Sanjeev Zarbade, VP PCG - Research at Kotak Securities
"Major global equity markets sold off during the current week on fears of economic weakness after the US ISM manufacturing purchasing managers’ index declined to 47.8 in September, the lowest since June 2009. There were also fears of trade protectionism as US put fresh tariffs on products from EU."
"The BSE-30 Index declined 3 percent in the current week. Equity markets saw some correction as investors got cautious about declining asset quality in the banking sector, risk of weakening of demand after tepid data prints on auto sales, GST collections and core sector. RBI delivered 25 bps rate cut on Friday which however failed to live upto investor expectations and markets sell-off intensified post the announcement. Yes Bank, IndusInd Bank and State Bank of India were the top losers in the BSE-30 Index, while ITC, Mahindra & Mahindra and Reliance Industries were the top gainers."
"On the economy front, CAD/GDP for 1QFY20 was at 2 percent, from 0.7 percent in 4QFY19. FPIs bought equities worth USD 1.2 billion over the past five trading sessions while DIIs bought USD 288 million worth of equities."
Rahul Gupta, Currency Head Research at Emkay Global Financial Services
"Over all the policy was in line with market expectations and it did not have any major impact on rupee. As expected, RBI cut repo rate by 25 bps to 5.15 percent from 5.40 percent and continued the accommodative stance. The only surprise factor was a sharp cut in FY20 GDP to 6.1 percent from 6.9 percent as local economic activity has weakened along with slowdown in global economy and lingering geo-political tensions."
"The central bank has increased its Q2FY20 CPI target to 3.4 percent from 3.1 percent. Going ahead, we expect RBI to continue the rate cut cycle until the GDP doesn’t begin to revive and we are not expecting USD/INR to fall below 70.50. Hence the range for next week will be 70.65- 71.35."
Sensex ended 433.56 points or 1.14 percent in the red at 37673.31 while the Nifty was down 139.20 points or 1.23 percent at 11174.80. About 973 shares have advanced, 1615 shares declined, and 244 shares are unchanged.
TCS, Infosys and ONGC were the top Sensex gainers while Kotak Mahindra Bank, ICICI Bank and Tata Motors were the top losers.
Among the sectors, Nifty media ended over 3 percent lower followed by Bank Nifty, Auto and FMCG.
George Alexander Muthoot, MD at Muthoot Finance
"RBI’s rate cut of 25 bps focuses on improving the financial health of the economy and managing inflation. We look forward to recovery in consumption levels with banks eventually passing on the benefits to both corporates and consumers. With constant rate cuts, amendments in policies and the beginning of festive season, we expect the economy to be soon in its best health."
Rupee at day's low, trades at 70.98 per dollar
The Indian rupee slipped and trading at day's low at 70.98 per dollar against previous close 70.88. The local currency has touched 71.01 intraday Friday.
The Indian rupee recovered from the day's lows and settled higher by 20 paise at 70.88 to the US dollar on Thursday, helped by weakening of the greenback overseas and easing crude oil prices.
Lakshmi Vilas Bank nears 10-year low on RBI's PCA move
Shares of Lakshmi Vilas Bank continued to remain under pressure as they were locked in lower circuit again on October 4, trading near 10-year low after the RBI initiated prompt corrective action (PCA) plan against the lender.
The PCA plan was initiated with effect from September 27, the bank said. The bank has reassured customers that it can transit normal business and there is no restriction on operations by depositors. The bank can also undertake lending activities to all segments except corporates and other stressed and high-risk sectors.
Dhiraj Relli, MD & CEO at HDFC Securities
"RBI has cut rate by 25bps and maintains stance to “accommodative” as expected. All committee members voted for a rate cut. Governor said that they will continue with an accommodative stance as long as it is necessary to revive growth. For FY20, RBI has cut GDP growth forecast to 6.1 percent from 6.9 percent, while raises inflation forecast marginally. It has also raised lending limit for MFIs. While reducing rate, Governor added that OMOs will be done to deal with the liquidity situation."
