Domestic shares advanced for fourth trading session on Thursday after Reserve Bank of India (RBI)'s Monetary Policy Committee (MPC) on Thursday refrained from slashing repo rate and maintained an accommodative stance. However, it announced certain measures aimed at ensuring better monetary policy transmission.
Sentiment also improved after RBI estimated a 6% GDP growth rate for 2020-21 while projecting a 6.2% growth rate for Q3 December 2020. It revised the CPI inflation projection for Q4 March 2020 to 6.5% and 5.4-5% in the first six months of 2020-21 and 3.2% in the third quarter of 2020-21.
The barometer BSE S&P Sensex rose 163.37 points or 0.40% to 41,306.03. The Nifty 50 index added 44.50 points or 0.37% to 12,133.65. Trading was volatile due to expiry of weekly index option on the NSE.
The BSE Mid-Cap index rose 0.81% and the BSE Small-Cap index rose 0.52%. Both these indices outperformed the Sensex.
The market breadth was positive. On the BSE, 1400 shares rose and 1085 shares fell. A total of 171 shares were unchanged.
The Sensex climbed 1570.50 points, or 3.95% and the Nifty rose 471.80 points, or 4.05% in four trading sessions.
Economy:
On the basis of an assessment of the current and evolving macroeconomic situation, MPC at its meeting today (6 February 2020) decided to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 5.15%. Consequently, the reverse repo rate under the LAF remains unchanged at 4.90% and the marginal standing facility (MSF) rate and the Bank Rate at 5.40%. The MPC also decided to continue with the accommodative stance as long as it is necessary to revive growth, while ensuring that inflation remains within the target.
These decisions are 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.
The CPI inflation projection is revised upwards to 6.5% for Q4 March 2020; 5.4-5.0% for first half of fiscal year ending March 2021 (H1:2020-21); and 3.2% for Q3 December 2020, with risks broadly balanced.
GDP growth for 2020-21 is projected at 6%; in the range of 5.5-6% in H1:2020-21 and 6.2% in Q3 December 2020.
The next meeting of the MPC is scheduled during March 31, April 1 and 3, 2020.
Addressing the press conference, RBI Governor Shaktikanta Das on Thursday said the central bank has no plans to monetise the rising fiscal deficit. FM Sitharaman informed Parliament during Budget presentation that India's fiscal deficit is pegged at 3.8% for FY20 and 3.5% in 2021. This is the third consecutive year that the government has revised its fiscal deficit target.
In the statement on developmental and regulatory policies, the most important announcement was long term repo operations for better transmission of the rate cuts already announced by the central bank in 2019.
The RBI stated that scheduled commercial banks will be allowed to deduct the equivalent of incremental credit disbursed by them as retail loans for automobiles, residential housing and loans to micro, small and medium enterprises (MSMEs), over and above the outstanding level of credit to these segments as at the end of the fortnight ended 31 January 2020 from their net demand and time liabilities (NDTL) for maintenance of cash reserve ratio (CRR). This exemption will be available for incremental credit extended up to the fortnight ending 31 July 2020.
Further, RBI also announced long term repo operations (LTROs) for improving monetary transmission. From the fortnight beginning on 15 February 2020, RBI shall conduct term repos of one-year and three-year tenors of appropriate sizes for up to a total amount of Rs 1,00,000 crore at the policy repo rate. Details about the LTRO facility are being issued separately.
"It is an effort to ensure better monetary policy transmission. It will enable banks to reduce their lending rates," RBI Governor Das told the media in the post policy conference.
Numbers to Watch:
The yield on 10-year benchmark federal paper fell to 6.454% at 16:55 IST compared with 6.505% at close in the previous trading session.
In the foreign exchange market, the rupee edged higher against the dollar. The partially convertible rupee was hovering at 71.185, compared with its close of 71.25 during the previous trading session.
In the commodities market, Brent crude for April 2020 settlement rose 4 cents to $55.32 a barrel. The contract rose $1.32 or 2.45% to settle at $55.28 a barrel in the previous trading session.
