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FPIs invest Rs 15,958 crore in first week of May

Reversing their two-month selling streak, overseas investors pumped in a net Rs 15,958 crore in the Indian capital markets in the first week of May. As per latest depositories data, foreign portfolio investors (FPI) infused a net Rs 18,637 crore in equities, but pulled out a net Rs 2,679 crore from the debt segment between May 1-8, taking the cumulative inflow to Rs 15,958 crore.

The latest inflow comes after two consecutive months of huge withdrawls.

In March, FPIs had withdrawn a record amount of over Rs 1.1 lakh crore on a net basis, while Rs 15,403 crore was pulled out in April from the domestic capital markets (both equity and debt).

“Despite uncertainty looming large over the severity of the possible impact of coronavirus pandemic on the global as well as Indian economy, FPIs surprisingly changed their stance this week as they turned net buyers in the Indian markets,” said Himanshu Srivastava, senior analyst manager research, Morningstar India.

The recent investment could be attributed to India doing fairly well compared to many other countries in terms of containing COVID-19 pandemic from spreading aggressively, Srivastava said.

In addition to that, measures announced by the government and the RBI periodically to revitalise the sagging economy would have also resonated well with investors, he added.

However, he cautioned that though it is a welcome shift in FPIs’ investment pattern, it would be premature to term it as a change in trend as this could be short-term buying given the relatively attractive valuations.

The growing fears of a prolonged global economic slowdown has triggered a risk-averse environment with investors taking flight to safety, he said. Harsh Jain, co-founder and COO at Groww pointed out that “we are seeing more tensions rise globally as Trump threatens action against China…Such news does affect the global investor’s sentiments.”

Going forward, Srivastava said FPIs would track how selective relaxations in the lockdown and gradual opening up of the economic activity in the country plays out.

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SEBI rebukes Franklin Templeton after CEO’s comments: ‘Focus on returning investors money’

Market regulator Securities and Exchange Board of India (SEBI), late Thursday night advised Franklin Templeton to focus on returning investor’s money after the fund house decided to wound up six of its debt mutual fund schemes. The comments from SEBI came soon after Franklin Templeton’s President and CEO, Jennifer Johnson partly blamed a SEBI rule from 2019 for the eventual closing of the debt fund schemes. SEBI rebuked the claim made by Franklin Templeton and said that since the credit events of September 2018, a need was felt to change the regulatory framework for mutual funds to safeguard investors’ interest and maintain the robustness of their investments.

“It was observed that unlisted debt securities, particularly bespoke securities in which only a single investor invested, suffered from both forms of opaqueness: opaqueness of structure and true nature of risk on the one hand and lack of ongoing disclosure in respect of financials of the issuer on the other,” SEBI said. The market regulator said that in order to address issues and improve transparency and disclosure of investments in debt securities made by mutual funds with money entrusted to them by investors, SEBI had constituted various working groups.

The working groups constituted by SEBI, consisting of representatives from AMCs, industry and academia, who were to review the risk management framework with respect to liquid schemes and to review the existing practices on valuation of money market and debt securities. “Further, an internal working group was constituted to, inter-alia, review prudential norms for Mutual Funds for investment in various debt and money market instruments. The analysis along with recommendations of the working groups were placed in a meeting of Mutual Fund Advisory Committee (MFAC) held in June, 2019,”SEBI said.

The market’s regulator in the late evening press release said, “MFAC had made several recommendations for prudential norms for Investment in Debt and Money Market instruments by Mutual Funds including investments only in listed NCDs and Commercial Papers (CPs) in the interest of greater transparency and accountability.” The MFAC, led by former SBI boss Arundhati Bhattacharya also had Franklin Templeton’s India head, Sanjay Sapre on the committee, according to SEBI.

“Despite the regulations being clear, some mutual fund schemes chose to have high concentrations of high risk, unlisted, opaque, bespoke, structured debt securities with low credit ratings and seem to have chosen not to rebalance their portfolios even during the almost 12 months available to them so far,” SEBI said while asking franklin Templeton to focus on returning the money of investors as soon as possible=, but refrained from setting a timeline.

