Today’s top business news: Shares plunge as record infections prompt new lockdowns, oil drops as surging virus infections stoke demand concerns, automakers fear dent in sales, and more

The Nifty and the Sensex opened the day on a  negative note as rising coronavirus cases continues to worry investors.

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

4:30 PM

Second Covid wave impacting two-wheeler sales harder: Report

The virus strikes back at businesses.

PTI reports: “The second Covid wave has impacted the two-wheeler markets harder than the earlier one with sales declining by 30-50 per cent so far in April despite a mini festive season during the month, according to a report.

Smaller cities are seeing the impact of the second wave (unlike the first wave), amid the cases reported in the second week of April surpassing the peak of September last year, brokerage firm Motilal Oswal Financial Services said in its report.

Gudi Padwa, which is a major festival of Maharashtra, fell on April 13 while the 9-day fasting period Navrarati commenced from the same day last week, among other festivals.

Festive periods like Navratri and Gudi-Padwa account for a fair share of annual vehicle sales across the country, as per the report.

Noting that the month-to-date (MTD) saw significant decline in demand in two-wheeler retail sales, the report said that if demand fails to recover amid the mini festive season and wedding season, demand recovery may be deferred up to October, which is main festive season.

Dealers commenced April with high inventory owing to factors such as the year-end push and high sales expectations from the festive and wedding season (northern and central India) and also rural demand from the rabi harvest, it said.

However, according to the report, sales were much lower from the festive season and the rabi harvest with expected two-wheeler demand recovery during this period is yet to play out and is much lower than normal.

According to Motilal Oswal, inventory at some of the major two-wheeler manufacturers was manageable at the start of the month, with a supporting number of inquiries and bookings. However, dealers saw a significant increase in cancellations with the rise in Covid cases.

Maharashtra dealers on Gudi Padwa posted just 50 per cent of expected sales. UP retails were also impacted by the ongoing Panchayat elections, it stated.

Stating that unlike the first wave, the second wave would see limited benefit from pent-up demand, the report said, as per dealers, after the first lockdown, sales were driven by pent-up demand on account of the wedding season along with rabi harvest as well as non-availability of public transport.

Demand was further supported by cash in the market as well as a very low number of cases. However, people have lesser savings amid the second wave as a consequence of a slow economic activity in the current fiscal coupled with minimal cash inflow from migrant relatives and high medical bills.

Therefore, at the current rate of increase in Covid cases, recovery is expected to be more back-ended, it said.

On the wholesales side, while FY21 wholesales were down 12 per cent, retail registrations were down 32 per cent. This implies 23 per cent  of wholesalers were used to stock up on inventory post the BS6 transition, which is not likely to be the case this time around, as per the report.

It also said that since April 2020, OEMs are gradually taking price hikes post the BS6 launch to cover the increase in commodity prices as well as recover contribution margins on cost inflation. The two-wheeler OEMs took a price hike of 5–8 per cent up to April this year (since April 2020). This is adding to the hyper cost inflation of  around 25 per cent seen in 2Ws over April’2018– April 2020, which has also served as a deterrent, according to the report.”

4:00 PM

Sensex tanks 883 points as rising COVID-19 cases spooks market; Nifty below 14,400

Equity benchmark Sensex plummeted 883 points on April 19 following a massive across-the-board selloff as mounting COVID-19 cases spooked domestic investors.

After crashing over 1,469 points in early trade, the 30-share BSE index pared some initial losses but still ended 882.61 points or 1.81% lower at 47,949.42.

Similarly, the broader NSE Nifty tanked 258.40 points or 1.77% to 14,359.45.

PowerGrid was the top loser in the Sensex pack, slumping over 4%, followed by ONGC, IndusInd Bank, Kotak Bank, L&T, Asian Paints and Bajaj Auto.

3:30 PM

India to fund capacity boost at Serum Institute as vaccines run short – source

Emergency financing for the nationa’s primary vaccine maker.

Reuters reports: “India is set to accept the Serum Institute of India’s (SII) request for a grant of 30 billion rupees ($400 million) to boost its capacity to make the AstraZeneca COVID-19 vaccine, a government source with knowledge of the matter told Reuters.

SII, the world’s biggest vaccine maker, had sought the funds to increase its monthly capacity to more than 100 million doses by the end of May, from up to 70 million currently.

“We are clear that we will give whatever support is necessary for development and boosting availability of vaccines in the country,” the source said on Sunday, declining to be identified as he was not authorised to speak publicly on the matter.

As coronavirus infections overwhelm the country, the government is struggling to meet demand for vaccine doses. It has now fast-tracked imports and also trying to expand production of its only domestically developed shot, Covaxin.

Another source close to the company said late last week SII was expecting the money to come through.