Foreign Markets:
European shares extended gains while Asian stocks ended higher on Thursday after US S&P 500 hit a record peak following encouraging economic data, while investors keep a wary eye on the impact of the coronavirus outbreak.
China announced on Thursday that it will halve tariffs on hundreds of U.S. goods worth about $75 billion. Tariffs on some US goods will be cut from 10% to 5%, and from 5% to 2.5% on others. The adjustments will take effect from February 14.
In US, stocks closed sharply higher on Wednesday for the third consecutive session as Wall Street continued its rebound from a selloff sparked in part by the outbreak of an Asian virus that has killed hundreds and infected tens of thousands.
Bullish sentiment was seen driven by hopes that stepped up containment efforts and work toward new vaccines could blunt the economic impact of the coronavirus.
On economic front, the services sector of the US economy, which accounts for most activity, grew at the fastest pace in six months in January, according to ISM's purchasing manager survey.
Earlier, a government report showed that the US trade deficit fell in 2019 for the first time in six years, reflecting tariff-reduced imports from China, with a 1.7% decline to $616.8 billion in December.
Buzzing Indian Index:
The Nifty Bank index rose 0.92% to 31,286.75.
Among the public sector banks, UCO Bank (up 4.98%), United Bank of India (up 4.6%), Bank of Baroda (up 3.97%), State Bank of India (up 3.55%) and Punjab National Bank (up 2.99%) jumped.
Among the private sector banks, IndusInd Bank (up 4.85%), RBL Bank (up 4.53%), Yes Bank (up 2.53%), Axis Bank (up 1.77%), Federal Bank (up 1.65%), City Union Bank (up 1.39%) and ICICI Bank (up 0.51%) advanced.
The Nifty Realty index fell 0.26% to 325.55. RBI offered major policy steps which would support the slowing real estate sector.
"It has been decided to permit extension of date of commencement of commercial operations (DCCO) of project loans for commercial real estate, delayed for reasons beyond the control of promoters, by another one year without downgrading the asset classification, in line with treatment accorded to other project loans for non-infrastructure sector. This would complement the initiatives taken by the Government of India in the real estate sector. The detailed instructions will be issued shortly," RBI said in a release on 'Statement on Developmental and Regulatory Policies' today.
Unitech (up 4.33%), Parsvnath Developers (up 2.48%), Godrej Properties (up 1.93%), D B Realty (up 1.77%), Sobha (up 1.40%), Indiabulls Real Estate (up 1.16%), Prestige Estates (up 1.06%), Oberoi Realty (up 0.52%) and Sunteck Realty (up 0.04%) advanced.
Sector major DLF fell 2.88%. Its consolidated net profit rose 23.5% to Rs 414.01 crore in Q3 December 2019 (Q3 FY20) from Rs 335.15 crore reported in Q3 December 2018 (Q3 FY19). Net sales declined 39.5% to Rs 1341.87 crore in Q3 FY20 compared with Rs 2219.28 crore reported in the same period last year. Profit before tax (PBT) jumped 55.2% to Rs 368.61 crore year-on-year.
Stocks in Spotlight:
Pharma major Lupin fell 0.26% after consolidated net loss stood at Rs 835 crore in Q3 December 2019 (Q3 FY20), higher than net loss of Rs 151.75 crore reported in Q3 December 2018 (Q3 FY19). Net sales declined 4.51% year-on-year (Y-o-Y) to Rs 3,769.27 crore in Q3 FY20. The Q3 earnings were disclosed during market hours today, 6 February 2020.
Consolidated pre-tax loss stood at Rs 106.82 crore in Q3 FY20 compared with pre-tax profit of Rs 83.40 crore reported in Q3 FY19. Total tax expenses jumped 212.55% to Rs 767.02 crore during the period under review. EBITDA slipped 27.6% to Rs 522.70 crore YoY. The EBITDA margin stood at 14.1% in Q3 FY20 as against 18.9% in Q3 FY19.
