Market ends with strong gains

Key benchmarks ended a volatile session with strong gains on Thursday. Trading was volatile due to weekly expiry of index options. The Reserve Bank of India (RBI) decided to keep rates unchanged in its monetary policy meeting. Banking and finance stocks were in demand as RBI allowed banks to restructure stressed loans.

As per the provisional closing data, the barometer index, the S&P BSE Sensex spurted 362.12 points or 0.96% at 38,025.56. The Nifty 50 index jumped 104.8 points or 0.94% at 11,206.70.

Index heavyweight Infosys (up 3.01%), TCS (up 2.22%) and HDFC Bank (up 1.24%) propelled indices higher.

The broader market ended higher. The S&P BSE Mid-Cap index gained 0.92% while the S&P BSE Small-Cap index advanced 1.01%.

The market breadth was strong. On the BSE, 1586 shares rose and 1072 shares fell. A total of 172 shares were unchanged.

Foreign portfolio investors (FPIs) sold shares worth Rs 60.18 crore, while domestic institutional investors (DIIs), were net sellers to the tune of Rs 425.98 crore in the Indian equity market on 5 August, provisional data showed.

COVID-19 Update:

Total COVID-19 confirmed cases worldwide stood at 18,824,259 with 707,905 deaths. India reported 5,95,501 active cases of COVID-19 infection and 40,699 deaths while 13,28,336 patients have been discharged, according to the data from the Ministry of Health and Family Welfare, Government of India.

RBI MPC Outcome:

The six-member monetary policy committee (MPC), headed by RBI governor Shaktikanta Das, kept repo rate untouched at 4%; and reverse repo rate at 3.35% while maintaining the accommodative stance. The MPC had convened the three-day meeting on Tuesday, 4 August.

RBI governor Shaktikanta Das said inflation is expected to stay elevated in Q2 FY21 but it is likely to ease in H2 aided by favourable base effects. Real GDP growth will remain in the negative, Das said. However, he added that any positive news on the COVID-19 containment efforts would change this scenario. RBI is taking measures to enhance liquidity support, further ease financial stress.

Das said Rs 10,000 crore additional liquidity facility will be provided by NHB (National Housing Bank), NABARD (National Bank for Agriculture and Rural Development).

RBI has decided to permit one-time restructuring of corporate loans. The details of this exercise will be spelt out by a committee headed by veteran banker KV Kamath. Das said a window under the 7 June 2020 stressed asset resolution framework will be provided which will enable lenders to implement a resolution plan, without a change in ownership.

RBI also provided a fresh lifeline to millions of stressed small businesses by extending the provision of restructuring of loans. A restructuring framework for MSMEs that were in default, but were standard on 1 January 2020 is already in place. Accordingly, it has been decided that stressed MSME borrowers will be made eligible for restructuring their debt under the existing framework, provided their accounts with the concerned lender were classified as standard as on 1 March 2020. This restructuring will have to be implemented by 31 March 2021.

With a view to mitigating the impact of COVID-19 on households, the RBI decided to increase the permissible loan to value ratio (LTV) for loans against pledge of gold ornaments and jewellery for non-agricultural purposes to 90% from 75% earlier and has this relaxation available till 31 March 2021.

Meanwhile, RBI has brought in startups and renewable energy sectors (including solar power and compressed bio-gas plants) into the purview of Priority Sector Lending (PSL). The RBI has also amended the priority sector guidelines to do away with regional disparity.

Earnings Impact:

Canara Bank down 0.68%. The bank said its net profit rose 23.5% to Rs 406.24 crore on 47% rise in total income to Rs 20,685.91 crore in Q1 June 2020 over Q1 June 2019. The bank's net-interest income grew by 21.11% to Rs 6096 crore in Q1 June 2020 from Q1 June 2019. On the asset quality front, the bank's gross non-performing assets (NPAs) stood at Rs 57,525.52 crore as on 30 June 2020 as against Rs 37,041.15 crore as on 31 March 2020 and Rs 39,399.02 crore as on 30 June 2019. The ratio of gross NPAs to gross advances stood at 8.84% as on 30 June 2020 as against 8.21% as on 31 March 2020 and 8.77% as on 30 June 2019. The ratio of net NPAs to net advances stood at 3.95% as on 30 June 2020 as against 4.22% as on 31 March 2020 and 5.35% as on 30 June 2019.

Adani Power was up 0.1%. The company reported a consolidated net loss of Rs 682.46 crore in Q1 June 2020 as against net loss of Rs 263.39 crore in Q1 June 2019. Revenue from operations during the quarter fell 33.3% on a year-on-year (YoY) basis to Rs 5203.83 crore. The company reported a pre-tax loss of Rs 633.62 crore in Q1 FY21 as against pre-tax loss of Rs 121.75 crore in Q1 FY20. Current tax expense declined 75.9% to Rs 22.18 crore in Q1 June 2020 over Q1 June 2019. Average Plant Load Factor (PLF) achieved during the first quarter of FY21 is 51%, as compared to 78% achieved in Q1 FY20. The PLF is lower due to the decline in power demand following the nationwide lockdown. Consolidated units sold for the quarter are 12.7 BU, as compared to the Q1 FY20 sales volume of 16.5 BU.

