H1 2020 Review: Union Budget, Franklin Templeton crisis among key events so far

To say 2020 has been an eventful year would be an understatement. In a span of just six months, we have witnessed a pandemic, a stock market crash, border skirmishes, and civil unrest, among a slew of other mishaps. Before we continue on this roller-coaster of a year, let's recap some of the key events so far in 2020: 

Union Budget 

The Union Budget presented by Finance Minister Nirmala Sitharaman on February 1 failed to impress the D-Street. Leading up to the Budget, the market had been forming new highs on expectations that the PM Modi government, which had set an ambitious target of making India a $5 trillion economy by 2024, will continue on its growth spurring path. However, investors felt the Budget failed to address key issues such as muted demand and the lingering issue of long-term capital gains (LTCG) tax.

On the contrary, it seemingly increased the income tax burden, especially for the rich, which did not sit well with the D-Street. In the final hour of the trade on Budget day, S&P BSE Sensex crashed around 1,100 points, while the Nifty50 fell over 2.5 percent. 

Also read: Lesser-known names make it big in H1 2020 as 55 stocks rise 100-1000%

COVID-19

2020 will perhaps be most remembered as the year of this global calamity. The COVID-19 pandemic first broke out in China late last year and now has 188 countries in its clutches. The health crisis, which has now become an economic crisis as well, put countries in lockdown forcing many businesses to shut and has caused irreversible damage to many industries such as tourism, aviation and hospitality.

Stock markets around the world crashed to multi-year lows and the rising rate of unemployment has forced economies looking for a quick fix which has only added to concerns about the blow out in the aftermath.

Yes Bank saga

In a first, the Reserve Bank of India on March 5 superseded the board of the beleaguered bank and imposed a 30-day moratorium on its operations. The central bank's decision put an end to the long-drawn saga which was marked by frauds, financial misreporting, rising non-performing assets and inability to raise funds. 

A Rs 7,250 crore restructuring plan was put in place and various banks such as SBI, HDFC Bank, ICICI Bank, Axis Bank and Kotak Bank among others contributed to keep Yes Bank afloat.

OPEC-Russia price war

In March, a petroleum price war ensued following the dramatic collapse of an alliance between Russia and the OPEC cartel, a pact that had underpinned world oil markets for three years.

In a meeting on March 6, Saudi proposed production cuts to prop up prices in a bid to revive demand ravaged by the pandemic. Russia refused and in retaliation Saudi Arabia, reversed course, and further opened its oil taps.

The Mexican standoff between The Kingdom and the Russians wiped off more than 50 percent of oil's value, sending shockwaves across the financial world.

Crude crash

Oil prices fell to sub-zero levels for the firth time on April 1 primarily due to the steep collapse in demand as life came to a standstill due to lockdown in various countries to curb the spread of COVID-19. The Russia, OPEC price war added even more crude inventory to an already oversupplied market.

As a result, the price on the futures contract for West Texas Intermediate (WTI) fell 306 percent to -$37.63 a barrel.

Franklin Templeton crisis

Franklin Templeton Mutual Fund on April 23 said it was closing down six credit funds due to liquidity issues amid the coronavirus crisis, leading to fears of redemptions among the market players.

The funds that were shut included Franklin India Low Duration Fund, Ultra Short Bond Fund, Short Term Income Plan, Credit Risk Fund, Dynamic Accrual Fund, Income Opportunities Fund.

In view of the Franklin Templeton crisis, the RBI announced a Rs 50,000 crore special liquidity facility for mutual funds.

US-China tussle

The tensions between the two economies, which finally seemed to be fizzling out with the signing of preliminary trade deals late last year, once again resurfaced in 2020.

While in the past disputes between the US and China were focused on areas such as their trade imbalance and contest in technology, it has now escalated to a wider range of issues including the origin of the coronavirus and the autonomy of Hong Kong. 

China’s expanding Belt and Road Initiative and continued assertions in the South China Sea has also miffed their western detractors.

India-China border tension

The border tensions between Indian and China took an ugly turn last month when a melee broke out between the two troops causing multiple casualties on both sides.

Following the Galwan Valley skirmish on 15 June, India banned 59 Chinese apps including TikTok, UC Browser, SHAREit and WeChat saying they were prejudicial to sovereignty, integrity and security of the country.