Nifty reclaims 10,400 mark as banks rally

Domestic benchmarks ended with strong gains on Wednesday. Positive Asian cues and recovering domestic macro data cheered investors. Banks stocks rallied while pharma stocks extended losses. The barometer S&P BSE Sensex rallied 498.65 points or 1.43% at 35,414.45. The Nifty 50 index jumped 127.95 points or 1.24% at 10,430.05.

Besides banks shares, Reliance Industries (up 2.03%), HDFC (up 4.59%) and ITC (up 4.16%) were major index movers.

The Nifty opened higher at 10,323.80 and scaled 10,400 mark in afternoon session. The index continued to trade sideways with decent gains in mid-afternoon session before closing near 10,420 level.

In the broader market, the BSE Mid-Cap index rose 0.18% and the BSE Small-Cap index gained 0.39%. Both these indices underperformed the Sensex.

The market breadth was positive. On the BSE, 1504 shares rose and 1277 shares fell. A total of 125 shares were unchanged.

COVID-19 update:

Total COVID-19 confirmed cases worldwide stood at 1,04,77,554 far with 5,11,300 deaths. India reported 2,20,114 active cases of COVID-19 infection and 17,400 deaths, according to the data from the Ministry of Health and Family Welfare, Government of India.

Economy:

The seasonally adjusted IHS Markit India Manufacturing PMI surged to 47.2 in June from 30.8 in May. Despite the rise, the latest reading pointed to a third successive monthly decline in the health of the manufacturing sector, albeit one that was far softer than registered in April and May.

Goods and service tax (GST) collections for June 2020 clocked Rs 90,917 crore at gross levels, 9% lower than the same month last year, the department of revenue said Wednesday. The collections are higher than those recorded in April and May - the peak months of the nationwide lockdown - where GST collection for April was Rs 32,294 crore and Rs 62,009 crore for May.

The output of eight core industries declined at slower pace of 23.4% in May 2020 compared with 37% (provisional) dip in previous month of April 2020. Its cumulative growth during April to May 2020-21 was 30.0%.

India's current account balance recorded a marginal surplus of $0.6 billion (0.1% of GDP) in Q4 of 2019-20 as against a deficit of $4.6 billion (0.7% of GDP) in Q4 of 2018-19 and $2.6 billion (0.4% of GDP) in the preceding quarter, i.e., Q3 of 2019-20.

The surplus in the current account in Q4 of 2019-20 was primarily on account of a lower trade deficit at $35 billion and a sharp rise in net invisible receipts at $35.6 billion as compared with the corresponding period of last year.

India's external debt for the quarter ended March 2020 rose to $558.5 billion on account of currency valuation effect, commercial borrowings and non-resident Indian (NRI) deposits, according to the data released by the Reserve Bank of India on Tuesday. The external debt during the March quarter rose by 2.8% or $15.4 billion on a year-on-year (YoY) basis.

Numbers to Watch:

The yield on 10-year benchmark federal paper fell to 5.838% as compared with 5.888% at close in the previous trading session.

In the foreign exchange market, the rupee edged lower against the dollar. The partially convertible rupee was hovering at 75.6025, compared with its close of 75.51 during the previous trading session.

In the commodities market, Brent crude for September 2020 settlement rose $1.14 at $42.41 a barrel. The contract fell 56 cents, or 1.34% to settle at $41.15 a barrel in the previous trading session.

Foreign Markets:

The US Dow Jones futures were down 239 points, indicating a weak opening of US stock market later today. European markets reversed early gains and turned negative.

Most Asian stocks ended higher as improving economic data from China offset by worries about surging coronavirus cases in the United States.

China's Caixin/Markit manufacturing PMI in June came in at 51.2, against previous month's reading of 50.7. PMI readings above 50 signify expansion, while those below that indicate contraction.

The US stock market finished session higher on Tuesday (30 June), as the investors risk sentiments boosted up with better-than-expected domestic economic data which helped to offset concerns over the health of the global economy from the coronavirus pandemic.

The Conference Board released a report showed a bigger than expected improvement in consumer confidence in the month of June. The Conference Board said its consumer confidence index jumped to 98.1 in June from a downwardly revised 85.9 in May.

Stocks gains were also supported by the testimony of the Federal Reserve Chair Jerome Powell and Treasury Secretary Steven Mnuchin's to the House Financial Services Committee regarding the response to the coronavirus pandemic. Mnuchin said the Treasury and Fed were looking at extending the Fed's established 11 emergency lending facilities to include asset-based lending markets, but also reiterated that additional types of COVID-19 aid likely will need to be addressed by Congress under the next phase of stimulus.

Powell emphasized that the 'overriding goal' of the central bank's facilities is to help get the roughly 25 million workers who lost jobs during the pandemic back to work, while also warning that a second wave of COVID-19 infections could undermine consumer confidence again.

Buzzing Indian Segments:

The Nifty Bank index rose 2.84% to 21,977.60. Axis Bank (up 6.34%), Bank of Baroda (up 5.76%), Punjab National Bank (up 4.89%), Federal Bank (up 4.31%), Indusind Bank (up 3.66%), SBI (up 3.45%), ICICI Bank (up 3.12%), IDFC First Bank (up 2.72%), Bandhan Bank (up 2.22%) and HDFC Bank (up 1.28%) advanced.

