Various estimates regarding the impact of the coronavirus pandemic on the world economy are starting to pour in, with many terming the current crisis as worse than the 2008 global financial crisis.Stocks are off to a strong start today with gains of over 3%. The Sensex has gained close to a thousand points while the Nifty is trading near the 9,000 mark. This has helped the rupee post some gains against the US dollar.2:00 PMLockdown hits electricity demandThe shutdown of most economic activity the last few days has, not surprisingly, dented the overall demand for electricity in the country.Reuters reports on the magnitude of the fall: “National electricity demand fell to 2.78 billion units on March 25, the first day of the three-week total shutdown called by Prime Minister Narendra Modi late on Tuesday.That was nearly 20% below the average of 3.45 billion units per day in the first three weeks of March, a Reuters analysis of government data showed.If demand continues at these reduced levels, India’s electricity consumption for March is set to decline at the fastest pace year-on-year since October, when power use fell at its steepest in over 12 years due to a broad economic slowdown.While electricity usage contracted nationally, consumption actually rose slightly in some states, raising concerns that the shutdown may not have been fully observed in all areas, although officials said higher temperatures may have contributed.”1:15 PMRBI recommendation for moratorium on EMI repayments half-hearted, says ChidambaramFormer Finance Minister P. Chidambaram on Friday welcomed the Reserve Bank of India’s (RBI) move to infuse liquidity into the markets but claimed that its recommendation for a three-month moratorium on EMI repayments was ‘half-hearted’.“I welcome the RBI’s decision to cut the repo rate and measures to provide more liquidity,” Mr. Chidambaram said on Twitter soon after RBI governor Shakti Kanta Das announced the decisions taken by the Monetary Policy Committee (MPC) of the central bank.Apart from increasing liquidity with steps such as reducing the cash reserve ratio, the RBI announced that banks are permitted to allow a three-month moratorium on payment of EMIs on all term loans that were outstanding on March 1.12:30 PMFineprint of RBI’s 3-month loan moratoriumManojit Saha offers some clarity on the RBI’s 3-month loan moratorium:The Reserve Bank of India on Friday took a series of measures to minimise the economic impact due to the lock down caused by Covid 19 which includes moratorium on term loans.”All commercial banks (including regional rural banks, small finance banks and local area banks), co-operative banks,all-India Financial Institutions, and NBFCs (including housing finance companies and micro-finance institutions) (“lending institutions”) are being permitted to allow a moratorium of three months on payment of installments in respect of all term loans outstanding as on March 1, 2020,” the RBI said.”Accordingly, the repayment schedule and all subsequent due dates, as also the tenor for such loans, may be shifted across the board by three month,” the RBI said.Terms loans will include retail loans like home and auto loans but credit card dues are not included. As a result equated monthly installment of borrowers are deferred by three months.Pallab Mohapatra, MD and CEO of Central Bank of India said since RBI has clarified that since banks do not have to classify these loans as non-performing there would be no adverse impact on credit score of the borrower. Interest will continue to accrue on the outstanding during the period though at a lower rate since RBI has reduced repo rate by 75 bps which the banks will have to pass on to the borrowers.
Today @RBI has taken giant steps to safeguard our economy from the impact of the Coronavirus. The announcements will improve liquidity, reduce cost of funds, help middle class and businesses. https://t.co/pgYOUBQtNl— Narendra Modi (@narendramodi) March 27, 2020
12:00 PMStocks lose most gains after RBI presserThe benchmark indices have pared gains made in the morning as the RBI’s stimulus measures failed to impress investors.The Nifty, which was trading close to the 9,000 mark this morning, is now trading below 8,750.The Sensex which was up close to 1,000 points in the morning is up only around 50 points at the moment.11:15 AMFinance Minister welcomes RBI’s measures
Appreciate @RBI @DasShaktikanta’s reassuring words on financial stability. The 3 month moratorium on payments of term loan instalments (EMI) & interest on working capital give much-desired relief. Slashed interest rate needs quick transmission. #IndiaFightsCoronavirus— Nirmala Sitharaman (@nsitharaman) March 27, 2020
11:00 AMCrisil cuts growth estimateRating agency Crisil has cut the country’s GDP growth forecast for the next financial year to 3.5% from 5.2% projected earlier, due to the spread of COVID-19.“We have slashed our base-case gross domestic product (GDP) growth forecast for fiscal 2021 to 3.5% from the 5.2% expected earlier. This assumes two things: a normal monsoon, and the effect of the pandemic subsiding materially, if not wearing out, in the April-June quarter,” said Dharmakirti Joshi, chief economist, Crisil.