Strategic disinvestment process:
Cabinet has approved a new process of strategic disinvestment, CNBC TV18 reported. To enable faster approvals, the strategic divestment process has been tweaked. DIPAM will be the nodal department for the strategic stake sale.
Altico Capital fund infusion:
CNBC TV18 reported, 4-5 players have shown initial interest in buying portfolios or acquiring a stake. Cerberus Cap, Apollo Global, Kotak Realty Fund, Edelweiss Special Opportunities Fund and SSG Capital are in talks with lenders for a potential deal. Yes Bank, HDFC Bank, SBI, IFC, BoB are among the key Indian lenders to Altico Capital. Lenders will meet on October 11 to discuss the resolution of Altico Capital.
Emami Cement is expecting an EV of Rs 6,000 crore via sale process, CNBC TV18 reported. The deadline for submission of non-binding bids For Emami Cement has ended. Ambuja Cements, UltraTech, Shree Cement, Nirma Group, Dalmia Cement and HeidelbergCement are in the race for Emami Cement.
Dheeraj Singh, Head of Investments & Fund Manager – Fixed Income at Taurus Asset Management
"Bond and equity markets may be slightly disappointed with the slightly lower than expected rate cut of 0.25 percent. However, the dovish statement accompanying the policy resolution which keeps the door open for future rate reductions should act as some sort of a solace. Also, RBI placing importance on quick monetary policy transmission is also an important indication of the possible measures that the central bank may take in the near future."
Shubhada Rao, Chief Economist at YES Bank
"RBI's rate cut of 25 bps by the RBI was short of our expectation of a front loaded cut of 40 bps amidst sharp downside revision of FY20 GDP growth forecast from 6.9 percent to 6.1 percent, which is reflective of further widening of the negative output gap. Basis the surplus monsoon outturn and numerous steps taken by the government in the recent past to revive growth, the MPC seems to have taken a calibrated view on incremental monetary accommodation."
"However, with CPI inflation projected to remain under 4 percent in the near to medium term, it is a welcome sign that the MPC has now decided to maintain accommodative policy stance “as long as it is necessary to revive growth. This should keep the door open for further rate cuts in the coming months."
Liquidity stress telling on Indian debt market: CARE
The Indian debt and credit markets are showing signs of stress, a CARE Ratings report has said.
"Downgrades in NBFC and HFC segment due to the continuing liquidity stress are making it difficult for entities to raise finance in a timely manner as also delaying monetisation plans," CARE said.
The CARE Ratings Debt Quality Index (CDQI) improved by 0.4 percent during April 2018-March 2019. Thereafter, it increased during April 2019 due to debt issuances in the higher-rated entities but started falling from June.
Jimeet Modi, Founder & CEO at Samco Securities
"RBI has reduced the interest rate by 0.25 percent, totalling about 1.35 percent since February 2019 one of the fasted rate cuts in the recent history. This is in line with the govt motives to urgently revive growth. Lowering cost of money would certainly budge corporates to take risk and expand driving capex in the economy."
"The MPC was expected to reduce the interest rates given the global fragile environment and slowdown in domestic economy. For stock markets this will be non-event from a short term point of view."
Amar Ambani, Head of Research – Institutional Equities at YES Securities
"MPC delivered yet another 25bps rate cut, bringing the cumulative reduction in interest rate of 135bps for this calendar year. Concerns on the fiscal side on account of lower GST revenues and corporate tax cuts possibly dissuaded RBI from a steeper rate cut. Nevertheless, accommodative policy action from the central bank is quite expected given the deceleration in frequency indicators and protracted slowdown in private consumption. The need of the hour is to revive the economy."
