Key equity indices snapped recent rally after the Reserve Bank of India's monetary policy committee raised repo rate by 25 basis points to a two-year high of 6.5%. The barometer index, the S&P BSE Sensex, fell 84.96 points or 0.23% to 37,521.62, as per the provisional closing data. The Nifty 50 index fell 10.30 points or 0.09% to 11,346.20, as per the provisional closing data. Also, weighing on sentiment were a private survey showing factory growth eased last month and conflicting signs over the state of US-China trade relations.
The Reserve Bank of India (RBI) concluded its two-day monetary policy meeting today, 1 August 2018. The resolution of the Monetary Policy Committee (MPC) was unveiled at 14:30 IST. On the basis of an assessment of the current and evolving macroeconomic situation at its meeting today, the MPC decided to increase the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points to 6.5%. Consequently, the reverse repo rate under the LAF stands adjusted to 6.25%, and the marginal standing facility (MSF) rate and the Bank Rate to 6.75%. The decision of the MPC is consistent with the neutral stance of monetary policy in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4% within a band of +/- 2%, while supporting growth.
Trading was volatile. The market opened higher and hit fresh intraday high in early trade. Selling emerged at higher levels, which dragged the market lower in mid-morning trade. Indices sharply recovered in early afternoon trade. Indices hit fresh intraday low in late trade after selling resumed in afternoon trade.
Broader market bucked negative market trend. Among secondary barometers, the BSE Mid-Cap index rose 0.19%. The BSE Small-Cap index rose 0.26%. Both these indices outperformed the Sensex.
The market breadth, indicating the overall health of the market, was positive. On BSE, 1379 shares rose and 1314 shares fell. A total of 147 shares were unchanged.
Vedanta (down 2.2%), Bharti Airtel (down 1.89%), ICICI Bank (down 1.68%), Tata Steel (down 1.52%), Axis Bank (down 1.2%), HDFC (down 1.19%), HDFC Bank (down 0.96%) and Infosys (down 0.88%), were the major Sensex losers.
Coal India (up 3.31%), TCS (up 1.56%), ITC (up 1.33%), Sun Pharmaceutical Industries (up 1.16%), ONGC (up 0.97%), Power Grid Corporation of India (up 0.88%), State Bank of India (up 0.55%) and Reliance Industries (up 0.35%), were the major Sensex gainers.
Maruti Suzuki India fell 1.75% after the company said that its total sales fell 0.6% to 164,369 lakh units in July 2018 over July 2017. The announcement was made today, 1 August 2018.
Mahindra & Mahindra (M&M) fell 0.75%. The announced during market hours today, 1 August 2018, that its auto sales performance for July 2018 stood at 47,199 vehicles, a growth of 13% compared to 41,819 vehicles during July 2017.
M&M's Farm Equipment Sector (FES) announced its tractor sales numbers for July 2018. Domestic tractor sales in July 2018 were at 21,574 units, as against 17,804 units during July 2017. Total tractor sales (domestic + exports) during July 2018 were at 22,679 units, as against 18,957 units for the same period last year. Exports for the month stood at 1,105 units compared with 1,153 units for the same period last year.
Tata Motors fell 0.15%. The company reported net loss of Rs 1862.57 crore in Q1 June 2018 as compared to net profit of Rs 3199.93 crore in Q1 June 2017. Tata Motors' total income rose 8.09% to Rs 67306.06 crore in Q1 June 2018 over Q1 June 2017. The result was announced after market hours yesterday, 31 July 2018.
Finance costs increased by Rs 266 crore to Rs 1375 crore in Q1 June 2018 over Q1 June 2017. The increase is primarily due to higher borrowings in JLR. Closing net debt was Rs 62436 crore compared to Rs 39977 crore as at 31 March 2018, reflecting negative free cash flow at both Tata Motors and JLR with continued high investments.
Natarajan Chandrasekaran, Chairman, Tata Motors said that the company continued to gain market share while strongly improving profitability in both Commercial Vehicles and Passenger Vehicles. With regards to JLR, the company faced multiple challenges including temporary issues like China duty impact as well as the market issues like diesel concerns in UK and Europe.
On the macro front, manufacturing conditions across India improved at a modest and slower pace at the start of the quarter, reflecting softer rises in output, new orders and employment. The Nikkei India Manufacturing Purchasing Managers' Index (PMI) posted 52.3 in July, down from 53.1 in June. Although modest, the latest improvement in the health of the manufacturing sector was the second-strongest (behind June) since January. The data was released during trading hours today, 1 August 2018.
A statement issued by the Ministry of Finance during trading hours today, 1 August 2018, said that the total gross Goods and Services Tax (GST) revenue collected in the month of July 2018 is Rs 96,483 crore of which CGST is Rs 15,877 crore, SGST is Rs 22,293 crore, IGST is Rs 49,951 crore (including Rs 24,852 crore collected on imports) and Cess is Rs 8,362 crore (including Rs 794 crore collected on imports). This is broadly on expected lines. The total number of GSTR 3B Returns filed for the month of July up to 31st July 2018 is 66 lakh compared to GSTR 3B Returns filed for the month of June up to 30 June 2018 was 64.69 lakh. Rs 3899 crore has been released to the States as GST Compensation for the months of April-May 2018.
Overseas, European stocks were trading lower as investors sifted through the latest news on the US-China trade front. Most Asian stocks ended higher as conflicting signs over the state of US-China trade relations pulled markets in opposite directions. A report on Tuesday said that the United States and China were seeking to resume trade talks to defuse a battle over import tariffs. However, later reports that the US administration plans to propose tariffs of 25% instead of the initially proposed 10% on $200 billion of imported Chinese goods injected uncertainty back into financial markets.
US stocks closed higher Tuesday, as investors continued to digest an onslaught of quarterly earnings reports, with the vast majority beating expectations. But headline news on trade continued to drive markets.
Policy meetings of the US Federal Reserve on Wednesday, 1 August 2018, and the Bank of England on Thursday, 2 August 2018, kept some investors on the sidelines, although the US central bank is expected to keep rates unchanged.
On the US data front, consumer spending rose a solid 0.4% in June. Meanwhile, the employment cost index rose 0.6% in the second quarter. The S&P/Case-Shiller national index rose a seasonally adjusted 0.4% and was up 6.4% for the year in May. A measure of regional manufacturing activity in Chicago came in at the highest in six months. Chicago PMI rose 1.4 points to 65.5 in July, MNI Indicators said. Any reading above 50 indicates improving conditions. Separately, a reading of consumer confidence came in at 127.4 in July, compared with 126.5 in the previous month.
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