After yesterday’s massive rally, which saw stocks gain over 8%, the benchmark indices are slightly up after trading with gains of over 3% this morning.
Growth and unemployment estimates coming from various agencies paint a bleak picture of the economy amid the 21-day economic lockdown.
Join us as we follow the top business news through the day.
Maruti cuts production by 32% in March
The country’s largest carmaker Maruti Suzuki India has decreased production by 32.05% in March, according to a regulatory filing by the company.
The company produced a total of 92,540 units in March as against 1,36,201 units in the year-ago month, the auto major said.
Passenger vehicle production last month stood at 91,602 units as against 1,35,236 units in March 2019, a dip of 32.26%, it added.
Production of mini and compact segment cars, including Alto, S-Presso WagonR, Celerio, Ignis, Swift, Baleno and Dzire stood at 67,708 units as against 98,602 units in March last year, down 31.33%
Stocks end day with losses
The benchmark stock indices ended today’s trading session down 0.5%, after being up well over 3% in the morning session, as they struggled to break past their most recent highs.
The Sensex was down 150 points at the end of trading, while the Nifty ended the day at around the 8,750 mark.
Rupee settles 70 paise lower at 76.34 against US dollar
The rupee has slipped further since the weak opening this morning, weakening past the 76/USD mark, due to the weakness in domestic equities and higher oil prices.
PTI reports: “The Indian rupee settled 70 paise lower at 76.34 (provisional) against the US dollar on Wednesday amid rise in coronavirus cases in the country and weak domestic equities.
Forex traders said rising brent prices and firm US dollar index also weighed on the local unit.
At the interbank foreign exchange, the rupee opened weak at 75.83, then lost further ground and finally settled for the day at 76.34, registering a fall of 70 paise over its previous close.
On Tuesday, the rupee had settled at 75.64 against the US dollar.
Domestic bourses were trading on a negative note on Wednesday with benchmark indices Sensex was trading 177.93 points lower at 29,889.28 and Nifty down by 73 points at 8,719.20.”
Industry needs stimulus package of Rs 9-10 lakh crore: FICCI survey
Industry body FICCI estimates that Indian businesses will need a massive stimulus package, amounting to 4-5% of GDP, to withstand the impact of the ongoing lockdown.
IANS reports: “The Indian industry requires an immediate stimulus package of Rs 9-10 lakh crore, which would account for 4-5 per cent of the country’s GDP, to recover from the impact of the coronavirus crisis and the ongoing nationwide lockdown, according to a survey by FICCI.
The report noted that other countries have also taken similar steps. The debt-to-GDP ratio of India is manageable, it added.
“This money to be injected for relief & rehabilitation across all levels of the economy including people at the bottom of the pyramid, informal workers, micro, small and medium enterprises and large corporates,” it said.
It said that given the complete breakdown of businesses there is a need to assess the situation and if required the timeline for loan moratorium should be extended.
The survey also suggested that all tax payments including GST payments should be deferred by six months without inviting any penalty.”
COVID-19 set to derail India’s affordable housing segment
The affordable housing sector, which has already been in trouble after the shadow banking crisis, is set for more pain in the wake of the economic lockdown.
IANS reports: “The coronavirus crisis and the ongoing lockdown in India will severely affect the country’s affordable housing sector, according to a report by Anarock Property Consultants.
The report noted that around 6.1 lakh affordable housing units were under construction across seven major cities when the 21-day nationwide lockdown was announced (on March 24 midnight), which are now stalled.
“The COVID-19 pandemic is all set to derail the growth momentum of affordable housing in 2020. This will be one of the worst-affected segments. As many as 6.1 lakh affordable units were under construction across top 7 cities when the lockdown was announced. This is over 39 per cent of the total 15.62 lakh under-construction units in the top 7 cities —— the highest share of all budget categories,” said the report.”
Invoke Essential Commodities Act to curb black marketing, Home Secretary tells States
Union Home Secretary Ajay Bhalla wrote to all State Chief Secretaries on Wednesday to ensure the availability of essential goods by invoking the provisions of the Essential Commodities (EC) Act 1955.
Offences under the EC Act are criminal offences and may result in imprisonment of seven years or fine or both. The State and Union Territory governments may also consider detention of offenders under the Prevention of Black-marketing and Maintenance of Supplies of Essential Commodities Act, 1980, Ministry of Home Affairs (MHA) said.
“I would urge you to personally take urgent steps to ensure availability of these commodities at fair prices for public at large,” Mr. Bhalla said in his letter.
These measures include fixing of stock limits, capping of prices, enhancing production, inspection of accounts of dealers and other such actions, a statement by the MHA said.
Bigger economic package to fight COVID-19 on cards, announcement soon
The Central government is said to be preparing a second economic rescue package to mitigate the effects of the lockdown imposed to check the spread of the coronavirus pandemic.
IANS reports: “The government may come out with another big package to address the demand and supply side issues facing the country, but its contours and timing of the announcement is yet to be worked out, senior government officials privy to the development said.
They added that the next economic stimulus package would be bigger than the Rs 1,70,000 crore worth of schemes announced by Finance Minister Nirmala Sitharaman last month focusing on providing food security to the poor and providing money in their hands to fight the Covid—19.
“The finance ministry is regularly interacting with various economic ministries and getting inputs from them over measures that would be required to give stimulus to the economy in this difficult period. These could be further discussed to finalise a concrete plan once the situation of lockdown becomes a bit clearer. In a lockdown many of the measures that the government announced may not yield desired results,” the officials quoted earlier said.”
