Business Live: Rate cut bets fall as recovery gains hold, inflation stays high; god hits one-week high as pandemic worsens

The stock bourses are shut today on account of Diwali Balipratipada. The currency market is also shut today.

Join us as we follow the top business news through the day.

2:30 PM

India’s diesel sales fall 5% in early November – industry data

A surprise fall in diesel sales despite the easing of lockdown measures.

Reuters reports: “India’s diesel sales fell 5% in the first half of November compared with the previous year, preliminary data showed on Monday, after rising for the first time in eight months during the month of October.

Diesel consumption, a key parameter linked to economic growth and which accounts for about 40% of overall refined fuel sales in India, fell 5% year-over-year to 2.86 million tonnes during the first fifteen days of November.

Sales of gasoline rose marginally to 1.03 million tonnes, the industry data showed.”

1:30 PM

WPI inflation at 8-month high of 1.48% in Oct on costlier manufactured items

The wholesale price-based inflation rose to an eight-month high of 1.48% in October, as manufactured products turned costlier.

The WPI inflation was 1.32% in September and zero per cent in October last year.

This is the highest level of Wholesale price index-based (WPI) inflation since February when it was 2.26%.

While food article prices softened in October, manufactured items witnessed hardening of prices, according to data released by the Commerce and Industry Ministry on Monday.

Food inflation in October stood at 6.37%, as against 8.17% in the previous month.

The rate of price rise in vegetables and potato remained high at 25.23% and 107.70%, respectively, during the month.

 

1:00 PM

Mutual funds add 4 lakh folios in Oct; total tally at 9.37 crore

Investor enthusiasm remains high despite high market volatility.

PTI reports: “The mutual fund industry has added over 4 lakh investor accounts in October, taking the total tally to 9.37 crore, primarily on account of contribution from debt schemes.

Market experts said the addition of folios suggests that investors were undeterred by the market volatility.

Besides, it indicates their understanding of the market risks associated with the mutual fund schemes, they added.

According to data from the Association of Mutual Funds in India (Amfi), the number of folios with 45 fund houses rose by 4.11 lakh to 9,37,18,991 at the end of last month from 9,33,07,480 at September-end.

The sector added 7.37 lakh investors account in September, 4.25 lakh in August, 5.6 lakh in July, 5 lakh in June, 6.13 lakh in May and 6.82 lakh in April.

Of the total new folios last month, more than 2 lakh were added in debt funds.

Folios are numbers designated to individual investor accounts. An investor can have multiple folios.

The number of folios under equity and equity-linked saving schemes rose by 30,000 in October to 6.39 crore.

Debt schemes folios count went up by 2.23 lakh to 75.25 lakh. Barring, long duration, credit risk, all categories in debt funds witnessed growth in folios.

Short duration funds added Rs 41,690 folios in October, followed by corporate bond funds (Rs 33,935), liquid funds ( 28,839) and banking and PSU (public sector undertaking) funds (Rs 17,075).

Overall, investors infused Rs 98,576 crore in various mutual fund schemes last month, driven by robust inflows in debt-oriented schemes.

Debt-oriented schemes witnessed a net inflow of Rs 1.1 lakh crore in October, after recording net outflows for two months in a row. The inflow was largely on the back of a significant investment in liquid, short-duration and money market categories.

On the other hand, the equity mutual funds saw an outflow for the fourth consecutive month to Rs 2,725 crore in October, mainly on profit-booking by investors.”

12:30 PM

Walmart nearly exits Japan after selling majority stake in Seiyu

Walmart Inc. is selling a majority stake in Japanese supermarket chain Seiyu to investment firm KKR and e-commerce company Rakuten for over $1 billion, after suffering years of poor profitability amid stiff competition.

The deal, which values Seiyu at 172.5 billion yen ($1.65 billion) including debt, comes after on-off speculation about the world’s biggest retailer looking to exit Japan. It is below the 300-500 billion yen it reportedly sought a few years ago.

KKR will buy 65% of Seiyu and Rakuten will acquire a 20% stake while Walmart will retain 15%, the companies said in a joint statement on November 16.

Walmart first entered the Japanese market in 2002 by buying a 6% stake in Seiyu, and gradually built up its stake before a full takeover in 2008.

But it has struggled in Japan, like other foreign entrants such as Tesco PLC and Carrefour SA who were lured by the high spending power of Japanese consumers but were frustrated by tough competition.