A finance ministry spokesman declined to comment. SII did not respond to a request for comment.”

3:00 PM

Pandemic hurts working cap management, top-500 cos’ cash cycles stretched by 6 days: EY

Business finances come under stress.

PTI reports: “The pandemic has impacted the working capital management for companies and stretched top-500 listed companies’ cash cycles by six days, a study by a consultancy firm said on Monday.

In the 12 months ended September 30, 2020, businesses in India saw an increase in the cash-to-cash cycle by 6 days year-on- year, the study of top-500 listed companies by EY, said.

Businesses in India have an opportunity to free up to Rs 5.2 lakh crore tied up in working capital, which can help businesses rebound much strongly from the crisis, it added.

The study said 69 per cent of companies extended their payables to offset the effects of the pandemic on working capital.

It explained that the pandemic-induced lockdowns resulted in increased inventory balances and reduced collections for companies. Prudent companies resorted to the strategy of extending payables in order to manage disruption and preserve cash.

Large and medium enterprises continue to be more efficient in managing their working capital requirements. Higher bargaining power combined with effective business processes to manage working capital for large businesses resulted in a working capital cycle of 29 days shorter than the small enterprises, it added.

Nine out of 12 sectors, including metals and mining, oil and gas and pharmaceuticals observed an increase in days of inventory, it said.

From a sectoral perspective, the power sector has witnessed a 34 day deterioration in cash-to-cash cycle, oil and gas by 10 days, and, engineering and EPC (engineering, procurement and construction) services by 17 days, it said.

Some sectors, like automobiles (13 days), chemicals (12 days) and cement and building products (7 days) have seen an improvement as well, it said.”

2:30 PM

China’s Ant explores ways for Jack Ma to exit as Beijing piles pressure

Ant Group is exploring options for founder Jack Ma to divest his stake in the financial technology giant and give up control, as meetings with Chinese regulators signalled to the company that the move could help draw a line under Beijing’s scrutiny of its business, according to a source familiar with regulators’ thinking and two people with close ties to the company.

Reuters is for the first time reporting details of the latest round of meetings and the discussions about the future of Ma’s control of Ant, exercised through a complicated structure of investment vehicles.

The Wall Street Journal previously reported that Ma had offered in a November meeting with regulators to hand over parts of Ant to the Chinese government.

 

1:30 PM

Toyota to review climate stance as investors turn up the heat

Japan’s Toyota Motor Corp signaled a shift in its climate change stance on April 19, saying it would review its lobbying and be more transparent on what steps it is taking as it faces increased activist and investor pressure.

The car maker came under scrutiny after siding with the Trump administration in 2019 in a bid to bar the state of California from setting its own fuel efficiency rules.

Toyota “will review public policy engagement activities through our company and industry associations to confirm they are consistent with the long-term goals of the Paris Agreement,” it said in a statement, adding that actions will be announced by the end of this year.

The auto maker also said it will “strive to provide more information so that our stakeholders can understand our effort to achieve carbon neutrality.”

 

1:00 PM

Automakers fear dent in sales as COVID-19 cases surge in India

The recovery may be stalled.

PTI reports: “Leading automobile companies like Maruti Suzuki India (MSI), Toyota Kirloskar Motor and Honda Cars fear dent in sales as COVID-19 cases surged across the country.

The country’s largest carmaker MSI stated that the auto sales were correlated closely with economic growth and also (being a discretionary purchase) with the consumer sentiment.

“The COVID-19 situation deterioration is obviously a negative for customer sentiment and thus has a negative impact on sales,” MSI Executive Director (Sales and Marketing) Shashank Srivastava told PTI when asked about the impact of second wave of the pandemic on the company’s sales.

Lockdowns make it physically not possible to deliver cars but even the deterioration in COVID-19 situation without lockdown also psychologically dents consumer propensity to buy, he noted.

Similarly, Toyota Kirloskar Motor (TKM) Senior Vice President Naveen Soni acknowledged that localised restrictions have impacted order flow and delivery schedules.

“We will be able access trends and define numbers only by the end of the month depending on the severity and extension of the restrictions. As of date, we have had a good number of pending orders that had to be carried forward from the month of February and March to April. Therefore, we are striving to meet the customer demand in spite of the local restrictions and lockdowns,” he noted.

On manufacturing operations, Soni said the company continues to cautiously proceed with vehicle production.

“Our immediate focus is to fasten and streamline the demand and supply processes with more accuracy and manage production, along with faster deliveries making it easier and convenient for customers by reducing the delivery time,” he added.

Well-being of the employees as well as dealer and supplier staff are sacrosanct and the automaker has already reintroduced monitoring systems which were in place including submission of a self-declaration health form, Soni said.