Opinion: A different economic approach
by Puja Mehra
As it fights COVID-19 with its meagre healthcare resources, India has chosen to bring the economy to a near halt with no clear idea of how many lives can be saved in this manner. What is going to be the cost of this decision? The 21-day lockdown will reduce the gross value added (GVA) during this period to near zero. More than half the GVA is contributed by the unorganised sector. A disproportionate burden of the economic cost has fallen on this large segment. The suffering of the stranded migrant labourers has set off a debate: is the disruption and the economic pain justified? Is it worth sacrificing the economy to save lives? And at the core of such questions is a policy dilemma: should public health matter more than economic health?
In time, a vaccine will become available. But the economy cannot remain shut until that happens. A prolonged lockdown will extract a huge economic cost. Therefore, the policy objective must be to find ways of ensuring that the lockdown ends early without compromising on public health.
Stocks lose most morning gains
The benchmark stock indices, which were up over 3% earlier in the morning session, have lost most of their gains.
Stocks are up less than 1% at the moment, struggling to break above their most recent high reached late last month.
The Sensex is up 200 points while the Nifty is trading below the 8,900 mark.
China’s central bank to step up easing, but won’t borrow Fed playbook
China has largely refrained from massive stimulus measures to boost the economy since the outbreak of the coronavirus pandemic, but that might be about to change soon.
Reuters reports: “China’s central bank will ramp up its policy easing to support the coronavirus-ravaged economy but debt worries and property risks will prevent it from following the U.S. Federal Reserve’s steep rate cuts or quantitative easing moves, policy sources said.
China’s leaders have pledged to combat the impact from the pandemic that looks to have tipped the world’s second-largest economy into its first quarterly contraction in at least 30 years, as mounting job losses pose a threat to social stability.
The People’s Bank of China (PBOC) will boost credit and lower funding costs, especially for small firms seen as vital for growth and jobs, and accommodate increased fiscal spending, according to three sources involved in internal policy discussions. The sources declined to be named due to the sensitivity of the matter.”
Plunging fuel demand amid COVID-19 lockdown has OMCs worried on all fronts
National oil companies are staring at inventory losses as they have to bring down refinery throughputs because of the plunging demand for fuels following the nationwide lockdown to contain the deadly COVID-19 outbreak.
India is the world’s third-largest energy consumer, but the lockdown has shut businesses, suspended flights, stopped trains and brought almost the entire vehicular movement to a halt, impacting fuel demand.
For the full the month of March, total retail volume has come down by 17%, led by a 26% dip in diesel demand and a 17% fall in petrol. Demand for aviation fuel is down by 33%, according to the national data shared by IOC on a year-on-year basis.
Rupee slips 21 paise to 75.85 against US dollar in early trade
Rising oil prices have played spoiler for the rupee this morning, the currency slipping closer to the 76/USD mark.
PTI reports: “The Indian rupee fell 21 paise to 75.85 against the US dollar in opening trade on Wednesday, as investors braced for a prolonged period of uncertainty as coronavirus cases rise.
Forex traders said rising brent prices and firm US dollar index weighed on the local unit.
The rupee opened weak at 75.83 at the interbank forex market and then fell further to 75.85, down 21 paise over its last close.
The rupee had settled at 75.64 against the US dollar on Tuesday.”
Cash is trash?
Data | The lockdown effect on jobs in India
In the two weeks following the lockdown that began on March 24, the estimated share of the unemployed in India has reached a peak. While urban workers are the most hit, rural workers too recorded significant job losses. The labour participation rate (employed plus those searching for jobs) also significantly decreased. Fewer people are actively searching for jobs than before, and of them, more now are unemployed.
The overall unemployment rate (represented by the blue line, left axis) in India, as measured by The Centre for Monitoring Indian Economy (CMIE*), showed a sharp increase in the two weeks following the lockdown (measured on Mar. 29 and Apr. 5). Notably, the overall labour participation rate (represented by the yellow line, right axis) recorded a drastic decrease to 36.1% on April 5 from about 42% two weeks back.
Economy likely to contract by 4.5% in Q4FY2020: ICRA
Some really gloomy estimates coming from ICRA, which predicts a prolonged period of slow growth for the economy.
IANS reports: “Ratings agency ICRA on Tuesday predicted that India’s economy is likely to witness a sharp contraction of 4.5 per cent during Q4FY2020 and is expected to gradually recover to post a GDP growth of just 2 percent in FY2021.
ICRA has sharply cut its forecast for Indian GDP growth in FY 2021, post the Covid-19 outbreak.
Furthermore, ICRA said that it expects the ripple effect of coronavirus to impact India Inc on five major counts of domestic demand slowdown due to regulatory restrictions, lockdown and fear of contagion will impact certain sectors over the near-term.
Purchasing power erosion due to job losses or pay cuts and trickle-down effect of demand deferral will have a longer-lasting impact on some other sectors, especially where demand is discretionary in nature.”
Virus to cull 80,000 retail jobs: RAI survey
About 80,000 jobs are expected to be cut by retailers due to the ongoing COVID-19 pandemic, according to a survey by industry body RAI.
Retailers Association of India (RAI) had conducted a survey of 768 retailers, which employ 3,92,963 people across India, to gauge their view on the impact of COVID-19 on their business and manpower.
“Small retailers are expecting to lay off 30% of their manpower going forward, this number falls to 12% for medium (sized) retailers and 5% for large retailers. On the whole, retailers who were surveyed expect lay-offs of about 20% of their manpower,” RAI said.
Stocks open with minor losses
The benchmark indices opened this morning with a minor loss of around 0.2%. The Nifty and the Sensex were up over 8% at close of trading yesterday.
The Sensex has lost about 75 points while the Nifty is trading above 8,750
Overnight, the Dow Jones closed with a minor loss of 0.12%