The First Forum is an initiative that focuses on covering the latest happenings going around in the world in a brief format. This is in lieu with the importance of catching up with these events in this fast-changing world.
In this Forty-Seventh Edition of The First Forum we would be covering the following:
1. Business
2. Economics
3. Finance

(By Mehak Gupta , Nikunj Gulati and Kanika Meena)

Business

Govt proposes two dates for e-commerce cos on displaying country of origin

The government has asked e-commerce companies to ensure that the ‘country of origin’ of all products is clearly listed on their platform so that the consumer can make informed decisions. The government gave the recommendation to online retailers that for new products listed on e-commerce platforms, the country of origin should be displayed next to the products from August 1, 2020.

Co-living players eye corporate sector with hybrid accommodation models

With work from home becoming the new normal after the Covid-19 outbreak, co-living companies are coming up with hybrid models eyeing corporate clients. Under this, they are looking at offering coworking along with co-living, by providing inmates with working space along with facilities like conference rooms, desks for work and dependable high-speed internet. Read MoreBengaluru-based co-living player Gesture, for example, is looking at rolling out work-from-home development centers where corporate employees can work and live. The project, which will be launched by end of July, will have dedicated floors for each company. The company is in talks with players in the IT, FMCG, and start-ups to provide them with such tailor-made spaces. The company has identified 15 of its properties in Bengaluru, Chennai, and Noida to turn them into dedicated co-living spaces, where employees can stay and work. This facility would be availed by 12 companies in sectors such as BFSI and IT.

Television, digital ads grow at 40% and 60% of pre-COVID levels

One of the country’s top media executives Uday Shankar, president of The Walt Disney Company for the Asia-Pacific (APAC) region, recently indicated the industry was overdependent on advertising revenue. But this reliance on advertising will not go away anytime soon. Instead, media industry experts and agency heads point to a revival in television (TV) and digital advertising in June, as big spenders such as fast-moving consumer goods (FMCG), automobiles, and e-commerce get operations back to pre-COVID-19 levels. Read MoreThe data from TAM AdEx, sourced from the industry, showed that advertising volumes per day on TV grew by 74% in June versus April when there was a sharp decline in ad spends on account of the lockdown. The Broadcast Audience Research Council (BARC), on the other hand, said that TV ad insertions by the top 10 advertisers, including names such as Hindustan Unilever, Procter & Gamble, and ITC, had increased by 13% for the week ended June 26 versus the previous week. BARC said this was because of renewed interest in advertising by key spenders on account of a sales revival in smaller towns and cities.

Startup funding down 29% in the first half of 2020 amid Covid-19 crisis

Startup funding activity decreased by 29% in the first six months of this year to $4.2 billion compared to $5.9 billion in the same period last year, due to the impact created by the coronavirus pandemic, according to data analytics firm Tracxn. Only 443 companies were funded in the January-June period this year against 725 in H1, 2019, according to ‘India Tech Semi-Annual Factsheet’, compiled by Tracxn. Read MoreIn the same period, three unicorns or startups valued at more than $1 billion (each) emerged compared to six last year. These were kids and baby products online retailer FirstCry, fintech company Pine Labs, and online beauty and wellness retailer Nykaa. Also, there were 17 ‘soonicorns’ or companies that hold the potential to become a unicorn in the near future against 28 last year. In the lending space, companies such as Navi, Lendingkart, and InCred attracted most of the funding. Some of the key acquisitions that took place in the first half of this year included the purchase of digital credit firm Paysense by fintech firm PayU for $185 million and the acquisition of delivery firm Daily Ninja by online grocery firm Bigbasket.

IRB infra raises Rs 150 crore via NCDs on a private placement basis

IRB Infrastructure Developers on Wednesday said it has raised Rs 150 crore through allotment of NCDs on a private placement basis. “This is to inform you that the management administration and share transfer committee of the board of directors of the company…has allotted 9.55 percent secured, redeemable, listed, rated non-convertible debentures (NCDs) of the face value of Rs 10 lakh each, for cash at par, aggregating to Rs 150 crore on a private placement basis to an eligible investor,” the company said in a BSE filing. Read MoreDilip Buildcon, in a separate filing, said it has raised Rs 200 crore via NCDs. “The company has issued and allotted 2,000 senior, secured, listed, rated, redeemable non-convertible debentures rupee-denominated face value of Rs 10,00,000/- bearing a coupon rate 8.67 percent p.a, on private placement basis,” it said.

