Stan AF Posted August 5, 2019 Posted August 5, 2019 How the NBFC crisis sent India's automobile sector into a tailspin Some 286 dealerships have shut down in the last 18 months and banks fear the crisis could result in a new wave of bad debt on books. - Reuters With NBFCs struggling, auto component makers, dealers and buyers were stung badly Sudhir Gharpure and his sales team sat chatting at a big Maruti Suzuki dealership on the outskirts of Mumbai some two hours after its doors were opened on a recent Saturday morning - not a single customer was in sight. “There used to be close to 15-20 bookings each day, but now we're down to 3-5 on good days,” said Gharpure, the general manager at the dealership. Gharpure's experience is not an isolated one. Across India dealerships are being pushed out of business and the Indian auto sector is going through its biggest slump in nearly two decades. Passenger vehicle sales fell for eight straight months until June, and in May sales dropped 20.55% - the sharpest recorded fall in 18 years. Preliminary data indicates passenger vehicle sales may have plunged as much as 30 percent in July. The slump in India, along with a simultaneous slide in Chinese auto sales, is a blow for automakers wrestling with higher costs driven by more stringent emission norms and a push to develop electric cars. Unlike in China, where the plunge in cars sales has been caused largely by new emissions rules, India has seen a mix of factors that have combined to erode demand for automobiles. Read also: Why the NBFC crisis is entering a new phase Prime Minister Narendra Modi's 2016 ban on high-value bank notes, higher tax rates under a new goods and services tax regime, a boom of ride-sharing firms such as Uber and Ola, and a weak rural economy have all played a role. But many dealers and automakers agree it is a deepening liquidity crunch among India's shadow banks that has been the biggest single factor in an auto sales collapse, which some fear may lead to more than a million job losses. Non-banking finance companies (NBFCs), or shadow banks, have dramatically slashed lending following the collapse of one of the biggest, IL&FS, in late 2018. IL&FS, or Infrastructure Leasing & Financial Services Ltd, was a behemoth in shadow banking and its defaults and unravelling, amid fraud allegations, have dried up funding for rivals and led to a surge in their borrowing costs. Non-bank or shadow banking firms generate credit outside traditional lenders, by means such as collective investment vehicles, broker-dealers or funds that invest in bonds and money markets. In India, NBFCs have in recent years helped fund nearly 55-60% of commercial vehicles both new and used, 30% of passenger cars and nearly 65% of the two-wheelers in the country, according to rating agency ICRA. To aggravate matters, the stress in the autos market has also prompted banks to begin trimming their exposure to the sector. “The car doesn't sell, it's the finance that sells,” said R. Vijayaraghavan, a senior marketing consultant at the same Mumbai dealership. “Today the finance is not selling, so the cars are not selling.” Problems amplified Some 286 dealerships have shut down in the last 18 months across India as rising costs for inventory management have made businesses unviable, according to the Federation of Automobile Dealers Association (FADA), a lobby group of auto dealers. “The slowdown in the (NBFC) sector has dragged down vehicle sales growth,” said A.M. Karthik, financial sector head at ICRA. ”Now the auto slowdown is becoming more visible as the liquidity squeeze continues.” Automakers including Maruti Suzuki, Tata Motors , and Mahindra & Mahindra are feeling the heat and have either cut production or temporarily closed plants to correct mounting stocks. According to FADA data, passenger vehicle inventories now stand at 50-60 days up from around 45 days earlier, while those of two-wheelers are even higher at 80-90 days. For commercial vehicles, inventory levels range between 45 and 50 days. “We are asking dealers to maintain an inventory of 21 days, which is almost half of the current levels,” said Ashish Kale, president of FADA. At least four dealers from different brands said, however, there was little scope to reduce inventories as automakers were pushing them to buy stock despite there being no demand even with heavy discounting and other sops on