“As responsible corporates, we are continuously monitoring the situation carefully and will take accurate actions, as and when required. More importantly, this time we have precious lessons from last year to learn, unlearn and reflect upon,” he noted.

Honda Cars India said it is keeping a close look at the emerging situation.

“Lockdown and weekend curfews will impact sales as showrooms will be shut in some of the markets. We are currently assessing and taking feedback from various cities about its extent,” Honda Cars India Senior Vice President and Director (Marketing and Sales) Rajesh Goel noted.

India’s total tally of COVID-19 cases crossed the 1.50 crore mark on Monday with a record single-day rise of 2,73,810 new coronavirus infections, while the active cases surpassed the 19-lakh mark.

The total tally of COVID-19 cases has mounted to 1,50,61,919 and the death toll increased to 1,78,769 with a record 1,619 daily new fatalities.

Registering a steady increase for the 40th day in a row, the active cases have increased to 19,29,329 comprising 12.81 per cent of the total infections, while the national COVID-19 recovery rate has dropped to 86 per cent.”

12:30 PM

Investors’ wealth tumbles over Rs 3.70 lakh crore as markets crack

The cost of the stock market crash.

PTI reports: “Investors’ wealth in morning trade on Monday tumbled over Rs 3.70 lakh crore as markets went into a tailspin amid record surge in coronavirus cases in India.

The 30-share BSE benchmark index tanked 1,469.32 points to 47,362.71 in early trade.

Following the massive selloff, the market capitalisation of BSE-listed companies declined by Rs 3,70,729.4 crore to Rs 2,01,60,016.60 crore in morning trade.

IndusInd Bank, Axis Bank, Bajaj Auto, SBI and ICICI Bank were the biggest drags among the BSE 30-share frontline companies’ list.

India’s total tally of COVID-19 cases crossed 1.50 crore with a record single-day rise of 2,73,810 new coronavirus infections, while the active cases surpassed the 19-lakh mark, according to the Union Health Ministry data updated on Monday.

“The health crisis India is going through and localised lockdowns and restrictions on economic activity warrant a market correction. The steady rise in test positivity cases and the steady decline in recovery rates are areas of serious concern. But, this negativity need not reflect fully in the market since the global clues are positive,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

In the previous trading session, the BSE benchmark closed 28.35 points or 0.06 per cent higher at 48,832.03.”

12:00 PM

Govt. working to save lives, livelihood: FM tells India Inc

Finance Minister Nirmala Sitharaman on Monday said she has taken inputs from various industry chambers on concerns of India Inc with regard to the management of COVID-19 pandemic and the Centre would continue to work with State governments to save lives and livelihood.

She sought feedback from businesses to deal with the impact of the second COVID-19 wave on the country’s economy.

It is to be noted that the economy contracted by a whopping 23.9 per cent in the first quarter (April-June) of the previous financial year due to the outbreak of the COVID-19 pandemic.

“Spoke on telephone with each of the following business/Chamber leaders. Took their inputs on industry/Association related matters. Informed them that GoI at various levels from @PMOIndia is responding to #Covid management. Working together with states for lives and livelihoods,” she said in a tweet.

 

11:30 AM

Rupee slumps 52 paise to 74.87 against US dollar in early trade

The rupee bears the brunt of the stock market fall.

PTI reports: “The Indian rupee slumped 52 paise to 74.87 against the US dollar in opening trade on Monday, amid fears that a rapid resurgence of COVID-19 cases in the country could disrupt economic recovery.

Besides, heavy selloff in domestic equities also weighed on investor sentiment.

At the interbank forex market, the domestic unit opened at 74.80 against the US dollar, then fell further to 74.87, registering a fall of 52 paise over its previous close.

On Friday, the rupee had settled at 74.35 against the American currency.

The Indian rupee started on a weaker note against the US dollar after another surge in coronavirus infections over the weekend increased the risk of more broadbased lockdowns, Reliance Securities said in a research note.

India’s total tally of COVID-19 cases crossed 1.50 crore with a record single-day rise of 2,73,810 new coronavirus infections, while the active cases surpassed the 19-lakh mark, according to the Union Health Ministry data updated on Monday.

Registering a steady increase for the 40th day in a row, the active cases have increased to 19,29,329 comprising 12.81 per cent of the total infections, while the national COVID-19 recovery rate has dropped to 86 per cent.

Meanwhile, Asian currencies were mostly weaker this Monday and could weigh on sentiments, the Reliance Securities’ note said adding that “the RBI could be present to curb volatility”.

In the domestic equity market, the 30-share BSE benchmark Sensex was trading 1,189.83 points lower at 47,642.20, and the broader NSE Nifty was down 340.60 points at 14,277.25.

