The broader market turned negative. The S&P BSE Mid-Cap index fell 0.64% while the S&P BSE Small-Cap index slipped 0.10%.
Sellers outpaced buyers. On the BSE, 1012 shares rose and 1138 shares fell. A total of 138 shares were unchanged. In Nifty 50 index, 15 stocks advanced while 35 stocks declined.
RBI Action:
On the basis of an assessment of the current and evolving macroeconomic situation, the Reserve bank of India (RBI)'s Monetary Policy Committee (MPC) at its meeting today (27 March 2020) decided to reduce the policy repo rate under the liquidity adjustment facility (LAF) by 75 basis points to 4.40% from 5.15% with immediate effect. Accordingly, the marginal standing facility (MSF) rate and the Bank Rate stand reduced to 4.65% from 5.40%. Further, consequent upon the widening of the LAF corridor as detailed in the accompanying Statement on Developmental and Regulatory Polices, the reverse repo rate under the LAF stands reduced by 90 basis points to 4%. The MPC also decided to continue with the accommodative stance as long as it is necessary to revive growth and mitigate the impact of coronavirus (COVID-19) on the economy, while ensuring that inflation remains within the target.
RBI reduced the cash reserve ratio (CRR) of all banks by 100 basis points to 3% of net demand and time liabilities (NDTL) with effect from the reporting fortnight beginning 28 March 2020. This reduction in the CRR would release primary liquidity of about Rs 1,37,000 crore uniformly across the banking system in proportion to liabilities of constituents rather than in relation to holdings of excess SLR. This dispensation will be available for a period of one year ending on 26 March 2021.
Under the marginal standing facility (MSF), banks can borrow overnight at their discretion by dipping up to 2% into the Statutory Liquidity Ratio (SLR). To provide comfort to the banking system, RBI increased the limit of 2% to 3% with immediate effect.
In order to mitigate their adverse effects on economic activity leading to pressures on cash flows, RBI will conduct auctions of targeted term repos of up to three years tenor of appropriate sizes for a total amount of up to Rs 1,00,000 crore at a floating rate linked to the policy repo rate.
RBI permitted all commercial banks, co-operative banks, all-India financial institutions and NBFCs to allow a moratorium of three months on payment of installments in respect of all term loans outstanding as on 1 March 2020. Accordingly, the repayment schedule and all subsequent due dates, as also the tenor for such loans, may be shifted across the board by three months.
In respect of working capital facilities sanctioned in the form of cash credit/overdraft, lending institutions are being permitted to allow a deferment of three months on payment of interest in respect of all such facilities outstanding as on 1 March 2020. The accumulated interest for the period will be paid after the expiry of the deferment period.
RBI said the global economic activity has come to a near standstill as COVID-19 related lockdowns and social distancing are imposed across a widening swathe of affected countries. Expectations of a shallow recovery in 2020 from 2019's decade low in global growth have been dashed. The outlook is now heavily contingent upon the intensity, spread and duration of the pandemic. There is a rising probability that large parts of the global economy will slip into recession.
RBI added that GDP growth of 4.7% for Q4:2019-20 within the annual estimate of 5% for the year as a whole, is now at risk from the pandemic's impact on the economy. High frequency indicators suggest that private final consumption expenditure has been hit hardest, even as gross fixed capital formation has been in contraction since Q2:2019-20. On the supply side, the outlook for agriculture and allied activities appears to be the only silver lining, with food grains output at 292 million tonnes being 2.4% higher than a year ago. A pick-up in manufacturing and electricity generation pulled industrial production into positive territory in January 2020 after intermittent contraction and/or lacklustre activity over the past five months; however, more data will need to be watched to assess whether the recent uptick will endure in the face of COVID-19.
As a consequence of COVID-19, aggregate demand may weaken and ease core inflation further. Heightened volatility in financial markets could also have a bearing on inflation, it added. Apart from the continuing resilience of agriculture and allied activities, most other sectors of the economy will be adversely impacted by the pandemic. If COVID-19 is prolonged and supply chain disruptions get accentuated, the global slowdown could deepen, with adverse implications for India. Upside growth impulses are expected to emanate from monetary, fiscal and other policy measures and the early containment of COVID-19.
The MPC is of the view that macroeconomic risks, both on the demand and supply sides, brought on by the pandemic could be severe. The need of the hour is to do whatever is necessary to shield the domestic economy from the pandemic.
Stocks in Spotlight:
Axis Bank (up 7.82%), Coal India (up 4.54%), Cipla (up 4.08%), HDFC (up 2.19%) and UPL (up 1.95%) were the top gainers.
IndusInd Bank (down 9.99%), Bajaj Finance (down 8.76%), Bajaj Finserv (down 8.40%), Bharti Airtel (down 6.55%) and Hero MotoCorp (down 6.10%) were the top losers.
NTPC rose 1.12% to Rs 81.40. The company said that it had signed a share-purchase agreement with the central government to acquire North Eastern Electric Power Corporation (NEEPCO) for Rs 4,000 crore and THDC India (THDCIL) for Rs 7,500 crore. The acquisitions are subject to regulatory approvals.
ICICI Bank rose 0.29% to Rs 332.95. The private lender has entered into an agreement to invest in Auxilo Finserve (previously known as Stellenyak General Finance) by acquiring 9.9% stake, or 34.1 million equity shares for Rs 51.1 crore.
Tata Motors fell 0.99% to Rs 70.10 amid profit booking after reporting gains in the past two sessions. Meanwhile, Moody's Investors Service on Thursday placed on review for downgrade Tata Motors' (TML) Ba3 corporate family rating and Ba3 senior unsecured debt rating. The outlook has been revised to ratings under review from negative. Offering the ratings rationale, Moody's said that the rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil prices, and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. The combined credit effects of these developments are unprecedented. The automotive sector has been one of the sectors most significantly affected by the shock given its sensitivity to consumer demand and sentiment.
Global Markets:
European markets opened lower while most Asian markets were trading higher on Friday as uncertainty over the economic impact of the coronavirus outbreak continues to weigh on investor sentiment.
On the economic data front, China's industrial profits for January-February plunged 38.3% year-on-year, according to the country's National Bureau of Statistics. The period covered by the data release coincided with lockdowns announced by the Chinese government to combat the spread of the coronavirus in the country, where the disease was first reported.
A surge in reported infections in recent days has made the US the country with the largest number of confirmed coronavirus cases. Globally, more than 531,800 have been infected while at least 24,000 lives have been taken, according to data compiled by John Hopkins University.
Meanwhile, the number of Americans filing claims for unemployment benefits surged to a record of more than 3 million last week as strict measures to contain the coronavirus pandemic ground the country to a sudden halt.
Meanwhile, U.S. Federal Reserve Chairman Jerome Powell reportedly said on Thursday that the central bank will not "run out of ammunition" to keep the economy stable.
In US, stocks roared higher on Thursday, closing up for the third day in a row despite a report from the Labor Department that showed unemployment claims soared to a record 3.28 million last week, as the coronavirus pandemic shut down businesses across the nation.
Investors took some comfort from the overnight passage of a historic $2 trillion economic stimulus bill by the Senate, putting it one step closer to being signed into law to mitigate the economic fallout from the outbreak
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