offer. While 70-75% of car sales were previously financed in-house by NBFC or bank agents sitting at a dealership, that has fallen to about 50%, say dealers, as buyers struggle to qualify under more stringent lending norms put in place by lenders that are under pressure to shore up their books. Moreover, as many NBFCs typically lent to less creditworthy clients, banks are reticent to rush in to fill the void, as they themselves struggle to cope with an existing pile of about $150 billion in bad loans. “The banking sector is certainly one of the factors that has affected the growth of the industry,” said R.C. Bhargava, chair of Maruti Suzuki, noting interest rates for car buyers have gone up in the last 12 months despite the central bank cutting rates. Early recovery unlikely With the autos sector employing more than 35 million people directly and indirectly, and contributing more than 7% to India's GDP and accounting for 49% of its manufacturing GDP, the fallout from the autos slump is huge and presents a big challenge to Prime Minister Narendra Modi's government as it begins its second term. The entire supply chain, from vehicle manufacturers to component makers, are bleeding amid the slump. “I've been making my payments for the last 30 years and the lenders know me,” said Adarsh Gupta, the director of finance at Autolite (India), a component manufacturing firm. “But even a two-day delay has people crying that I will default. “I too want to pay, but because of the fall in cashflows I'm facing short-term issues and because of that it's difficult to get more financing. This is the vicious cycle we are in.” Still, automakers are hopeful of a recovery in the months ahead, helped by the September-December festive season that traditionally sees a surge in consumer spending. “One can only wish that things improve sooner rather than later. With festive demand starting to seep through, we should start seeing a gradual improvement in sales,” said P.B. Balaji, group CFO at Tata Motors. Analysts are more sceptical though, and say without vehicle financing becoming cheaper and easier the chances for that are low. With no silver lining in sight, analysts fear bad debts could mount in the auto sector, forcing banks to further reduce their exposure. “We see market prices and sales coming down so there may be issues,” said a top official at the Indian Banks' Association. ”We could see a spillover in terms of bad loans for the overall sector, but we are going to wait and watch.” Dealers said they were hopeful of tiding over the current downturn as the broader growth story for India remains intact, but there could be a lot more pain before a recovery kicks in. “The future is going to be multi-brand car showrooms,” said marketing consultant Vijayaraghavan. “That is the only way for dealerships to survive going forward as overhead costs need to be shared.” https://www.thehindubusinessline.com/money-and-banking/how-the-nbfc-crisis-sent-indias-automobile-sector-into-a-tailspin/article28814259.ece
Stan AF Posted August 5, 2019 Posted August 5, 2019 Sensex crashes below 650 points, Nifty below 10800 https://timesofindia.indiatimes.com/business/india-business/sensex-crashes-over-650-points-nifty-below-10800/articleshow/70530320.cms
Stan AF Posted August 5, 2019 Posted August 5, 2019 (edited) India needs 9% GDP growth to realise PM Modi's $5 trillion economy target: EY EY in its latest edition of Economy Watch stated that the size of Indian economy will grow to $3 trillion from $2.7 trillion in the previous year, supposing India grows by projected 7% in the current fiscal year ending March 31, 2020. BusinessToday.In Last Updated: August 4, 2019 | 16:13 IST India will constantly need to grow by 9% every for five years and elevate aggregate investment rate to 38% of GDP in order to realise PM Modi's ambition of seeing India as a $5 trillion economy, EY has said. India will constantly need to grow by 9% every for five years and elevate aggregate investment rate to 38% of Gross Domestic Product (GDP) in order to realise Prime Minister Narendra Modi's ambition of seeing India as a $5 trillion economy, EY has said. EY in its latest edition of Economy Watch stated that the size of Indian economy will grow to $3 trillion from $2.7 trillion in the previous year, supposing India grows by projected 7% in the current fiscal year ending March 31, 2020. The Indian economy will