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QBiz: Auto Sector Crisis Worsens; Longer Overdraft Time for States

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1. Crisis in Auto Sector Worsens as More Firms Defer Payments

Alliance partners Renault India Pvt. Ltd and Nissan Motor India Pvt. Ltd, as well as Ashok Leyland Ltd, have decided to defer payments to suppliers because of the adverse impact of COVID-19 on their domestic businesses, said three people aware of the development, requesting anonymity.

Renault Nissan Automotive India Pvt. Ltd (RNAIPL), a joint venture between Renault and Nissan for procuring spare parts, wrote a letter informing suppliers about its decision. Hinduja Group-owned Ashok Leyland informally told suppliers that there could be a possible delay in payments.

(Source: Livemint)

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2. RIL, HDFC, Infosys Shares May Be Hit by MSCI Index Rejig, Even as Indian Equities Get Rs 50,000 Crore

The expansion of India’s weightage in MSCI indices, prompted by a regulatory change in the foreign portfolio investment (FPI) limits of public listed companies, could bring windfall gains to shares of certain companies including Kotak Mahindra Bank, IGL and Biocon, but at the same time, may cut the heft of heavyweight stocks such as Reliance Industries and HDFC.

The change in India’s weightage would flood the Indian equity markets with funds worth over Rs 52,000 crore as foreign investors would queue to invest in shares of public listed Indian companies.

“The top five beneficiaries of this regime change are L&T, Asian Paints, Bajaj Finance, Nestle and Divi’s Labs – these stocks could see the most increase in their stock weights in the index,” Morgan Stanley said in a research note. “On a relative basis, large cap stocks such as RIL, HDFC, and Infosys are likely to see the most reduction in weights given the upward rebalancing of beneficiaries,” Morgan Stanley research said. The three stocks, whose relative weightage could be cut, are the top three constituents on the MSCI India index.

(Source: The Financial Express)

3. TRAI Pulls up Mobile Operators Over Extension of Validity

Sectoral regulator Telecom Regulatory Authority of India (TRAI) has pulled up mobile operators for selectively picking prepaid customers for extension of validity, leading to many such users being without connectivity as they did not get the benefit.

In similarly worded letters to operators including Vodafone Idea, Bharti Airtel and Reliance Jio, TRAI has asked the telcos to “take immediate steps to ensure that all prepaid subscribers can enjoy uninterrupted services during the period of lockdown”.

The Financial Express had reported on Monday, 6 April, that since the extension of validity by the telecom operators during the lockdown does not cover the entire 2G user base, it was causing problem to a section of customers. Roughly, of the total 500 million 2G users, around 200 million have got left out of this facility.

(Source: The Financial Express)

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4. Rupee Ends Higher Against the Dollar

The domestic currency ended at 75.63 against the dollar, up 0.44%. The rupee had opened at 75.94 and touched a high of 75.57 and a low of 75.99 a dollar during the day. The 10-year government bond yield closed at 6.42% up 11 basis points from its previous close.

The domestic currency traded for the first time on Tuesday, 7 April, after the Reserve Bank of India (RBI) revised timings for debt markets because of the lockdown. On Friday, RBI had announced a change in debt money market timings from the existing 9am-5pm to 10am-2pm. The new arrangement came into effect on Tuesday and will continue till 17 April.

(Source: Livemint)

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5. IndusInd Bank Records Meagre 4% Deposit Growth

Private lender IndusInd Bank on Tuesday, 7 April, said its advances grew 13 percent at the end of March 2020 much slower than the 20 percent growth it had recorded in credit growth at the end of the December quarter. In value terms, its advances stood at Rs 2.09 lakh crore versus Rs 1.86 lakh crore during the corresponding period last year.

Its deposits grew a paltry 4 percent at the end of March to Rs 2.02 lakh crore versus Rs 1.94 lakh crore at the end of March 2019.

Its deposits had grown 23 percent at the end of December. Out of the total deposits 34 percent was contributed by retail and small business customers. Its CASA ratio stood at 40.5 percent at the end of March 2020, which was at 43.1 percent in March 2019 and 42.4 percent at the end of December.

(Source: The Economic Times)

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6. Lufthansa to Discontinue Germanwings, Slash Fleet in Sweeping Restructuring

Lufthansa will close its Germanwings low-cost airline as part of a broader overhaul including capacity cuts across the group, it said on Tuesday, 7 April, as it warned it could take years for the industry to recover from the coronavirus crisis.

The group, which also owns the Austrian Airlines, Swiss and Eurowings brands, said the coronavirus had forced it to accelerate radical restructuring steps.

Its shares were up 1.1% in late trading.

"It will take months until the global travel restrictions are completely lifted and years until worldwide demand for air travel returns to pre-crisis levels," it said.

(Source: Livemint)

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7. SBI Reduces Savings Account Interest Rate to 2.75%; MCLR Cut by 35 bps

The country’s largest lender, State Bank of India (SBI), announced today that it has cut interest rates on saving accounts by 25 basis points. With effect from April 15, 2020, savings accounts will earn 2.75 per cent an annum. Along with the reduction in savings deposit rates, the bank also cut marginal cost-based lending rates (MCLR) by 35 bps across all tenors. (1 basis points/bps = 0.01 per cent).

According to the SBI press release, the one year MCLR comes down to 7.4 per cent per annum from 7.75 per cent, with effect from April 10, 2020. "This is the eleventh consecutive cut in MCLR in FY 2019-20. Consequently, EMIs on eligible home loan accounts (linked to MCLR) will get cheaper by around Rs. 24.00 per 1 lakh on a 30 year loan," the press release stated.

(Source: The Economic Times)

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8. RBI Gives States Longer Overdraft Period

The Reserve Bank of India has allowed a longer overdraft period for States and Union Territories (UTs) with immediate effect.

This facility to tide over the cashflow mismatches will be available till September.

States and Union Territories can now be in overdraft continuously for up to 21 working days against the earlier limit of 14 working days. Further, the number of days States and UTs can be in overdraft in a quarter has been increased to 50 working days from the current 36.

(Source: The Hindu BusinessLine)

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9. Airbnb Raises $1 Billion to Stockpile Cash in Pandemic

Airbnb said Monday that it had raised $1 billion in new funding as it grapples with devastation from the coronavirus pandemic and as some technology startups take extra measures to stockpile cash during the outbreak.

Private equity giant Silver Lake and investment firm Sixth Street Partners led the investment, which was a mixture of equity and debt. Airbnb, a home rental startup that was previously valued at as much as $31 billion, also lowered its internal valuation to $26 billion last month, according to a person with knowledge of the situation who declined to be identified because the information was confidential.

(Source: The Economic Times)

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