10:45 AMStock market update: Stocks pare early morning gainsAshish Rukhaiyar reports from Mumbai:Indian equity indices surged northwards for the fourth consecutive session on Friday though coming off marginally from the highs after the first hour of trade even as the Reserve Bank of India (RBI) announced a slew of measures including a cut in key rates.The 30-share Sensex, which gained 1,179 points to touch a high of 31,126.03, was trading at 30,431.47, up 484.70 points or 1.62% after the RBI announced a 75 basis points cut in repo rate and 100 basis points cut in cash reserve ratio (CRR). The broader Nifty was at 8,780.35, 138.90 points or 1.61%. The India VIX index dipped marginally in the morning session.Banking and financial stocks were among the top gainers with Axis Bank, IndusInd Bank, State Bank of India, ICICI Bank, Bajaj Finance, HDFC Bank and Kotak Mahindra Bank were among the top gainers.The overall market breadth was also strong with more than 1,200 stocks gaining ground as against around 500 declines.10:10 AMRBI governor meets the mediaHere are highlights from the RBI Governor Shaktikanta Das’ press conference:Manojit Saha reports from Mumbai* RBI to reduce policy repo rate by 75 bps to 4.4%* In view of Covid-19 pandemic, MPC advanced meeting was held between 24 and 27 March. 4 of 6 members voted for 75 bps cut* RBI is monitoring evolving market and macroeconomic situation* We have to recognise govt’s timely measures to contain intensity, duration and spread of the virus* Looking ahead, food prices may soften further. As a result of Covid-19, demand may weaken* Projection of growth and inflation depends on spread, intensity and duration of virus, hence RBI is not giving any guidelines on growth and inflation* Rs 3.74 lakh crore liquidity to be injected into system through measures announced today* India has locked down and financial activities are under severe stress. Strong fiscal measures are critical to deal with the situation* Living in extraordinary situation; war effort needs to be mounted against coronavirus using conventional, unconventional tools* All lending institutions allowed three month moratorium for all term loans* Cash reserve ratio of all banks reduced by 100 bps to 3% with effect from March 28 for 1 yr; to release Rs 1.37 lakh crore liquidity10:00 AMGold set for best week in 11 yearsThe safe haven asset that initially failed to rally despite high economic uncertainty and stock market volatility is finally beginning to show some llife.Reuters reports: “Gold edged lower on Friday as investors booked profits, but was set for its best week since December 2008 as record high U.S. jobless claims due to the coronavirus fuelled hopes for more stimulus to stem the economic damage caused by the epidemic.Bullion has gained 8.2% so far this week, supported by weak U.S. unemployment data and the Federal Reserve’s unprecedented economic stimulus measures.“I don’t see any real reason to sell gold at the moment other than perhaps to book profits before the weekend,” said Stephen Innes, chief market strategist at financial services firm AxiCorp. “Everything still looks good for gold except the dreaded need for distress sales.””9:45 AMCoronavirus lockdown worse than 2008 global financial crisis, say analystsHere’s another estimate of the likely impact of the coronavirus pandemic on the economy, this one coming from the ING Group.IANS reports: “ING Group said in a note that the three-week nationwide lockdown will significantly dent India’s GDP growth, making this an even worse year for the economy than the 2008 global financial crisis. This demands a stronger policy response. Until then, the looming economic misery is poised to push US dollar/rupee above 80 in the coming daysThe report said that the biggest whammy will be to private consumption, which accounts for 57 per cent of India’s GDP. With all non-essential consumption dropping virtually to zero for a week in the current quarter means year-on-year GDP growth plunges to just about 1 per cent, and with two weeks of a hit in the next quarter could push it to about -5 per cent.”9:30 AMStocks rally at openThe benchmark indices are up well over 3% in the initial minutes of trading this morning.The Sensex has gained close to 1,000 points while the Nifty is trading close to the 9,000 mark.Overnight, the Dow Jones gained over 6% after hopes of stimulus increased following record job losses.