have to progress by 9% in each of the succeeding years to take the economy size to $3.3 trillion in FY21, $3.6 trillion in FY22, $4.1 trillion in FY23, $4.5 trillion in FY24 and $5 trillion in FY25. "Assuming an inflation rate of 4 per cent which is the target inflation rate as per the Monetary Policy Framework, a real growth rate close to 9 per cent would be required to increase the size of the Indian economy to $5 trillion by FY25. This implies a nominal growth rate of 13 per cent, assuming an average annual depreciation of the rupee vis-a-vis the US$ at 2 per cent," it said. In FY19 (2018-19), the gross investment rate, estimated at 31.3 per cent, was able to deliver a real growth rate of 6.8 per cent. The implicit incremental capital-output ratio (ICOR) was 4.6, it said. "This is relatively high because of deficient capacity utilisation." Historically, India's average ICOR during the three-year period from FY17 to FY19 has averaged 4.23. The highest achieved investment rate in India was 39.6 per cent in FY12. EY said achieving such levels would be consistent with the requirements of our demographic dividend. In China, average saving and investment rates of close to 45 per cent have been maintained for a long period. Total investment is the sum of public investment, household investment and investment by the private corporate sector. Raising the growth rate to 9 per cent in FY21 would require uplifting the investment rate to close to 38 per cent of GDP as against 31.3 per cent in FY19, it said. "If the inflation rate is lower than 4 per cent on an average and if the exchange rate depreciation is higher than 2 per cent per annum, reaching the size of USD 5 trillion would be delayed even beyond these target years." While the central government plays a four-fold role in determining the overall investment rate through its budgetary capital expenditure, spending through PSUs, policy initiatives inducing private investments and coordination with state governments, the Centre's share in country's aggregate investment was quite small at 1.6 per cent of GDP in FY19. As per actuals from the Controller General of Accounts (CGA), this constituted only 5.1 per cent of the aggregate investment. After adding central PSU's capital expenditure of 2.4 per cent of GDP in FY19, the Centre's contribution to the investment increases to 4 per cent of GDP, which is 12.6 per cent of the total investment. "This can be substantially improved. The center may, therefore, provide a policy framework to induce the state governments and the private sector to uplift their investment rates," EY said. "Furthermore, if the central government can successfully reduce its revenue deficit, there would be room for higher capital expenditure with the same fiscal deficit. It can also induce additional investment through the CPSEs while keeping in mind, the overall constraint of resources in the form of savings in the system." https://www.businesstoday.in/current/economy-politics/india-economy-9-per-cent-gdp-growth-pm-modi-5-trillion-dollar-economy-target-ey/story/370433.html No way India is going to grow to 3 trillion by this year. Edited August 5, 2019 by Stan AF
Stan AF Posted August 5, 2019 Posted August 5, 2019 (edited) Rs 15,00,000 cr gone in 30 days as blue chips bear brunt of FII selloff NEW DELHI: The massive selloff in the stock market has eroded Rs 15,00,000 crore worth of investor wealth in last 30 days. While broader market has been in pain for the entire first half of Calendar 2019, a selling spree by foreign investors post the July 5 Budget and earnings disappointment have ensured that largecaps no longer remain safe bets. At Monday’s low of 36,443, BSE Sensex was mere 374 points away from erasing entire this year’s gains. The 30-pack index had closed at 374 points away from erasing entire this year’s gains. The 30-pack index had closed at 36,068 on December 31. BSE’s total market capitalisation has fallen 10 per cent to Rs 138 lakh crore from Rs 153.58 lakh crore on July 5. Sensex has fallen 8 per cent during the same period. “There were no big bang reforms, or any major stimulus, in the Union Budget. On the contrary, an increase in income-tax surcharge and the proposal to raise public shareholding dampened investor sentiment and led to a sharp correction post Budget,” Kotak Securities said in a note. Consensus Nifty EPS estimates have been seeing repeated