The Nifty Pharma index fell 1.02% to 9,882.85. The index has fallen 3.04% in four sessions.

Cipla (down 1.88%), Divis Laboratories (down 1.73%), Torrent Pharmaceuticals (down 1.31%), Cadila Healthcare (down 1.23%), Sun Pharmaceutical Industries (down 1.06%), Dr. Reddy's Laboratories (down 0.76%), Lupin (down 0.67%), Biocon (down 0.44%) and Alkem Laboratories (down 0.35%) declined.

June Auto Sales:

Maruti Suzuki India fell 0.69%. The car manufacturer said its total sales slumped 54% to 57,428 units in June 2020 as against 124,708 units in June 2019. Total domestic sales tanked 53.7% to 53,139 units in June 2020 from 114,861 units in June 2019. Exports dropped 56.64% to 4,289 units in June 2020 from 9,847 units in June 2019. The car major's total sales jumped 210% in June 2020 from 18,539 units registered in May 2020.

Hero MotoCorp fell 0.05%. The two wheeler manufacturer sold 450,744 two-wheelers in June 2020, a record sequential growth of four times over the 112,682 units dispatched in May 2020. The company said the sales figure has reached 90% of pre-covid sales, which signals positive sentiments & revival of consumer demand. Total two-wheeler sales in June 2020 fell 26.89% compared with 6,16,526 units sold in June 2019.

Eicher Motors rose 0.31%. The auto maker on Wednesday (1 July) announced that its unlisted subsidiary, VE Commercial Vehicles (VECV), reported 70.3% slump in total sales to 1358 units in June 2020 over June 2019. VECV's total domestic sales slumped 75.4% YoY to 1016 units last month. Total exports fell 16.4% to 305 units during the period under review. Sequentially, VECV reported 97.96% surge in total sales in June from 686 units sold in May 2020. VECV reported weak sales in May amid nationwide lockdown.

Mahindra & Mahindra (M&M) fell 2.18%. The company's total sales surged to 19,358 units in June 2020 from 9,560 units sold in May 2020. However, M&M's total sales have fallen 55% in June compared with 42,547 units sold in June 2019. While total domestic sales declined 53% YoY to 18,505 units, total exports fell 72% YoY 853 units during the month.

Escorts fell 0.64% after the company's total tractor sales rose 21.1% to 10,851 units in June 2020 over June 2019. Total tractor sales spurted 64.6% month-on-month (MoM) in June 2020 compared with 6,594 units in May 2020. Escorts' total domestic tractor sales stood at 10,623 units (up 22.8% YoY) and total exports were at 228 units (down 26.9% YoY) in June 2020.

Earnings Impact:

ONGC fell 1.11% after the PSU company posted a standalone net loss of Rs 3,098.26 crore in the fourth quarter. The company had reported a net profit of Rs 4,239.50 in the same period last year. Net sales declined by 19.8% to Rs 21,456.20 crore in Q4 FY20 over Q4 FY19. ONGC's crude oil price realization from its nominated fields fell 20.9% YoY to $49.01 per barrel while the price realization from the joint venture fields was down 19.4% YoY to $49.39 per barrel during the March quarter. Gas price also fell 3.9% to $3.23 per million British thermal unit (mmbtu) in Q4 FY20. "The Company has recognized an Exceptional Item towards impairment loss of Rs. 4,899 crore in Q4 FY'20 to factor into estimated future crude oil and natural gas prices. This has adversely impacted PAT for Q4 FY'20 and FY'20 as compared to last year," ONGC said.

Vodafone Idea declined 4.33% after the company recorded a consolidated net loss of Rs 11,643.50 crore in Q4 March 2020, higher than net loss of Rs 4,881.90 crore in Q4 March 2019. Consolidated revenue from operations fell 0.17% to Rs 11,754.20 crore in Q4 FY20 over Rs 11,775 crore in Q4 FY19. Pre-tax loss was at Rs 11,742.60 crore in Q4 FY20 as against Rs 6,758.90 crore in Q4 FY19. The subscriber base declined to 291 million in Q4 FY20 from 304 million in Q3 FY20. Subscriber churn remained stable in Q4 FY20 at 3.3%. Average revenue per user (ARPU) for Q4 FY20 improved to Rs 121 from Rs 109 in Q3 FY20, driven by the prepaid tariff hike effective from December 2019.

On the adjusted gross revenue (AGR) matter, the department of telecommunications (DoT) has proposed to stagger the balance of AGR payments over 20 years. The next Supreme Court hearing is scheduled for the third week of July. The DoT wants the company to pay Rs 58,254 crore as AGR dues. The company claims that amount to be Rs 45,960 crore. The company wants a 20-year timeframe to pay its dues that it claims now stand at Rs 39,106 crore after it paid Rs 6,854 crore during the March quarter.

RITES jumped 4.37%. The company posted a 4.29% drop in consolidated net profit to Rs 143.93 crore on a 22.17% drop in revenue to Rs 614.24 crore in Q4 FY20 as compared to Q4 FY19. Commenting on the outlook, Rajeev Mehrotra, the company's chairman and managing director, said that some uncertainties have emerged in recent times due to Covid-19, which may impact the business operations in FY21 but sufficient order book, diversified business segments and opportunities in infrastructure sector at domestic level as well as abroad are expected to help in quick recovery and future business growth.

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