Foreign institutional investors were net buyers in the capital market as they purchased shares worth Rs 437.51 crore on Friday, according to exchange data.

Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, rose 0.10 per cent to 91.64.

Brent crude futures, the global oil benchmark, fell 0.37 per cent to USD 66.52 per barrel.”

11:00 AM

FPIs pull out ₹4,615 crore from Indian markets in April so far

Foreign portfolio investors (FPIs) have pulled out a net ₹4,615 crore from Indian markets in April so far amid sharp escalation in COVID-19 cases and the consequent restrictions imposed by various states, unnerving overseas investors.

According to the depositories data, overseas investors pulled out ₹4,643 crore from equities but invested ₹28 crore in the debt segment.

This translated into a total net withdrawal of ₹Rs 4,615 crore during April 1-16.

Previously, FPIs invested ₹17,304 crore in March, ₹23,663 crore in February and ₹14,649 crore in January.

“Various states have imposed restrictions of varying degrees to curb the sharp rise in COVID-19 cases. The fear of rising coronavirus cases and currency depreciation has led to FPI outflows in this month to date,” Rusmik Oza, executive vice-president and head (fundamental research) at Kotak Securities, said.

 

10:30 AM

Oil drops as surging COVID-19 infections stoke demand concerns

The virus continues to be oil’s biggest nemesis at the moment.

Reuters reports: “Oil prices were lower on Monday as rising coronavirus infections in India and other countries prompted concerns that stronger measures to contain the pandemic will hit economic activity, along with demand for commodities such as crude.

Brent crude was down 23 cents, or 0.3%, at $66.54 a barrel by 0426 GMT, after rising 6% last week. U.S. oil was down 27 cents, or 0.2%, at $62.96 a barrel, having gained 6.4% last week.

“The progress of vaccination drives in the developed markets can be seen in road traffic levels, but resurging case numbers have reversed the recovery in the emerging countries,” such as India and Brazil, said ANZ Research in a report on Monday.

India reported a record rise in coronavirus infections of 273,810 on Monday, increasing overall cases to just over 15 million, making the country the second-worst affected after the United States, which has reported more than 31 million infections. India’s deaths from COVID-19 rose by a record 1,619 to nearly 180,000.

Hong Kong will suspend flights from India, Pakistan and the Philippines from April 20 due to imported coronavirus infections, authorities said in a statement late on Sunday.

Japanese companies believe the world’s third-largest economy will experience a fourth round of coronavirus infections, with many bracing for a further blow to business, a Reuters monthly poll showed.

Japan has had far fewer COVID-19 cases than many other major economies, but concerns about a new wave of infections are rising fast, according to their responses in the poll.

A slower rollout of vaccinations compared with other Group of Seven advanced countries and the lack of a sense of crisis among the public will trigger a new wave of infections, some companies wrote in the poll.

In the United States energy companies added oil and natural gas rigs for a fifth consecutive week for the first time since February as higher oil prices this year encouraged drillers to return to the wellpad.”

10:00 AM

Indian shares sink on record surge in daily COVID-19 cases

Another poor start to the day for stocks.

Reuters reports: “Indian shares dropped on Monday as the country struggled to contain an unrelenting surge in coronavirus infections, fuelling fears of harsher restrictions and more economic pain.

The NSE Nifty 50 index was down 2.4% at 14,264.10 by 0345 GMT, while the S&P BSE Sensex also declined 2.4% at 47,660.55.

India on Monday reported its tenth record daily increase in COVID-19 cases in eleven days, with the capital city of New Delhi — currently under a weekend curfew — reporting a shortage in critical-care beds.

The state of Maharashtra, home to financial hub Mumbai, has already imposed stringent curbs, effective April 15.

State owned banks led the declines among sectors as it dropped over 5% at open, on track for its third straight session of losses.

Private banks fell over 4%, with lending heavyweights HDFC Bank and ICICI Bank leading the losses on the benchmark index. Metal stocks lost 3.3%.”

9:30 AM

Are you an investor doing fundamental analysis?

Many individuals we talk to seem to consider themselves as investors and insist that they do fundamental analysis for stock picking. So, we decided to address these two topics in this column. Specifically, we discuss the difference between traders and investors and also show why most individuals may not be actually doing fundamental analysis.

It is generally argued that a trader has a short-term outlook whereas an investor has a long-term outlook. But how relevant is long term? Suppose your investments are down 20%. Of what use is an argument that equity generates good returns over the long-term if you need the money to fund your child’s college education three years hence? Whether you invest to achieve a life goal or to capture short-term movements in the market, your primary source of returns from equity is capital appreciation. That means you are exposed to market risk. Therefore, you are a trader, not an investor.