"On inflation, RBI continues to see CPI well below 4 percent till Q1 FY21 in the wake of widening negative output gap and benign core price pressure. On growth, GDP projections for FY20 is significantly downgraded to 6.1 percent from the earlier estimate of 6.9 percent, which was quite expected. In terms of future policy action, there is certainly scope for further rate move given the weak domestic demand conditions accompanied with contained inflation trajectory. We believe there is a possibility of another 15 to 30bps further cut."
"On the bond markets, while we do not rule out the possibility of yields rising somewhat, but eventually we see them headed lower. Although there is a concern regarding fiscal slippage, we sense that markets have largely baked in the fact that fiscal deficit will widen to 3.7-3.8 percent of GDP. We see interest rates falling significantly, looking at high real rates and scope for fall in credit spread as well as term premium. Moreover, policy transmission will eventually take place, which has not been yet materialized optimally. We see 10-year yields in the range of 6.3-6.7 percent."
Romesh Tiwari, Head of Research at CapitalAim
"The rate cut by 25 bps was expected by the market and is no surprise. I think the market will react indifferently to the statements from RBI about the expectations of the revival of domestic demand due to various measures taken by the government in the last couple of months and the assurance by the governor that the RBI will continue with an accommodative stance on monetary policy as long as needed. The downward revision of GDP for the June quarter of 2020 is not a surprise and the market is already discounting it. The market movement will not be much impacted with these measures.
Mustafa Nadeem, CEO at Epic Research
"A rate cut of 25 BPS, fifth inline in 2019 is what was widely expected since the stance of the RBI has remained the same; accommodative. This is cumulatively 135 BPS. We are now down from 6.5 to 5.15, back to where we were in 2010. This is in line with the expectations of the street. We believe this is done for two reasons. Firstly it is important to see that it is a unanimous vote and one which was out was suggesting for 40 BPS. So RBI is ready to do more to push growth in the economy. this is going to boost the MSME and other SME space while banks would have to work on that as well. Secondly, the post-corporate tax cut by FM we believe this is in line to boost the demand side issues in the economy; to improve the consumption since a lot of things are now done for the supply side."
"It is also very well accepted by RBI and it was seen that liquidity was an issue in NBFCs and other spaces in the last few quarters and that is now seen to be resolved. With the current tone which is very dovish and unanimous in the board; there may be further rates cut. The only negative aspect is the downward revision in GDP for FY20. Markets have discounted the rate cuts and since it is delivered there may be some short term profit booking, mild correction but this move is in line to ensure that long term growth remains robust."
"Technically, a short term profit booking or a correction towards 11100- 11150 would rather be healthy since there is a value play in that zone and some buying may come in at those levels. The undertone is largely bullish and the investor should utilize the dips."
Rupee trades flat at 70.89 per dollar
The Indian rupee is trading flat at 70.89 per dollar on Friday against previous close 70.88. It recovered from the day's lows and settled higher by 20 paise at 70.88 to the US dollar on Thursday, helped by weakening of the greenback overseas and easing crude oil prices.
However, sustained foreign fund outflows and sell-offs in domestic equities put pressure on the forex market, somewhat capping the rupee gains.
Shishir Baijal, Chairman & Managing Director at Knight Frank India
“In light of the ongoing economic distress in the country, the 25 basis points cut in policy rate is short of expectation. While it is the fifth consecutive rate cut this year, it is insufficient to support the flagging consumer demand. The stressed real estate sector was looking up to a strong rate cut and sector specific lending provisions to improve both liquidity scenario and consumer spending ability. As has been witnessed so far, a cumulative 110 bps REPO rate cut over the last 6 quarters has failed to stimulate consumer demand as well as private investment in the economy. A slew of factors such as slowing economic output, rising unemployment rate and low consumer confidence have hindered the percolation of these small quantum rate cuts to the economy at large."
"On this backdrop, another 25 bps rate cut by Reserve Bank of India (RBI) comes as a disappointment, more so for the real estate sector. The aggravating non-banking financial company (NBFC) liquidity crisis is severely impacting credit availability for the industry, especially developers, as they struggle to raise even construction finance. Lack of liquidity stimulus will only worsen the situation further. Therefore, a substantial rate cut to reinvigorate end consumer demand and intervention on real estate sector specific lending provisions could have been a better intervention at this juncture."