Apollo Tyre fell 0.26%. The tyre maker reported consolidated net loss of Rs 134.58 crore in Q1 June 2020 compared with net profit of Rs 141.60 crore in Q1 June 2019. Net sales tanked 33.8% to Rs 2,828.23 crore in Q1 June 2020 over Rs 4,272.05 crore in Q1 June 2019. Pre-tax loss stood at Rs 162.20 crore in Q1 June 2020 compared with pre-tax profit of Rs 176.74 crore in Q1 June 2019. Current tax expense for the quarter dropped 82.6% to Rs 5.68 crore as against Rs 32.69 crore in Q1 June 2019. The result was announced after trading hours yesterday, 5 August 2020.

Inox Leisure was up 0.15%. The multiplex operator reported a consolidated net loss of 73.64 crore in Q1 June 2020 compared with net profit of Rs 27.01 crore in Q1 June 2019. Total income fell 99.4% to Rs 2.97 crore in the June quarter from Rs 496.13 crore in the corresponding period last year. Amongst the steps taken to reduce operational costs, the group has invoked the force majeure clause under various lease agreements for its multiplex premises, contending that rent and CAM (Common Area Maintenance) charges for the shutdown period on account of COVID-19 pandemic are not payable.

VIP Industries fell 2.47% after the company reported a consolidated net loss of Rs 51.32 crore in Q1 June 2020 compared with net profit of Rs 35.08 crore in Q1 June 2019. Net sales tanked 92.9% to Rs 40.33 crore in Q1 June 2020 over Q1 June 2019. Pre-tax loss stood at Rs 67.38 crore in Q1 June 2020 as against pre-tax profit of Rs 54.68 crore in Q1 June 2019. The Q1 earnings was announced after trading hours yesterday, 5 August 2020

DLF was up 0.14%. The realty major reported a consolidated net loss of Rs 70.65 crore in Q1 FY21 as against a net profit of Rs 414.72 crore in Q1 FY20. Revenue from operations in the June quarter declined 58.8% to Rs 548.63 crore as compared to the same period last year. EBITDA fell 78% to Rs 99 crore in Q1 June 2020 from Rs 449 crore crore in Q1 June 2019. The company reported a pre-tax loss of Rs 179.48 crore in Q1 FY21 compared with pre-tax profit of Rs 158.86 crore in Q1 FY20. With respect to outlook, DLF said that the company remains optimistic about the business and its growth returning to levels of normalcy.

Adani Gas down 3.37%. On a standalone basis, Adani gas' net profit fell 41.55% to Rs 46.33 crore on 56.24% decline in net sales to Rs 197.15 crore in Q1 June 2020 over Q1 June 2019. EBITDA tanked 41% to Rs 86 crore in Q1 FY21 as against Rs 146 crore in Q1 FY20. Sales volume for the quarter dropped 53% to 64 million metric standard cubic meters (MMSCM) from 137 MMSCM in Q1 June 2019. CNG sales tumbled 66% to 24 MMSCM in Q1 June 2020 over 71 MMSCM in Q1 June 2019. PNG sales skid 40% to 40 MMSCM in Q1 FY21 as compared to 67 MMSCM in Q1 FY20. Volume in June 2020 stood at 0.71 million metric standard cubic meters per day (MMSCMD) as compared to volume in April 2020 at 0.35 MMSCMD showing significant volume recovery trend. PNG home connection increased to 4.38 lakh (979 new connections during the quarter) while Commercial & Industrial connection now stands increased to 4,448.

JK Lakshmi Cement shed 3.74% after consolidated net profit fell 5.8% to Rs 50.63 crore on 19.8% decline in net sales to Rs 911.54 crore in Q1 June 2020 over Q1 June 2019. Sales volume was severely impacted by lockdown restrictions during most part of the quarter Q1 June 2020 resulting into sales volume plunging by 18% Y-o-Y (year-on-year) in April-June 2020 over April-June 2019. EBITDA skid 14% Y-o-Y to Rs 151.51 crore in April - June 2020 as against Rs 175.93 crore in April - June 2019. Continuing cost savings, improving product mix & reduction in logistic costs enabled the company to marginally improve its operating margins to 17%.

Global Markets:

European markets declined while most Asian markets closed higher on Thursday. The Bank of England (BOE) on Thursday kept benchmark interest rates at an all-time low of 0.1% and left the size of its bond-buying program unchanged at 745 billion ($981 billion).

The BOE said the UK's gross domestic product (GDP) was expected to have fallen 20% in the second quarter when compared to the final three months of last year. The Monetary Policy Committee's central projection was for UK GDP to continue to recover beyond the near term, but it warned that the economy was unlikely to exceed its pre-pandemic level until the end of 2021.

In US, Wall Street's main indexes rose on August 5 after Disney delivered a surprise quarterly profit, with sentiment aided by signs that a coronavirus fiscal relief package was imminent.

In economic news, the final monthly reading of the closely-watched ISM service sector purchasing managers index jumped to a reading of 58.1 in July, signalling stronger economic growth.

US services industry activity gained momentum in July as new orders jumped to a record high, but hiring declined, supporting views that the labor market recovery was faltering amid a resurgence in new COVID-19 infections across the country. The Institute for Supply Management (ISM) said on August 5 its non-manufacturing activity index increased to a reading of 58.1 last month, the highest since March 2019, from 57.1 in June. The index slumped to 41.8 in April, which was the lowest reading since March 2009.

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