 

12:00 PM

Gold hits 1-week high as dollar eases, pandemic worsens

The second wave of the pandemic is turning out to be good for the yellow metal.

Reuters reports: “Gold prices touched a one-week high on Monday as the dollar retreated, while mounting U.S. coronavirus cases fuelled concerns over the pandemic’s impact on economic recovery, underpinning hopes of further monetary stimulus.

Spot gold rose 0.2% to $1,892.15 per ounce by 0540 GMT, after hitting its highest level since Nov. 9 at $1,898.81 earlier in the session. U.S. gold futures were up 0.3% at $1,892.20.

The dollar index hit a one-week trough, making bullion cheaper for holders of other currencies. Coronavirus cases crossed the 11-million mark in the United States on Sunday, while President-elect Joe Biden’s top advisers called for urgent action to address the crisis.

“There are still underlying problems in structural economies, with job creation being the biggest problem,” said Stephen Innes, chief global market strategist at financial services firm Axi. “Central banks are going to keep the markets flushed enough to bridge this gap between now and the vaccine.”

Germany’s Economy Minister Peter Altmaier said the country should brace for another 4-5 months of severe measures to halt the outbreak. U.S. Federal Reserve Chairman Jerome Powell repeated last week his view that more action from the central bank and Congress, in the form of further fiscal stimulus, would likely be needed.

 Gold, which tends to benefit from stimulus measures from central banks as it is considered a hedge against inflation and currency debasement, has soared 25% this year. Prices fell 3.3% last week after Pfizer said its experimental COVID-19 vaccine was over 90% effective based on initial trial results.

“From a technical point of view, gold may face some resistance around $1,900-$1,905,” said Howie Lee, economist at OCBC Bank, adding that bullion’s move higher depends on clarity on fresh U.S. fiscal stimulus. Silver rose 1.1% to $24.91 per ounce. Platinum rose 1% to $897.52, while palladium was 1.1% higher at $2,350.20.”

11:30 AM

Maruti Suzuki India sells over 2 lakh cars via online channel

Yet another pandemic-induced trend in the economy.

PTI reports: “The country’s largest carmaker Maruti Suzuki India on Monday said it has sold over two lakh cars through the online channel.

The company, which initiated its online sales platform around two years back, said the digital channel now covers nearly 1,000 dealerships across the country.

“Since the introduction of this new digital channel in 2018, we have witnessed three times increase in digital enquiries and recorded sales of over 2 lakh units since April 2019. This digital channel has helped to generate over 21 lakh customer enquiries,” Maruti Suzuki India Executive Director (Marketing & Sales) Shashank Srivastava said in a statement.

Citing ‘Google Auto Gear Shift India 2020 Report’, he said nearly 95 per cent of new car sales in India are digitally influenced as per the customers first research online and then buy at the physical dealerships. While online experience provides the complete spectrum of information to the customers, at the last mile the customers seek assurance of the deal from their trusted dealer advisors.

“Interestingly, customers who enquire through our digital channel end up purchasing a car within 10 days. This reaffirms that with a robust online to offline platform executed by a digitally enabled salesforce, converting digital enquiries into sales becomes easier,” Srivastava said.

He said the company witnessed a two-fold increase in ‘Near Me’ customer searches for Maruti Suzuki dealers.

“Our investment to create a hyper-local platform is to help customers discover faster and connect to their nearest dealers. This initiative has seen rapid growth in recent times. In the last two years, we have integrated over 1,000 dealerships across 3,000 online touchpoints in this digital transformation journey,” Srivastava added.

Maruti Suzuki India began taking online bookings in 2017. The company said as customer behaviour further shifts online, its dealership’s websites are witnessing a much larger traffic flow.

“The positive results of the initiatives are evident as digital enquiries for Maruti Suzuki have seen a five-fold increase to around 20 per cent of total sales. In the prevailing COVID-19 scenario, the digital enquiry contribution has further increased exceeding 33 per cent during the last five months,” the company said.”

11:00 AM

Fed balance sheet grows to a third of US GDP

 

10:40 AM

Reliance Retail acquires Urban Ladder

Reliance Retail Ventures Ltd. (RRVL), a subsidiary of Reliance Industries Ltd. (RIL), has acquired 96% of equity shares of Urban Ladder Home Décor Solutions Private Ltd. for a cash consideration of ₹182.12 crore.

