
- The S&P BSE Sensex Index fell 0.22 percent or 79 points to 35,159.
- The NSE Nifty 50 Index declined 0.12 percent or 13 points to 10,585.
- Nine of 19 sector gauges compiled by BSE ended lower led by the S&P BSE IT Index's 1.2 percent drop.
- On the other hand, the S&P BSE Healthcare Index was the top gainer, up 1.08 percent.
U.S. equity-index futures fell for a second day as crude oil’s slide into a bear market and concerns over the health of China’s economy weighed on global stocks.
- The dollar continued its advance after the Federal Reserve stayed on track for a December rate hike.
- Mining and energy shares led a drop in Europe’s main equity gauge as most industrial metals fell, while disappointing forecasts from Richemont and Thyssenkrup AG also weighed on the index.
- In Asia, financial shares performed particularly poorly following news that Beijing plans to set quotas for banks to pump credit into private companies.
5. Brent Below $70
Oil extended a run of declines after falling into a bear market, heading for its longest losing streak on record.
- Futures in New York fell for a 10th day, extending a dramatic plunge that’s dragged prices down more than 20 percent from a four-year high reached in early October.
- In London, Brent sank to a seven-month low below $70 a barrel.
- The drop comes days before the Organization of Petroleum Exporting Countries meets with partners in Abu Dhabi, having signaled it may cut output next year.
- Oil’s decline has been exacerbated by a U.S. decision to allow eight countries to continue importing from Iran, which it slapped with sanctions earlier this week.
6. Kid In A Candy Shop!
The opportunity due to volatile markets makes veteran investor Bharat Shah feel “like a kid in a candy shop”.
- “This is a fantastic opportunity to buy quality franchises at fair prices,” said the executive director of the wealth management firm ASK Group.
- Shah said that equity classes can create unparalleled long-term value, adding that he isn’t surprised at the “routine” drop in the bourses every few years.
- Shah said the turmoil in the non-bank finance space was necessary as it helped investors to differentiate good NBFCs from the bad.
7. Dr. Reddy’s Duvvada Plant Worries
Dr. Reddy’s Laboratories received eight observations, five of them a repeat of 2017 and warning letter of 2015, from the U.S. drug regulator at its Duvvada facility—crucial for future growth prospects in its largest market.
- The observations were issued after an audit of the injectable plant starting Oct. 23, according to a copy of the Form 483 issued by the U.S. Food and Drug Administration .
- To be sure, this is the third time the plant received observations from the U.S. FDA. Repeat observations or signs of persisting data integrity can escalate to an import alert.
- The Duvvada plant is important for Dr. Reddy’s as nearly 20 percent of its future filings (abbreviated new drug applications) come from this facility.
- Though the plant contributes less than 10 percent to the total sales, a large number of observations, including a repeat, will result in delays in getting new approvals.
8. No Festive Cheer For Carmakers
Domestic passenger vehicle sales rose 1.55 percent in October, snapping three consecutive months of declines. However, muted consumer sentiment affected festive season demand.
- Passenger vehicle sales in October stood at 2.84 lakh units as against 2.79 lakh units in the year-ago month, according to the Society of Indian Automobile Manufacturers.
- In July, August and September passenger sales declined 2.71 percent, 2.46 percent and 5.61 percent, respectively.
"The real impact of festive sales will be known only next month as Diwali was in November this year. However, till the end of October, sales have been slow and it wasn’t like festive season." - Vishnu Mathur, Director General, SIAM
9. A Missed Opportunity For A Cleaner Ganga
Even as Prime Minister Narendra Modi is expected to receive a container vessel in Varanasi, on the banks of the Ganga, on Nov. 12—a first for the nation’s inland waterways—India may have lost an opportunity to operate boats that run on cleaner fuel.
- Petronet LNG Ltd., which was tasked with providing liquefied natural gas for barges—or small freight vessels— along the National Waterways-1, said that the project was rendered unviable after the government scaled down requirements.
- LNG is a cleaner alternative compared with fuels such as diesel, ship oil and methanol.
- It emits nearly 25 percent lesser carbon dioxide, in addition to reducing nitrogen oxide and sulphur oxide emissions by over 90 percent.
10. Madhya Pradesh: From Decade Of Record Farm Growth To Crisis
Madhya Pradesh presents a classic case of success itself becoming a reason for failure, writes former Agriculture Secretary Siraj Hussain.
- From FY06 to FY15 India’s average annual growth rate in agriculture was only 3.2 percent while MP achieved growth of 9.6 percent per annum.
- In the last four years, the global commodity downturn and demonetisation, negated gains from higher production.
- Farmers did not get MSP for most Rabi crops which arrived in mandis from April to June 2018.
- Not all farmers have benefitted from the Bhavantar Bhugtan Yojana.
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