The deal to sell 20% stake in Reliance refining business to Saudi Aramco has picked up steam. The proposal was first announced in August 2019 valuing the overall refining and petchem business at $75 billion with the 20% stake at $15 billion. RIL is keen to sign a binding agreement before the next AGM in September. The deal had been stalled due to outstanding fees owed by RIL on its gas finds. The government had actually asked the court to stop the sale to ensure that RIL refining business has enough assets to pay the outstanding amount to the government. It will help RIL reduce leverage.
Donald Trump indicated in no uncertain terms that there would be no trade deal with India during his visit in the end of February. In fact, a limited trade deal was a big expectation but Trump has indicated that a full-fledged trade deal with India may happen closer to the US elections towards the end of 2020. Donald Trump has not been too happy with the pace at which Indian government had been opening up many of its sectors for US companies. There were expectations that India could partly open the agriculture and dairy sector to US companies, something they had avoided doing all these years.
Sensex closed 429 points up on Wednesday even as the Nifty closed 125 points higher. The sentiments were turned by the positive cues coming from the telecom sector. Vodafone Idea rallied by 40% in a single day after the DOT agreed not to cash the bank guarantees of Vodafone which would push the company to the brink of insolvency. The positive cues led to a spurt of short covering in the markets as the Nifty closed convincingly above the 12,100 mark. The proposal to launch a telecom fund to ease the cash flow pressures on the telecom sector is also likely to be viewed positively by the stock markets.
There has been a sharp fall in the percentage of shares pledged in the BSE500 companies as promoters used the rally in stocks to reduce their pledges. In, fact pledged holdings in the BSE500 companies fell sharply from 2.52% to 2.28% on a QOQ basis in December 2019. Promoters of Bajaj Consumer and Nippon Life did away with their pledges altogether. Promoters of other companies like Zee, Centrum, Adani Green, JSW Energy and Max Financials substantially reduced their pledged shares in the December quarter. Between Mar-18 and Dec-19, pledged percent of BSE-500 fell from 2.91% to 2.28%.
Even as the death toll in the Coronavirus pandemic has crossed the 2000 mark, China is working against time to control the virus and also the economic and social effects of the virus. The strict travel and movement curbs have had a huge impact on business with scores of Chinese losing their jobs due to lack of business. Of the small and medium enterprises in China, nearly 60% of businesses believe that they would not be able to survive another month in this cash crunch. Stimulus packages are nothing new for China and they had done that in 2008 and 2009 but that had resulted in a mountain of debt. Chinese government is already working towards unemployment insurance to avoid mass layoffs. Joblessness was already 5.2% before the virus scare and it is feared that it could have gone up sharply.
A recent report brought out by MOSPI has shown that the Indian savings rate had plunged to a 15 year low. Indian gross savings fell from 34.6% of GDP in 2012 to just 30.1% in 2019. This figure was above 36% in 2007, prior to the financial crisis. Household savings have also fallen from 23% of GDP in 2012 to a new low of 18% in 2019. A high domestic savings rate is essential to finance the investments made by businesses. Else, these businesses will have to start relying on external sources of funding which could have an impact on the current account as well as on the rupee value. That could be a challenge for India.