cuts, with the momentum of downgrades spreading across stocks. Earnings of Nifty companies so far (two-thirds of the index weight) indicated Q1FY20 EPS gr .. Reliance Industries, the second most valued stock on Dalal Street, dropped over 3 per cent on Monday after foreign brokerage Credit Suisse cut its rating by 26 per cent. Recently, foreign brokerage UBS cut Maruti Suzuki India rating to ‘sell’ from ‘buy’ while CLSA cut M&M’s rating to ‘sell’. Tata Motors, UPL, IOCL, Axis Bank, Vedanta and Tech MahindraNSE 1.87 % are a few companies, which have missed profit estimates, triggering cut in price targets for these stocks. . Read more at: //economictimes.indiatimes.com/articleshow/70531923.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst Edited August 5, 2019 by Stan AF
velu Posted August 5, 2019 Posted August 5, 2019 3 hours ago, Stan AF said: Rs 15,00,000 cr gone in 30 days as blue chips bear brunt of FII selloff right decision .. let them pay tax like what FIIs and other companies do
Stan AF Posted August 6, 2019 Posted August 6, 2019 Rupee Tumbles to 70.73 Versus US Dollar as Indian Economy Moves at Snail's Pace, Chinese Yuan Fares Better in Market INDIA AUGUST, 05 2019 New Delhi, August 5: With the Indian economy going through a rough phase, another sad piece of news arrived as the Indian rupee on Monday weakened most against the US dollar since September 2013. The rupee ended 1.6 percent lower at 70.73 a dollar, its steepest fall since 3 September, 2013. https://www.latestly.com/india/news/rupee-tumbles-to-70-73-versus-us-dollar-as-indian-economy-moves-at-snails-pace-chinese-yuan-fares-better-in-market-1076713.html
Stan AF Posted August 6, 2019 Posted August 6, 2019 (edited) India m-cap slips below $2 trillion after a sharp drop in the rupee The increase in tax surcharge, introduction of the buyback tax and a lack of stimulus to boost economic growth have left investors disappointed Business Standard Last Updated at August 5, 2019 23:18 IST<br /> After ceding the tag of the fastest-growing major economy, India has now moved out of the $2-trillion market capitalisation club. The combined market value of all domestically-listed stocks stood at $1.95 trillion on Monday, following a sharp drop in the rupee against the dollar and a slide in the markets. Indian markets have lost nearly $250 billion in market value since the Union Budget The increase in tax surcharge, introduction of the buyback tax and a lack of stimulus to boost economic growth have left investors disappointed. India, by far, is the worst-performing major market in the past one month, having declined 11 per cent in dollar terms. India’s peak dollar market cap was $2.45 trillion in January 2018, when its rank had climbed to seventh globally. At present, India is the ninth-biggest market in terms of market cap. https://www.business-standard.com/article/markets/india-m-cap-slips-below-2-trillion-after-a-sharp-drop-in-the-rupee-119080501807_1.html Edited August 6, 2019 by Stan AF
Stan AF Posted August 6, 2019 Posted August 6, 2019 (edited) US labels China a currency manipulator, escalating trade war The move underscores the rapidly deteriorating ties between world’s two largest economies. The Trump administration formally labeled China a currency manipulator, further escalating its trade war with Beijing after the country’s central bank allowed the yuan to fall in retaliation for new US tariffs. While the US Treasury Department’s determination is largely symbolic, as the potential punishments are a shadow of the steps Trump has already taken against China, it underscores the rapidly deteriorating relationship between the world’s two largest economies. The move roiled mark he move roiled markets, with S&P 500 Index futures sliding more than 1 per cent Tuesday in Asia. The yuan stabilized as China announced its daily fix for the onshore level. The US announcement followed a declaration by China’s central bank chief, Yi Gang, that his nation wouldn’t use the yuan as a tool to deal with trade disputes. “I am fully confident that the yuan will remain a strong currency in spite of recent fluctuations amid external uncertainties,” Yi said in a statement. Pr .. Read more at: //economictimes.indiatimes.com/articleshow/70545877.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst Edited August 6, 2019 by Stan AF
