SBI Cards IPO was subscribed 0.39 times at the end of Day 1. However, what was more gratifying was the retail portion had been subscribed 0.62 times till the end of the first day. This is a good sign since most of the HNI and institutional applications come in on the last day of the IPO, which is the 05th of March. In spite of markets facing deep cuts in the last one week, the response to the SBI Cards IPO has been pretty encouraging considering the unique business model and also the pedigree of the SBI group backing them. The listing price would largely depend on the extent of oversubscription the issue gets.
Jack Welch, better known as Neutron Jack, passed away on 02 March 2020. He was 84 years of age. Jack Welch has the unique distinction of turning around General Electric and making it a powerhouse in American manufacturing. However, Welch was also the person who led the aggressive foray of GE into financial services; something that would eventually prove to the undoing of GE post the Lehmann crisis. GE, at one point of time, had a market cap close to $600 billion. However, post the huge losses it took on the financial services business, its market today stands at less than $90 billion.
The Sensex shed more than 900 points from its peak in a volatile session. One reason was that the market failed to get any buying support once the short covering trades were completed. However, there was also a sense of panic after two people in India were diagnosed with Coronavirus affliction. In the last few days, the impact of the Coronavirus has been much more rampant outside China. India had been largely immune to the virus affliction but these latest cases spread a sense of panic in markets. Lower growth projections by Fitch and US yields touching a low of 1.10% also impacted the markets.
The US Fed may be preparing to cut rates much sooner than expected as US bond yields appear to be indicating. US Bond yields on the benchmark 10-year bonds have fallen sharply in the last 1 month from 1.51% to 1.09%, one of the lowest levels it has seen in quite some time. The bond markets are clearly expecting the Fed to intervene and cut rates for now to ensure that the stock market carnage is arrested and the US does not slip into a slowdown. If the US Fed goes ahead with rate cuts to salvage the current situation, then many central banks, including the RBI, may also follow suit on rate cuts.
Fitch has cut India’s growth forecast for 2019-20 from 5.1% to 4.9%. It has also downsized its estimates for FY20-21 growth from 5.9% to 5.4%. According to Fitch, the credit squeeze that started with the NBFC crisis in late 2018 continues to remain an overhang on credit off take in India. Fitch also pointed out that the spate of recent bankruptcies could renew the problem of NPAs for banks and other financial lenders. Fitch has also pointed out that some key industries like automobiles, electronics and pharmaceuticals are facing a major challenge in terms of disruption in their supply chain due to their overt dependence on China. This disruption of the supply chain combined with weak domestic demand is likely to keep manufacturing under pressure. Gross fixed growth has contracted by (-4.5%).
The Indian rupee fell to a 1-year low as it slumped by 50 paisa in a single day to Rs.72.74/$. Clearly, the RBI was not supporting the rupee at the 72/$ levels, as it has normally done. The emergence of the Coronavirus cases in India had an impact on Rupee as it is expected to impact tourism and trade. The rupee also came under pressure as FIIs have pulled out nearly Rs.20,000 crore from equity and debt in the last 2 weeks since the pandemic hit equity markets. There is also a fear that China could drop the Yuan value to boost growth and that could weaken currencies across most of the emerging markets.