 

Economics

Chancellor Rishi Sunak unveils £30bn plan to save jobs

The U.K. government has set out a £30 billion plan to protect jobs and prevent mass unemployment as a result of the coronavirus pandemic. Chancellor Rishi Sunak promised that no one would be left “without hope” during the tough times. Companies that have furloughed staff will be paid a £1,000 bonus to keep their workers in their old jobs and valued added tax will be slashed for restaurants, hotels, and tourist attractions in moves to limit the impact of the post-coronavirus recession facing the United Kingdom. Read MoreIn his speech, Sunak said the furlough system had to end in October. He added “Leaving the furlough scheme open forever gives people false hope that it will always be possible to return to the jobs they had before.” He also announced a “eat out to help out” scheme to boost the hospitality industry under which the Treasury will pay half the bill of restaurant meals on selected days in August. The chancellor also announced a £2.1bn “kickstart scheme” to create more jobs for young people. The fund will subsidize six-month work placements for people on Universal Credit aged between 16 and 24, who are at risk of long-term unemployment.

India among most open economies, says PM Modi, calls for global investment

Prime Minister Narendra Modi said Asia’s third-largest economy is one of the most open in the world and offers investment friendly, competitive business environment and immense opportunities in the India Global Week 2020 which is themed as, ‘Be The Revival: India and a Better New World’. Speaking at the India Global Week, he said green shoots of economic revival are already visible in India that is coming out of coronavirus lockdown.Read More And even during the pandemic, the government had undertaken structural reforms that will improve the economy in the longer run. Highlighting that India has played a leading role in reducing the cost of medicines, especially for developing countries, it will have an important role in scaling up the production of the Covid-19 vaccine once it is discovered. To the agricultural sector, he said that reforms in this domain have opened up opportunities to invest in storage and logistics. Citing the defence sector, the PM said that “with relaxed FDI norms, one of the world’s biggest militaries invites you to come and make products for it” also talked about the scope of private investment in the MSME and space.

The downward revision of growth by agencies shows the deleterious impact of lockdown: EY

The sharp downward revision in growth by various national and international agencies indicates that the impact of the coronavirus-induced lockdown was highly deleterious, and the stimulus package was inadequate, Ernst and Young said. The agencies like the World Bank had projected the Indian economy to contract 3.2%. Read MoreAmong the domestic agencies, State Bank of India (SBI) and CARE Ratings have projected the economy to contract by 6.8% and 6.4%, respectively. India Ratings pegged it at 5.3%.  India’s fiscal stimulus at 1.25% of GDP is the third lowest among the major economies of the world but hoped that as more fiscal space gets created, there could be another round of stimulus towards the later part of the financial year. And the growth projections for the current year by various global and domestic agencies indicate a sharp contraction ranging from (-)3.2% to (-)6.8%. The more recent the projection, the steeper is the predicted contraction, EY said.

Indian economy shows the signs of normalcy: RBI Governor 

With the easing of restrictions, the Indian economy has started showing signs of restoring normalcy, RBI Governor Shaktikanta Das said while delivering the keynote at the 7th virtual SBI Banking and Economic Conclave. Das also added that the topmost priority for the central bank is the growth. However, it is still uncertain when supply chains will be restored fully, how long it will take for demand conditions to normalize, and what kind of durable effects the pandemic will leave behind on potential growth as COVID-19 is the worst health and economic crisis in the last 100 years with unprecedented negative consequences for output, jobs, and well being. Read MoreHe reiterated that the RBI has taken a number of important measures, conventional and unconventional, to boost the financial system and support the economy against the crisis. The economic impact of the pandemic due to the lockdown and anticipated post-lockdown compression in economic growth may result in higher non-performing assets and capital erosion of the banks, Das cautioned. A recapitalization plan for public and private sector banks has, therefore, become absolutely necessary, he said.

India’s GDP to contract by 3% in FY21, says Bank of America

Another estimate of the economic impact of the coronavirus induced lockdown. India’s GDP will contract by 3% in FY21, assuming the economy is opened up fully from next month, says BofA securities foreign brokerage. The estimate has been arrived at with the assumption that the lockdown will extend till mid-July and a restart of the economy will get stretched to August, analysts at Bank of America Securities said. Read MoreIt also said the RBI will monetize the fiscal deficit through the purchase of government bonds of up to $95 billion through open market operations, and its revaluation reserves of $127 billion may also be used to recapitalize state-run banks. Economists have been sharply cutting their growth forecasts for FY21 because of the impact of the pandemic and all watchers, including the RBI, now believe the Indian GDP will contract this fiscal, with some estimates ranging up to 7% negative growth. The biggest strength for India at present is the over $500 billion in forex reserves which have been accumulated by the RBI over some months.

