Closing Bell: Nifty ends below 10,900, Sensex falls 286 pts post rate cut; auto, banks underperform

Technical View: Nifty forms bearish candle, chart indicates consolidation ahead

Mazhar Mohammad said in case if 10,782 level is breached on closing basis then the said index shall head towards the zone of 10,566-10,497 levels.... Read More

“RBI today announced an unconventional cut in repo rate by 35 basis points. We expected a 25 basis point cut in Repo with inflation risks benign, pick up in monsoon in recent weeks and growth slowing down. We didn’t think a 50 basis point cut would cut through as RBI would take cognizance of currency depreciation, global trade war escalation and the need to maintain rate differentials with US bond yields. In hindsight, this unconventional 35 basis points cut should have been seen coming, after RBI’s statement in its last policy meet to do away with 25bps norm. Equities, however hasn’t risen post the policy announcement, as a 50 basis points cut was priced in the market,"Amar Ambani, President & Research Head, Institutional Equities, YES Securities said.

Going forward, he believes that scope for another 25 basis points cut is available to the MPC in 2019 itself.

Evening Walk Down D-St: A 35 bps rate cut fails to lift sentiment

Indiabulls Housing Finance was the top Nifty loser, down 13 percent, followed by M&M which fell 5.6 percent post Q1 results, and Tata Steel closed 4.9 percent down.... Read More

The company is neither aware of any action being contemplated by the bondholders nor can comment upon the intentions of the bondholders. The Company has also not received any communication in this regard

The company continues to work on holistic solution for its debt and is in discussions with various stakeholders in relation to its outstanding debt including the Bonds.

Software services company HCL Technologies has reported a 13 percent sequential decline in June quarter (Q1) profit at Rs 2,220 crore, dented by operating income, but maintained full year revenue growth guidance.

The profit in previous quarter was Rs 2,568 crore. The year-on-year profit degrowth was 7.6 percent.

Revenue was ahead of estimates at Rs 16,425 crore in quarter ended June 2019, growing 2.7 percent sequentially and 18.7 percent year-on-year, the company said in its BSE filing.

Revenue in dollar terms increased 3.8 percent quarter-on-quarter (15 percent YoY) to $2,364 million and the same in constant currency grew by 4.2 percent QoQ (up 17 percent YoY).

"We have started FY20 on a very strong note with quarterly revenue growth of 4.2 percent QoQ and 17 percent YoY in constant currency. With our current momentum, we aspire to register an industry leading organic growth in FY20," C Vijayakumar, President & CEO said.

RBI took the unusual step of reducing the repo rate by 35 basis points. The repo rate now is 5.4 %. They have also reduced the GDP growth forecast to 6.9 % from 7 % levels. The reason for cutting repo rates is increase the output in the economy, as per RBI, the economy is running significant slack due to consumption and investment slowdown.

As per RBI , the one year forward CPI inflation is forecast at 3.6 %. Given the current repo rates of 5.4 %, the real rates is around 1.8 % (5.4- 3.6) levels which is on the higher side. As per our view, GDP growth will face significant headwinds due to global uncertainty and high debt of corporates. We feel deeper cuts in policy rates are required to tackle GDP slowdown.

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Nifty has broken strong support levels of 11,000 and continues to remain under pressure. With the dollar weakening and global markets being under pressure expect volatility to remain high. On the downside support is seen at 10,600/10,830.

Expect consolidation in the near term before market decides its further course of action. IT and select consumption stocks trade with a positive bias while Metal and PSU Banking remain under significant pressure.

The RBI monetary policy committee's decision of an unconventional 35 bps rate cut speaks about its intent of cutting rates more than the usual 25bps but less than the 50 bps which it termed as excessive. This however induces some uncertainty in market expectations on the quantum of rate changes expected henceforth.

The overall tone of the monetary policy was dovish with slowing growth - both on the global and domestic front - being a major concern. ‘Cyclical slowdown in growth’ as RBI governor mentioned - has been the primary driving factor for rate cuts as seen in the past few MPC decision.

The last hour selling has pulled the indices to the day's low level after remained volatile as Reserve Bank of India (RBI) has cut the repo rate by 35 bps at 5.40 percentin its policy meet.

At close, the Sensex was down 286.35 points at 36,690.50, while Nifty was down 92.80 points at 10,855.50. About 1107 shares have advanced, 1348 shares declined, and 159 shares are unchanged.

Indiabulls Housing, M&M, Tata Steel, Tata Motors and BPCL were among major losers on the Nifty, while gainers were Zee Entertainment, Cipla, HUL, Yes Bank and Hero Motocorp.

Except IT and pharma, all other sectoral indices ended in the red led by bank, metal, auto, energy and infra. BSE midcap and smallcap index ended with marginal loss.

The company's consolidated net profit jumped 42.5 percent to Rs 105.6 crore versus Rs 74.1 crore, while revenue was down 5.4 percent at Rs 948.5 crore versus Rs 1,002.5 crore, YoY.

The MPC deviated from convention by cutting repo rate by 35bps. In the current situation, 25bps cut would have been inadequate while 50bps cut would have been too aggressive. Inflation and growth are likely to pick up in the second half of FY20 hence we believe there is room to cut rate only once more in this fiscal year. The committee cut growth forecast for FY20 by 10bps to 6.9% however we believe actual growth could be lower.

Also, the MPC forecasts inflation to average ~3.3% in FY20 while we believe actual inflation outturns could be much higher at ~3.6-3.7%. Large banks have started cutting lending rates in response to reduced repo rate. Also, the RBI announced a slew of measures to aid the NBFC sector such as reduced risk weights for consumer credit, increasing banks' exposure to a single NBFC, permitting banks to on-lend through NBFCs etc.

Greater transmission of rate cuts along with easier conditions in the NBFC sector are likely to have a position impact on the economy.

The company's Q1 consolidated net profit was up 6 percent at Rs 478.2 crore against Rs 451.3 crore. Revenue was up at Rs 3,989 crore against Rs 3,940 crore, YoY.

Earnings before interest, tax, depreciation and amortization (EBITDA) rose 24.4% at Rs 904.6 crore against Rs 727.4 crore and margin was up 220 bps at 22.7 percent versus 18.5 percent.