Sun Pharmaceutical Industries rose 1.13%. The drug major's consolidated net profit fell 26.44% to Rs 913.52 crore in Q3 December 2019 (Q3 FY20) compared with Rs 1,241.85 crore in Q3 December 2018 (Q3 FY19). Profit before tax declined 21.89% to Rs 1,351.33 crore in Q3 FY20 from Rs 1,730.11 crore in Q3 FY19. Total revenue from operations for the December quarter stood at Rs 8,154.85 crore, up 5.36% from Rs 7,740.19 crore in Q3 December 2018. In Q3 FY20, EBITDA stood at Rs 1,725 crore with a resulting EBITDA margin of 21.5%.
Cipla fell 1.59%. On a consolidated basis, The company's net profit gained 5.66% to Rs 351.03 crore in Q3 December 2019 (Q3 FY20) as against Rs 332.20 crore reported in Q3 December 2018 (Q3 FY19). Net sales advanced 8.40% year-on-year (YoY) to Rs 4,234.55 crore in Q3 FY20. Profit before Tax jumped 12.81% to Rs 506.40 crore in Q3 FY20 as compared to Rs 448.88 crore posted in Q3 FY19. Total tax expenses, for the quarter, jumped 21.59% to Rs 152.82 crore YoY. EBITDA grew 5.27% to Rs 758 crore in Q3 FY20 from Rs 720 crore in Q3 FY19.
Eicher Motors soared 4.80%. Consolidated net profit declined 6.42% to Rs 498.70 crore in Q3 December 2019 (Q3 FY20) as against Rs 532.95 crore reported in Q3 December 2018 (Q3 FY19) while net sales rose 0.95% year-on-year (Y-o-Y) to Rs 2,350.45 crore in Q3 FY20. Consolidated profit before tax slumped 18.40% to Rs 644.09 crore Y-o-Y. Consolidated total tax expenses dropped 43.30% to Rs 145.39 crore during the period under review. The fall in current tax expense reduced the impact of consolidated loss before tax during the quarter. The Q3 figures were declared during trading hours today, 6 February 2020.
V-Mart Retail soared 12.43% after net profit jumped 39.7% to Rs 58.22 crore in Q3 December 2019 (Q3 FY20) as against Rs 41.68 crore reported in Q3 December 2018 (Q3 FY19). Net sales soared 20.7% year-on-year (Y-o-Y) to Rs 562.16 crore in Q3 FY20. Profit before tax climbed 14.8% to Rs 76.97 crore Y-o-Y. Current tax expenses declined 21% to Rs 20.46 crore during the period under review.
Adani Green Energy (AGEL) hit 5% upper circuit at Rs 202.20 after the company, in an exchange filing made during market hours today, said that it has entered into a binding agreement with Total Gas & Power Business Services SAS for investment of approximately $510 million for acquisition of 50% stake in a Joint Venture Company (JVCo).
Avenue Supermarts rose 2.01%. The firm informed that its operations committee has authorized the opening of the qualified institutional placement (QIP) of equity shares from February 5 onwards. The company intends to issue 2 crore shares at the floor price of Rs. 1999.04 per equity share, offering a discount of not more than 5% on the floor price as permitted under Sebi norms.
ITI jumped 6.71% to Rs 89.80 after the PSU company said it has withdrawn its follow-on-public offer (FPO), citing market condition. The FPO was supposed to close on Wednesday, 5 February 2020. ITI launched its FPO on 24 January 2020. The FPO was earlier slated to close on 28 January 2020, but the company later extended FPO closing date to 31 January and readjusted its price band. Price band was revised from Rs 72-77 to Rs 71-77 per share.
Schneider Electric Infrastructure were locked in an upper circuit of 20% at Rs 94.35 after turnaround in Q3 2019 earnings. The company reported a net profit of Rs 30.03 crore in Q3 December 2019 as compared to a net loss of Rs 6.30 crore in Q3 December 2018. Net sales rose 9.9% to Rs 480.69 crore in Q3 December 2019 from Rs 437.35 crore in Q3 December 2018.
Engineers India fell 1.64%. On a consolidated basis, the company's net profit rose 19.5% to Rs 111.82 crore in Q3 December 2019 as against Rs 93.57 crore reported in Q3 December 2018. Net sales jumped 53.7% to Rs 899.17 crore in Q3 December 2019 over Q3 December 2018.
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