RRVL has the option of acquiring the balance stake, taking its shareholding to 100% in the acquired company.

RRVL will make a further investment of up to ₹75 crore in Urban Ladder and this investment is expected to be completed by December 2023, the company said in a filing with stock exchanges.

Incorporated in India in 2012, Urban Ladder is in the business of operating a digital platform for home furniture and décor products.

It also has a chain of retail stores in several cities across India.

 

10:20 AM

Let the power of compounding serve you

Often, a question comes to me from a client, viewer or reader. ‘When should I start investing for retirement?’ My answer is, ‘The day you earned your first income. The day we start working.’ If you experienced your first day of work, it also means that some day you would retire. On retirement, we all will need a ‘money’ tree that will feed us when our income stops.

Anyone who has ever sowed a seed will know that all seeds do not blossom. Many fail to germinate. Out of the few that survive, not all go on to become large trees.

Some will die after a few weeks, or months. In some cases, there could be external factors such as adverse weather conditions, an animal eating away the leaves and the like. This can be compared with our savings that may suddenly get wiped out on account of contingencies such as income loss due to an adverse economy or health-related spending.

 

10:00 AM

India rate cuts bets fall as recovery gains hold, inflation stays high

Why the RBI may not resort to further rate cuts, according to the market.

Reuters reports: “Negative real rates in India and recovering growth alongside high inflation suggest its central bank has little room for more monetary stimulus, but policy is likely to stay accommodative, economists and analysts said.

Industrial production in September grew for the first time in six months while green shoots are also visible in rising goods and services tax collections, higher energy consumption, and an uptick in the purchasing managers’ index among other gauges.

With inflation staying above 7% in October for a second straight month, well above the RBI’s medium term target of 4%, views that India is near the end of the current rate cutting cycle have become more pronounced.

“The inflation rate has been consistently ahead of not only your target rate but the upper end of your target range as well. Ideally, you should be looking at rate hikes right now,” said Sameer Narang, chief economist at Bank of Baroda.

Though the central bank is unable to hike rates due to the impact of the COVID-19 pandemic on economic activity, it would still be mindful of the long-term impact of negative real interest rates on the economy, economists believe.

High inflation is a risk the RBI cannot afford to ignore, Nomura economists wrote in a note.

JOKER IN THE PACK

The RBI said on Wednesday that prospects for economic recovery have brightened, a comment interpreted by some analysts that the bank may not need to do much more to boost growth.

If the upturn is sustained over the next few months, the RBI said it expects the economy to break out of the contraction seen in the first two quarters and return to positive growth in the December quarter.

Rating agency Moody’s on Thursday revised its 2020/21 growth forecast to a 8.9% contraction from its earlier forecast of 9.6%, citing the steady decline in new and active COVID-19 cases since September.

But COVID-19 is widely seen as the joker in the pack by most analysts.

They said the central bank would help banks and corporates through lower borrowing costs unless a second wave of infections forces it to provide more direct support through rate cuts.

India’s daily coronavirus infections are less than half their peak hit in September, but the economy is still recovering from sweeping lockdowns to check the pandemic’s spread.

Since March, the RBI has slashed the repo rate by 115 basis points to cushion the shock from the crisis.

“Given the fragile state of the economy, the RBI is likely to continue with its accommodative stance for a prolonged period,” Sujan Hajra, chief economist at Anand Rathi Securities said.”

9:30 AM

Asia forms world’s biggest trade bloc, a China-backed group excluding U.S.

Fifteen Asia-Pacific economies formed the world’s largest free trade bloc on Sunday, a China-backed deal that excludes the United States, which had left a rival Asia-Pacific grouping under President Donald Trump.

The signing of the Regional Comprehensive Economic Partnership (RCEP) at a regional summit in Hanoi, is a further blow to the group pushed by former U.S. President Barack Obama, which his successor Trump exited in 2017.

Amid questions over Washington’s engagement in Asia, RCEP may cement China’s position more firmly as an economic partner with Southeast Asia, Japan and Korea, putting the world’s second-biggest economy in a better position to shape the region’s trade rules.

The United States is absent from both RCEP and the successor to the Obama-led Trans-Pacific Partnership (TPP), leaving the world’s biggest economy out of two trade groups that span the fastest-growing region on earth.