"The central bank and the government have taken several measures to aid the supply side in the recent past. However, it is the weak consumer sentiment and spending inability that is the fundamental problem of the current economic slump. Unless meaningful initiatives are taken to propel consumer demand, these supply side interventions may not meet the desired goal of economic revival."
VK Vijayakumar Chief Investment Strategist at Geojit Financial Services
"The big takeaway from the extremely accommodative monetary is that the central bank and the government are in sync on the policy response to revive growth. The MPC’s view is that there is further policy space for accommodation to revive growth clearly indicates that more rate cuts are in the offing. Eventually the repo rate is likely to settle at 4.75 percent in this rate cut cycle. This is good news for the markets even though the markets are concerned about the issues in the NBFC and housing finance space".
Dr. K. Joseph Thomas, Head Research at Emkay Wealth Management
“RBI has once again proved to be well ahead of the curve in unleashing monetary efficacies to combat the economic slowdown, in perfectly complementing the fiscal initiatives, with the cut of 25 bps, bringing down the repo rate to 5.15 percent. In conformity with this aggressive approach, RBI is likely to continue with its campaign for more rapid transmission of the benefits to credit users, through lower rates to a large extent linked to the base rate."
"There may be further cuts in the rate in the light of the GDP growth forecast being lowered form 6.90 percent to 6.10 percent for FY 20. We need to see more action from the government for a consumption-led recovery."
Rupee, bond prices fall after RBI cuts repo rate
Rupee and bond prices fell after the monetary policy committee of the Reserve Bank of India cut repo rates by 25 basis points to 5.15 percent on October 4. The rupee was trading flat at 70.88 per dollar, while 10-year government bond yield was at 6.62 percent, up 24 basis points. Bond yields and prices move in opposite directions.
A rate cut of 25 basis points was expected and the market had already factored it in, experts said.
Chintan Sheth, Director of Ashwin Sheth Group
“The Reserve Bank of India’s decision to reduce repo rate by 0.25% bps is a step in the right direction. This accommodative stance will help in stirring demand among homebuyers. With festive season beginning, this decision has come at a right time. Today’s announcement will help in boosting consumption, in the existing scenario when there’s an economic slowdown."
"RBI’s recent mandate on directly linking repo rate with fresh home loan rate was much needed to ensure immediate transmission of rate cut. After RBI’s decision, we request the government to take necessary steps to create housing demand across segments in this slowed economy.”
Ananth Narayan, Professor at SPJIMR
"The rate cut ison expected lines given fiscal deficit concerns. The RBI language is extremely dovish, indicating further rate cut going ahead. On the whole, it was a robust policy from RBI and the correction in equity market could be due to expectations of 40bps rate cut."
"Only change I see is governor Shaktikanta Das ensures that transmission of rate cut will go through. If he does see bond yields going up, fiscal deficit is large, then he will do open market operations so that bond market will do behave correctly."
Info Edge climbs 6% on Zomato's $600mn fund-raising plan
Shares of Info Edge India gained nearly 6 percent intraday on October 4 after a media report talked about a fund raising plan from Zomato.
"Online food delivery and restaurant discovery platform Zomato is finalising a fresh $600-million round of fundraising likely to be led by existing Chinese investor, Ant Financial," The Economic Times said quoting people in the know.
RBI MPC cuts repo rate by 25 bps to 5.15%
The Reserve Bank of India has cut its benchmark repo rate by 25 basis points to 5.15 percent, in the fifth straight interest rate cut.
Real GDP growth for 2019-20 has been revised downwards from 6.9 percent in the August policy to 6.1 percent. The reverse repo rate has been reduced to 4.9 percent, and the bank rate stands at 5.40 percent.
