Record Defaults Cloud India’s Resilient Equities, Bonds

(Bloomberg) – Credit markets are issuing warnings for other asset classes amid India’s unprecedented surge in Covid-19 business. Companies have defaulted on at least Rs 57 billion (763 million of dollars) of national bonds this year, the most on record for a similar situation. period. Traders expect more. They pushed the spreads of local A-rated corporate bonds over AAA ratings to a 17-year high, a dark sign for small companies which tend to have those lower ratings and which form the backbone of the economy. of $ 2.7 trillion. the need for greater caution in the equity and government bond markets, which have held up better despite volatility. While defaults largely affect small, often unlisted borrowers, they add to the challenges for policymakers already struggling with one of the world’s worst bad debt ratios. On top of that, the Covid outbreak risks stoking inflation as local brakes disrupt supply chains, threatening to limit the central bank’s options to boost the economy. earnings information and stock prices will increase, ”said Sunil Subramaniam, Managing Director of Sundaram Asset Management Co.“ It will undoubtedly be a volatile time for the market. Equities In recent days, investors in stocks and government bonds have focused on more bullish signals as the government refrained from broad national lockdowns. India’s S&P BSE Sensex index hit a three-week high on Tuesday after the US move to offer vaccine support, and continued on Wednesday. Despite the recent rebound, Indian stocks lagged their Asian peers this month after outperforming for four straight quarters, and while some long-term investors, including Fidelity International and Invesco, have said they are looking for opportunities. to add equities, sentiment has deteriorated overall among global equities. funds. Foreign investors sold $ 1.2 billion net of Indian stocks this month to April 26, on track for the worst exit since March 2020. Government bonds, RupeeIndia’s central bank has been able to tame yields with the announcement of a QE-style bond buying program earlier today. month. This lowered the benchmark 10-year sovereign bond yield by around 12 basis points in April, which is expected to experience the biggest pullback in six months. The rupee has also rebounded in recent days, hitting its lowest level against the dollar since August earlier this month, but returns have been volatile as traders worried about the possibility of increasing government spending to mitigate the impact. of the pandemic. Finance Minister Nirmala Sitharaman has raised the possibility of advancing planned borrowing; concerns over the supply of government notes have already forced underwriters to bail out bond auctions and the central bank to cancel some . The resurgence of Covid left the rupee down about 2.1% in April against the dollar despite the recent rally, which is expected to experience the worst decline since March of last year. Credit-to-default swaps for the State Bank of India – seen as an indicator of India’s default risk – widened to a 9-month high this week, before retreating on Tuesday after news of the aid American vaccines, according to data from the CMA. are cautious on the credit side as economic growth slows, raising concerns about rising distressed debt, ”said Vikas Goel, managing director and ex-chief. India’s largest asset manager, SBI Funds Management Pvt., Has said it is vigilant on the financial sector as relief announced by the authorities, such as a debt moratorium, has obscured the true picture of the stress that the pandemic has exerted. Across industries, some borrowers find it more difficult to tap the credit market. Local currency banknote issuance rated A and below fell to a 10-year low of Rs 1.8 billion in April (add SBI CDS chart) For more articles like this, please visit us on bloomberg.com, a trusted source of business information. © 2021 Bloomberg LP


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