Morning Scan: All the big stories to get you started for the day


#1. India’s sovereign bond yields rise at fastest pace in 14 years

India’s bond yields are rising at the fastest pace since the 2008 global financial crisis. In 2022, yields on the benchmark 10-year bond have climbed 107 basis points despite an accommodative central bank till May, when it increased benchmark interest rates. One basis point is a hundredth of a percentage point.

Why it’s important: Investors are pricing in the likelihood of stubborn inflation and higher government borrowing, outcomes that could force the Reserve Bank to raise policy rates more quickly than previously thought.

#2. Reserve Bank intervenes to save rupee, Sensex declines

The Reserve Bank of India stepped up its intervention in the foreign exchange market as the rupee headed for a new low after a weak opening. The rupee opened at 77.68 to a dollar compared to the previous close of 77.63, and ended the day at 77.71, down 8 paise from its previous close. India´s benchmark indices also declined about 1 percent ahead of the central bank’s policy decision on Wednesday.

Why it’s important: Currency dealers and investors assessed the outcome of a tighter monetary policy and squeezed liquidity and priced in the probability of the central bank raising benchmark interest rates.

#3. World Bank slashes India’s economic growth forecast to 7.5 percent

The World Bank has cut its 2022-23 gross domestic product growth forecast for India to 7.5 percent from 8 percent previously predicted due to inflationary pressures, supply-chain pressures, and geopolitical tensions due to war in eastern Europe. It also lowered its global growth forecast for 2022 calendar year to 2.9 percent from 4.1 percent.

Why it’s important: The headwinds of high inflation and geopolitical tensions will lower economic growth. Expansion will be mainly supported by fixed investment by the private sector and the government, which is giving incentives and introducing reforms to improve the business climate.

#4. Discounts on Russian crude oil limited for Indian refiners

Indian refiners are receiving lower discounts on Russian oil compared to European counterparts. Since the Ukraine war started, Indian refiners have significantly raised their intake of Russian oil that’s been selling at a deep discount to global benchmarks. But average discounts have been in the range of $ 10 per barrel, much lower than what is availed in Europe.

Why it’s important: Proximity to Russia has always meant lower delivered costs for Europe. Discounts have also been limited after the European Union restricted traders from supplying to non-European customers.

#5. Naresh Goyal and wife move court against fraud account tag

Naresh Goyal and his wife Anita, original promoters of Jet Airways, have mounted a legal challenge against a decision by the State Bank of India to club them with the airline in the list of fraud accounts. They have filed separate writ petitions before the Bombay High Court on the grounds that they were neither served show-cause notices nor heard by the state-owned bank. The matter is expected to be heard this week.

Why it’s important: Although the Goyals were neither guarantors nor direct borrowers, including them in the fraud list could trigger criminal proceedings and put them under the lens of govt investigative agencies.

#6. HDFC’s Parekh expects fair regulatory response to merger with HDFC Bank

The chairman of HDFC has said that he expected regulators to take a fair and judicious view on India’s largest mortgage financier’s proposed merger with HDFC Bank, and asked stakeholders to be patient. “At this juncture, we are awaiting regulatory guidance on the path forward. We remain respectful of all our regulators and are confident that the outcome will be judicious and fair at a systemic level,” Parekh said in his note to HDFC shareholders in its annual report.

Why it’s important: HDFC and HDFC Bank announced plans in April for an all-stock merger deal, for which regulatory approvals were expected in 15-18 months.

#7. Adani plans partnership with Flipkart on sourcing and wholesale

The Adani Group and Walmart’s Flipkart are in advanced talks to expand their partnership beyond warehousing and data centers into new domains, including wholesale e-commerce and sourcing of groceries and household goods.

Why it’s important: The partnership is likely to enable Flipkart to compete on a stronger footing against rival wholesalers such as Udaan, Amazon and JioMart. A revenue-sharing agreement will fetch income for both Adani and Walmart.

#8. Rural demand in India could revive from October on good monsoon

Rural demand may rebound in the second half of 2022-23 fiscal year if the monsoon brings bountiful rain, food prices remain high and there’s a spike in remittances from migrant workers before the festival season, analysts and company executives have said.

Why it’s important: A rise in incomes of rural households will be good for packaged goods companies, appliance makers, and two-wheeler and tractor manufacturers, which saw demand drop as price hikes to offset inflationary pressures resulted in cutbacks to consumption.

#9. Reopening future stores work in progress for Reliance

Reliance Retail is still in the process of opening the supermarkets it took over from the Future Group in February. It had taken control of 947 stores and planned to reopen them within 45 days. While some stores are functioning under the banner of Smart Bazaar, a grocery retail outlet of Reliance Retail, others remain shut as the conglomerate is yet to take a call on their business viability.

Why it’s important: The legal tussle between Amazon and Future has become largely moot after Reliance took over many of Future’s stores on nonpayment of rent. It now has the luxury of moving at its own pace to rebrand and reposition the retail assets.

#10. Expert banker panel to vet proposals to recast borrowings

Banks will jointly set up an expert committee to vet loan restructuring proposals involving amounts of Rs 5 billion or more. The committee to be set up by the Indian Banks’ Association will comprise financial services experts and will conduct process validation of the restructuring without interfering in the commercial judgment of the lenders.

Why it’s important: The development is expected to speed up the process of recasting loans and will also shield officials from subsequent scrutiny by investigative agencies.