 

Finance

Top five private banks stare at NPAs doubling to 5% in FY21
Top five private sector banks may see their slippages double to 5% this fiscal year because of poor loan offtake and the moratorium-driven contraction in net interest margins, a report warned. These five banks include HDFC Bank, ICICI Bank, Axis Bank, Kotak Mahindra Bank, IndusInd Bank and Yes Bank. Read MoreAccording to reports by Indian Ratings these banks collectively a quarter of the banking system and nearly three-forth of the private banking sector. FY21 slippages to nearly double to around 5% for these banks from 2.3% in FY19 and 2.7% in FY20, even though net slippages would be lower if refinancing remains a challenge, resulting in a 4% contraction in their net interest margin, the reports forecast. banks are parking their excess liquidity in low yielding alternatives such as government bonds and top-rated corporate securities as loans demands are tepid. The operating buffers — pre-provisioning operating profit (PPOP) could decline by up to 15% on a year-on-year basis in FY21.

Financial Sector Needs to be Recapitalised: Uday Kotak
The financial sector needs recapitalisation as it will witness erosion of capital due to increase in bad loans caused by the COVID-19 crisis, says Uday Kotak, Kotak Mahindra bank’s chief executive and managing director. He further added that there will be costs that cannot be borne by businesses or the government, and these will be borne by the financial sector as the banking sector’s loan book is about Rs 100 lakh crore and the total capital of all banks in India is about Rs 11 to 12 lakh crore. Read MoreSo, if 4-5% of loans turn bad due to COVID, capital position of banking sector will get impacted by 40%. He also said his bank with look through three filters in post COVID world: develop views on sectors the bank is comfortable working with, analyse levels of fixed operating costs of individual companies and be mindful about how we deal with businesses or companies with high leverage.

Goldman Sachs warns delayed Election results in November could rock the Market
Goldman Sachs is warning that the presidential election could see delayed results and is therefore recommending that clients hedge their market bets through December in anticipation of heightened volatility through November. There could be several factors that could delay the results beyond Nov. 3, including a rise in mail-in ballots as Covid-19 keeps people from voting in person. Read MoreGiven this, Goldman Sachs chief U.S. equity strategist David Kostin told its clients that they should limit their market exposure into December in order to stem any losses incurred from a nondefinitive election result. Looking at that market, he noted that implied volatility around the election is “extremely high compared with prior cycles.” A similar situation like the 2000 contest between George W. Bush and Al Gore could take place when it took 34 days for the winner to be announced.

Well Fargo’s new clients need minimum 1 million in balances for certain mortgage refinancings
Wells Fargo is tightening requirements for some mortgage transactions. It is mandating that new customers seeking to refinance a jumbo mortgage take $1 million in balances to the financial institution at a minimum compared to a $250,000 threshold in the past, according to reports. Read MoreThe move shows how Wells Fargo, the largest U.S. mortgage lender, is operating under the dual pressures of the coronavirus pandemic and a Federal Reserve cap on its balance sheet. While the entire industry has tightened access to mortgages amid the pandemic, the pullback has been more pronounced at Wells Fargo, which can’t grow its balance sheet thanks to the Fed order. The bank also tightened lending standards in its mortgage business in the July 1 overhaul, which impacts everyone applying for a home loan, not just jumbo refinancings.

Sensex, Nifty continue to scale back to pre-covid levels
Domestic benchmark indices despite ending this week’s last trading session in the red gained half a percent during the week with volatility coming back to haunt investors. With this, Sensex and the Nifty 50 are now up over 41% from their March lows.Read More In the coming week, markets are expected to react to June quarter results of listed companies, global stock markets and also the AGM of Reliance Industries for which investors will be all ears to the man who managed to erase the net debt of his firm during the coronavirus pandemic. Traders said domestic markets followed optimistic sentiments from global equities, shrugging off concerns over rising number of COVID-19 cases and its impact on economic recovery. Analysts are also still betting on stock-specific actions to steer the market with domestic factors not posing any grave threat in the coming weeks.

 

Get The Connectere directly in your E-mail inbox !

Enter your email address to subscribe to The Connectere and receive notifications of our new content on your E-Mail