Alembic Pharma rises 3% after JV drug gets US approval
Shares of Alembic Pharmaceuticals rose 3 percent intraday on October 4 after the company's joint venture received the USFDA’s approval for a spray used for treating plaque psoriasis.
Aleor Dermaceuticals (Aleor) has got the US Food and Drug Administration nod to for its abbreviated new drug application (ANDA) Clobetasol Propionate Spray, 0.05%.
Zee Entertainment slips 5% after Morgan Stanley cuts target sharply
Shares of Zee Entertainment Enterprises fell more than 5 percent intraday on October 4 after global brokerage Morgan Stanley slashed its target price by 33 percent amid debt concerns.
Morgan Stanley has underweight rating on the stock. It cut the target price to Rs 248 from Rs 370 per share earlier, saying the uncertainty may continue as the promoter debt issue lingered.
Maruti Suzuki shares gain as CLSA remains bullish
Shares of Maruti Suzuki India gained more than 1 percent intraday on October 4 after CLSA maintained its buy call on the stock with a target price at Rs 7,950, implying 18 percent potential upside from current levels.
"The bringing SUV styling to compact cars should help boost market share as Indian market still lacks SUV-like products in a lower price range," the global brokerage said.
CLSA sees potential for the company to strengthen its India franchise on such launches and believes Maruti is the best way to play a potential demand recovery.
Wipro gains 2% on rating upgrades from Goldman Sachs
Wipro gained more than 2 percent intraday on October 4 after Goldman Sachs upgraded the stock to neutral from sell and raised the target price to Rs 226 from Rs 221 per share.
According to Goldman Sachs, the current valuation reflected its weak growth profile against its peers, while it expected the company to continue underperforming its peers on IT revenue growth.
Sharekhan by BNP Paribas on Yes Bank
"The stock currently trades at about 0.4 times its FY2021E book value, which reflects concerns over its business outlook. There are significant challenges before the bank, with a large stressed pool, which, at the present state of threshold capital position, is a key risk."
"Ratings downgrade and rise in stress loans may further impact the bank’s profitability. Moreover, a delay in raising capital may result in slow growth in the interim," Sharekhan added.
Yes Bank continues upward march
Shares of privatelender Yes Bank rallied 8 percent intraday on October 4 after promoter entities and Rana Kapoor reduced their stake significantly and assurance from the CEO Ravneet Gill that the fundraising plan is on track.
Gold price today:
Gold prices witnessed profit-taking in December futures trade on October 4 after registering a rally of more than 1 percent in the previous trading session. However, in the international markets, prices remain firm amid expectations of a rate cut by the US Federal Reserve.
IndusInd Bank climbs 3%
After four straight sessions of losses, shares of IndusInd Bank climbed 3 percent on BSE in the morning trade on October 4. The stock rose after the global financial firm Citi maintained a buy recommendation, with a target price of Rs 1,980, saying the asset quality was holding up but NPA coverage was likely to increase.
Rupee update:
Rupee traded with mild gains ahead of RBI policy rate decision. The Indian currency traded 8 paise higher at 70.82 per dollar around 0945 hours IST.
Market update:
The hopes of a rate cut by the Reserve Bank of India is keeping the Indian market aloft. Around 0935 hours, the 30-share Sensex was 210 points up at 38,317, while the Nifty index was 53 points up at 11,367.
Market update:
Equity benchmarks Sensex and Nifty traded with healthy gains, supported by bank, financial and IT heavyweights. Yes Bank shares jumped 5 percent, followed by IndusInd Bank, State Bank of India and HDFC, each trading higher by over a percent.
Market update:
The Indian market opened in the green ahead of RBI's policy meet outcome. The central bank is likely to go for the fifth consecutive rate cut. Yes Bank, IndusInd Bank, ONGC and State Bank of India were among the top gainers in the Sensex index.
The pre-opening session began on a positive note for the Indian market. The key indices Sensex and Nifty showed healthy gains, in line with most Asian peers.
