 "Markets eye RBI policy review, GST rollout")
Markets, which had slumped to nearly two-month lows earlier during the week on concerns over P-notes and the crash in Chinese stocks staged a recovery in the latter half of the week after Cabinet nod for changes in the GST Bill and government's plan to infuse capital in state-owned banks.
The S&P barometer index BSE Sensex reclaimed its crucial level of 28,000-mark to end the week at 28,114.56, up by 2.25 points after slipping to 27,416.39, its lowest level since June 19. The CNX Nifty increased by 11.3 points or 0.1% to end at 8,532.85 levels. The broader markets, however, depicted strength as the BSE Midcap and Smallcap indices rose 1.1% and 1.4% respectively.
MARKET OUTLOOK
According to Dipen Shah, Head of Private Client Group Research, Kotak Securities, “Markets rose sharply on Friday and erased the losses of the week. Better-than-expected numbers from few companies, revival of monsoons, absence of any negative surprice from US Fed and increased expectations of RBI rate cut / passage of GST Bill improved sentiments.”
He further added, “The Government is making all efforts to pass the GST Bill in the current session of the Parliament. Passage of the bill will be a positive for the market. RBI policy meeting will be a big event for the market next week. We expect status quo. However, a rate cut from the RBI, if any, will act as a catalyst for improving sentiments in the markets.”
At the start of the week, the rout in Chinese equities and worries that the Securities and Exchange Board of India (SEBI) may tighten the rules on Participatory Notes( P-Notes) spread panic across the bourses resulting in markets shedding nearly 2% on opening day trades. However, the Finance Ministry issued a clarity that the government will not react in a haphazardly manner that would hurt the investor sentiment. This provided some relief to the market participants.
The 2-day US Federal Open Market Committee (FOMC) meeting that concluded on Wednesday did signal a Fed rate hike this year, if not this September.
Meanwhile, the Union Cabinet gave its nod to amendments in the Goods and Services tax (GST) bill suggested by the Rajya Sabha Select Committee to compensate states for the revenue losses.
Further, the government said on Friday that it will infuse Rs 70,000 crore in state-owned banks over the next four years. During the current and next fiscal, the government plans to infuse Rs 25,000 crore each and provide Rs 10,000 crore each in 2017-18 and 2018-19.
On the monsoon front, the India Meteorological Department (IMD) said that the southwest monsoon showed some improvement during the period from July 23- 29, above normal by 21%; however, the overall rainfall for the month of July was 15% below Long Period Average (LPA)
EARNINGS REVIEW
HDFC declined 1.1% during the week after the mortgage lender posted a mere 1.2% increase in its net profit to Rs.1360.98 crore for the period April-June 2015.
Maruti Suzuki surged 2.3% after the company’s net profit jumped 56.5% for Q1 on the back of 18.1% rise in net sales.
Dr. Reddy’s advanced 4% after the drug maker posted 14% rise in its net profit to Rs. 630 crores on the back of a 7% increase in revenue for the quarter.
Index heavyweight ITC soared 3.79% after the company’s net profit rose 3.6% in Q1.
Vedanta slipped 1.8% as the company’s consolidated profit after tax (PAT) fell 35% to Rs.866 crore.
Nestle India rose 5.2% during the week. However, the company reported a loss of Rs. 64.4 crore for the first time in more than 15 years post the Maggi ban controversy. The net sales plunged 20% to Rs. 1933 crore.
THE WEEK AHEAD
The macroeconomic data, progress of the monsoon, developments in the monsoon session of the Parliament, quarterly corporate earnings and trend in the global markets will dictate the sentiment of market participants for the upcoming week.
The Reserve bank of India’s (RBI) third bi-monthly monetary policy review meeting is scheduled for Tuesday, i.e. August 4. The repo rate is at 7.25% after the central bank cut it by 25bps on June 2, 2015.
On the earnings front, Bharti Airtel, HCL Technologies, Britannia Industries, BHEL, M&M and Tata Motors, among others, are expected to announce their Q1 results during the next week.