mishra Posted August 7, 2019 Posted August 7, 2019 Growth forecast down by 0.1% ie 6.9% from 7%. Dont know much but India can do with little bit of Inflation. BTW would like growth forecasters to allways get it right. This 5% -6% isnt right and looks more of a shoddy job They should be accurate to a level like 5.45%-5.5%
Stan AF Posted August 7, 2019 Posted August 7, 2019 Outlook for India’s growth is bleak and RBI forecasts this year nail it RBI cuts growth forecast for 2019-20 for the third time in 6 months — to 6.9% from 7.4%. Remya Nair Updated: 7 August, 2019 4:48 pm IST Reserve Bank of India Headquarters, in Mumbai | PTI New Delhi: Want to know just how consistently the Indian economy has been slowing down? Take a look at the bi-monthly outlook of Reserve Bank of India’s monetary policy committee this year. The outlook is bleak and every meeting of the panel since February has reinforced this.The RBI Wednesday, while announcing a surprise and unconventional 35 basis points rate cut, further pared India’s growth forecast to 6.9 per cent for the year 2019-20 — the third such downward revision in six months. In February, the monetary policy committee had projected the economy to grow at 7.4 per cent, but subsequently reduced it to 7.2 per cent in the April review and to 7 per cent in the June review. The 6.9 per cent growth forecast is lower than the 7 per cent growth projected by the Economic Survey for 2019-20 and may be further revised downwards in the coming months if one reads between the lines of the statement issued by the RBI committee. Graph: Arindam Mukherjee | ThePrint ‘Boosting aggregate demand assumes highest priority’ The committee made the 6.9 per cent projection “with risks somewhat tilted to the downside”. “Various high frequency indicators suggest weakening of both domestic and external demand conditions. The Business Expectations Index of the Reserve Bank’s industrial outlook survey shows muted expansion in demand conditions in Q2, although a decline in input costs augurs well for growth,” the RBI committee’s statement said. “Boosting aggregate demand, especially private investment, assumes the highest priority at this juncture while remaining consistent with the inflation mandate.” The tonality of the statement is in stark contrast to the December monetary policy review that was full of optimism. At that time, the committee had said there has been significant acceleration in investment activity and high frequency indicators suggested that it was likely to be sustained while credit off-take from the banking sector has strengthened. It had projected the economy to grow at 7.5 per cent in the first half of 2019-20 while maintaining a status quo on rates. The February monetary policy — the first one helmed by RBI Governor Shaktikanta Das — cautioned against some of the downside risks, but remained optimistic about the growth in the economy. It projected the economy to grow at 7.4 per cent in 2019-20 with “risks evenly balanced”, while announcing a 25 basis points rate cut. The April monetary policy had said there were signs of weakening domestic investment activities as reflected in a slowdown in production and imports of capital goods. The moderation of growth in the global economy might impact India’s exports, it had warned. On the positive side, it had pointed out that private consumption has remained resilient. While announcing another 25 basis points cut, it downgraded the growth projection to 7.2 per cent with “risks evenly balanced”. However, since then, concerns over growth have come to the fore. ‘Current slowdown is cyclical, not structural’ The Indian economy slowed to a five-year low of 5.8 per cent in the fourth quarter of 2018-19, data released by the Central Statistics Office in May revealed. Graph: Arindam Mukherjee | ThePrint The full-year growth for 2018-19 also slowed down for the second consecutive year to 6.8 per cent as against 7.2 per cent in 2017-18 and 8.2 per cent in 2016-17. Along with investment, private consumption slowdown also came to the fore as reflected by shrinking sales of automobile and consumer durables. Graph: Arindam Mukherjee | ThePrint The June monetary policy further lowered the growth projection to 7 per cent with “risks evenly balanced” and said that domestic investment activities have weakened and overall demand has been weighed down partly by slowing exports. Weak global demand due to escalation in trade wars may further impact