Franklin Templeton had earlier last month announced wounding up of six debt fund schemes and blocked redemptions indefinitely. The closed funds include — Franklin India Low Duration Fund, Dynamic Accrual Fund, Credit Risk Fund, Short Term Income Plan, Ultra Short Bond Fund and Income Opportunities Fund. Johnson, in an earning conference call had said that the 2019 order by SEBI orphaned one-third of its funds, which led to the eventual wounding up of the six schemes.

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Yes Bank results surprise investors, share price soars 20% to hit circuit; check net profit, income

Yes Bank share price today zoomed as much as 20 per cent to hit upper circuit at Rs 31.60 apiece on BSE in an otherwise weak trade on Thursday, after the private sector lender reported a net profit of Rs 2,629 crore for the quarter ended on March 31. Yes Bank, which is now recovering with the help of an RBI-guided bailout, had posted a loss of Rs 18,560 crore in the October-December quarter of FY20, and a net loss of Rs 1,506 crore in the January-March quarter of the previous year. Net Interest Income (NII) for the fourth quarter of FY20 stood at Rs 1,274 crore, a growth of 19.6 per cent sequentially on account of lower slippages compared to the corresponding period of the previous year.

Yes Bank share price opened at Rs 25.80 on Thursday and hit an intraday high and low of Rs 31.60 and Rs 25.25, respectively, in the session so far. Yes Bank has reported a gross non-performing assets (Gross NPAs) of Rs 32,878 crore and net non-performing assets (Net NPAs) of Rs 862,37 crore.

Reserve Bank of India superseded the board of troubled private sector lender YES Bank and imposed a 30-day moratorium on it, following which, shares of the lender hit a record low of Rs 5.55, plunging 85 per cent. However, Yes Bank resumed all its banking services for customers from March 18, 2020.

During the quarter ended March 31, 2020, under Reconstruction Scheme, 2020, cash strapped Yes Bank raised equity capital of Rs 10,000 crores from State Bank of India (SBI) and seven private financial institutions which include HDFC Ltd, ICICI Bank, Kotak Mahindra Bank, Bandhan Bank, Federal Bank and IDFC First Bank. RBI placed Yes Bank under moratorium and superseded the board with former SBI official Prashant Kumar.

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S&P says Indian banks highly stressed, quotes Axis Bank Q4 results

S&P on Tuesday said Axis Bank’s results for the year ended March 31 underscore high levels of stress and uncertainty across the Indian banking system.

“The negative outlook on Axis (BBB-/Negative/A-3) reflects our view that the economic risks for the banks, and the Indian economy at large, remain high,” the agency said in its report.

“In our opinion, systemic pressures for Indian banks could rise owing to the recently announced extension of the nationwide lockdown to check the Covid-19 spread,” the global rating agency wrote.

It said Axis Bank identified that more than 10% of its customers (25% of its loan book by value) as on April 25 availed the payment moratorium. The bank’s additional bad-loan provisioning of Rs 7,700 crore, including Rs 3,000 crore related to the Covid-19 pandemic, triggered its Rs 1,400-crore after-tax loss for the quarter ended March 31.

“Axis’ credit costs for the quarter ended March 31 are higher than we anticipated, but some of it is precautionary, in our view. Prudent provisioning will certainly help the bank take care of future credit costs. The significant number of the bank’s borrowers opting for moratorium could be partly due to some of the stronger borrowers also opting to conserve liquidity in these tough times. We will compare the proportion of customers availing the moratorium to see if Axis is an outlier to peers. We expect the bank to maintain its strong market position and adequate capitalisation over the next 18 months,” the agency said.

Large unanticipated asset quality shocks could result in a downgrade of the bank, S&P said. Such a situation could arise if Axis’ stressed assets rise significantly beyond the system average or economic risks in India rise sufficiently for a downward revision of the banking industry country risk assessment on the country, it said.

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