India’s exports and investment activities. Further, private consumption, especially in rural areas, has weakened in recent months, it had said. Addressing a press conference Wednesday after the monetary policy review, Das said the 6.9 per cent growth forecast has been made with risks to the downside. Das termed the current slowdown as a “cyclical slowdown” and not really a deep structural slowdown, but stressed the need for structural reforms to be undertaken. He added that the government would take necessary measures required to address the growth slowdown in the economy. Aditi Nayar, principal economist, ICRA Ltd, said the unconventional 35 bps rate cut is a clear signal that the “increasing evidence of a pervasive slowdown in economic growth has emerged as the MPC’s (monetary policy committee) chief concern, given that it expects inflation to remain under its medium-term target”. https://theprint.in/economy/outlook-for-indias-growth-is-bleak-and-rbi-forecasts-this-year-nail-it/273627/
Stan AF Posted August 7, 2019 Posted August 7, 2019 Consumer confidence in economy dwindled in July, says RBI survey 1 min read . 08:47 PM IST Asit Ranjan Mishra The last time it was this worse was in December 2018 The survey showed 59.4% consumers expect their situation to improve a year from now while 24.6% consumers feel their situation will deteriorate The RBI survey was conducted in 13 major cities and obtained 5,351 responses (Photo: Reuters) New Delhi: For the first time since December last year, more Indian consumers now feel they are worse off than a year ago while they are hopeful that their situation will improve a year from now. According to the latest July round of Consumer Confidence Survey released by the Reserve Bank of India on Wednesday, while 37.4% respondents said they are better off now than a year ago, 38.4% respondents said they are worse off. Thus, net response is a negative 1%. Only in December, 2018, the net response was a negative 6.4%. Similarly, the survey showed 59.4% consumers expect their situation to improve a year from now while 24.6% consumers feel their situation will deteriorate. Thus, the net response was positive 34.8%. This was the lowest since November, 2018 when net 22.4% saw their situation better off a year ahead. The RBI survey was conducted in 13 major cities – Ahmedabad, Bengaluru, Bhopal, Chennai, Delhi, Guwahati, Hyderabad, Jaipur, Kolkata, Lucknow, Mumbai, Patna and Thiruvananthapuram. It obtained 5,351 responses on households’ perceptions and expectations on the general economic situation, the employment scenario, the overall price situation and their own income and spending. When it comes to their current perception compared to the situation a year ago, the sentiment is negative with sign of deterioration in three out of five sub-indices such as economic situation, employment, price level. While the sentiment is positive in case of 'spending' with sign of improvement as compared to last round and in case of 'income', the sentiment is still positive but with a sign of deterioration compared to the previous round of survey. On consumer expectations one year ahead from now, the sentiment remains negative with sign of deterioration compared to last round only in case of price level. For all other indicators such as economic situation, employment, income and spending, the sentiment remains positive with sign of deterioration compared to last round. https://www.livemint.com/news/india/consumer-confidence-in-economy-dwindled-in-july-says-rbi-survey-1565190681114.html
Stan AF Posted August 8, 2019 Posted August 8, 2019 (edited) One of the core issues which lie at the heart of many of these problems has to do with India’s dwindling investment rate. In just under a decade, India’s Gross Capital Formation (investment rate) has fallen about 9 percentage points from a high of 40... Read more at: https://www.deccanherald.com/opinion/india-needs-to-urgently-address-its-investment-problem-752680.html Read more at: https://www.deccanherald.com/opinion/india-needs-to-urgently-address-its-investment-problem-752680.html Edited August 8, 2019 by Stan AF
Stan AF Posted August 9, 2019 Posted August 9, 2019 Something Even the terrorists couldn't achieve in 2008
velu Posted August 9, 2019 Posted August 9, 2019 @Stan AF ஆளே இல்லாத கடைல யாருக்குப்பா டீ ஆத்தற ...??? Stan AF 1
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