Expert's Take on RBI Policy
“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.
Suzlon Energy clarified on bondholders plans to take legal action over default:
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.
HCL Technologies Q1 profit falls 13%:
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.
Murthy Nagarajan, Head-Fixed Income, Tata Mutual Fund
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.
Sahaj Agarwal, Head of Derivatives, Kotak Securities on Nifty:
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.
Dhiraj Relli, MD & CEO, HDFC Securities:
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.
Market at close:
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.
Balrampur Chini Mills Q1:
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.
Anagha Deodhar, Economist - ICICI Securities
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.
Cipla Q1 result:
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.
Birlasoft slips 5% post Q1 numbers
Share price of Birlasoft shed 5 percent on August 7 after company's Q1 profit declined 36.7% at Rs 41.8 crore against Rs 66 crore, revenue was down at Rs 777.2 crore versus Rs 788.3 crore, QoQ.
Its other income fell at Rs 8.4 crore versus Rs 17 crore.
Adani Ports Q1 earnings:
The company's Q1 net profit at Rs 1,022.4 crore including one-time loss at Rs 58.6 crore. Revenue of the company for the June quarter was at Rs 2,794.5 crore
Its other income was up Rs 422.5 crore versus Rs 292.8 crore. EBITDA margin was up at 66.1% versus 52.8%.
Ankur Maheshwari, CEO of Equirus Wealth Management
Given the slowdown in the economy, prevailing liquidity crisis in the NBFC space and inflation in RBI’s comfortable range, this rate-cut is on expected lines and is a welcome step. A smooth onward transmission of the same will be quite helpful for revival of economic activity.
Aster DM Healthcare dips post Q1 result:
Aster DM Healthcare shares declined 1 percent after company reported 73.4 percent fall in its consolidated net profit at Rs 3.3 crore against Rs 12.4 crore, revenue was up 14.3 percent at Rs 2,028.6 crore versus Rs 1,774.7 crore, YoY.
R.K.Gurumurthy, Head - Treasury, Lakshmi Vilas Bank on the RBI Monetary Policy:
RBI cuts key Repo rate by 35 basis points, in line with expectations However, the quantum of cut i.e 35 basis points, is an unconventional first and could soon be the order. The global economic backdrop where rate cuts and a reversal to a QE regime seem the more preferred path, today’s rate decision seems most timely. Stance has been maintained as “accommodative” with liquidity expected to be in an enduring surplus mode, inflation expectations are benign and GDP Growth has been lowered by 10 basis.
M&M Q1 earnings:
Mahindra and Mahindra started off financial year 2019-20 on a subdued note by reporting adjusted net profit at Rs 892.7 crore for June ended quarter, falling 29 percent compared to year-ago due to weak demand across segments. Numbers include Mahindra Vehicle Manufacturers which is a 100 percent subsidiary of M&M.
Revenue during the quarter grew by 4.1 percent year-on-year to Rs 12,805.5 crore with 5 percent YoY decline in auto sales and 15 percent fall in tractors segment.
Sujan Hajra, Chief Economist and Executive Director, Anand Rathi Shares & Stock Brokers on the RBI Monetary Policy:
The 35 bps rate cut is higher than the consensus and our expectation of 25 bps rate cut. This clearly shows RBI's concern about the growth performance and outlook and urgency to take measures to revive growth.
The real issues, however, are improving monetary policy transmission and reviving the NBFC sector and the policy does not provide any new measures or even perspectives on these areas.
With 110 bps cumulative rate cuts, banks would be under moral pressures to cut lending rates which can depress NIM. This is negative for the sector and positive for interest sensitive sectors. Lowering of credit risk weight for most personal loans are positive for banks with large personal loan portfolios. Indirect priority sector lending through NBFCs are positive for MFIs and HFCs. Reduction of near term growth and upward revision of near term inflation are indicative of higher macro concerns.
Lupin Q1 earnings:
Q1 consolidated net profit at Rs 303 crore and revenue at Rs 4,418.4 crore. EBITDA stood at Rs 860.1 crore and margin was at 19.5 percent.
Voltas Q1 result:
The company has posted Q1 net profit at Rs 166.3 crore, and revenue at Rs 2,654 crore. EBITDA was at Rs 291.2 crore, while margin was at 11 percent.
The company has incurred one-time loss at Rs 43 crore.
Kalyani Steels surges 7% post Q1 numbers:
Shares of Kalyani Steels rose more than 7 percent on August 7 after company posted 30.5 percent jump in its Q1 net profit at Rs 36.51 crore against Rs 27.98 crore, revenue was up 5.8 percent at Rs 343.4 crore against Rs 324.5 crore, YoY.
State Bank of India (SBI) is likely to reduce lending rate by 15 bps w.e.f August 10. The 1-year MCLR to be at 8.25%; home loans cheaper by 35 bps since April 10.
Earnings
Precision Wiressaid June quarter profit fell 31.9 percent to Rs 8.1 crore and revenue slipped3.5 percent to Rs 426.8 crore compared to year-ago.
Expert's Take on RBI Policy
"The RBI policy , especially the repo rate cut of 35 bps, takes cognizance of the need to bring down interest cost on liquidity and credit, to support the sluggish economic growth and to stimulate aggregate demand. The success of this accommodative policy would depend entirely on the next level of its application, that is, the transmission of the lower rates to the ultimate borrowers. The banks seem to be seized of this need and effective cascading of the benefits of lower base rate may happen over the next few months,"K Joseph Thomas, Head Research -EmkayWealth Management said.
Indian Metals Falls Over 1%
Company's Q1 consolidated net profit fell 58.4 percent to Rs12.6 crore, but revenue grew by 8.1 percent to Rs 446 crore compared to year-ago.
Bajaj Electricals Q1:
Consolidated net profit fell 64 percent at Rs 14.4 crore against Rs 40.1 crore, revenue was up 14 percent at Rs 1,300.7 crore versus Rs 1,139.9 crore, YoY.
EBITDA was up 18.7 percent at Rs 73.4 crore versus Rs 61.9 crore, EBITDA margin at 5.7 percent against 5.4 percent, YoY.
Jimeet Modi, Founder & CEO, Samco Securities:
RBI has today demonstrated boldness by an unconventional reduction of 0.35% showing an urgent need to take pressure off the bond markets and reduce the cost of capital in the economy to kickstart the investment cycle from the private sector.
Increasing the bank exposure limit to a single NBFC from 15% to 20% is indeed RBI’s way of managing the current crises thereby addressing the liquidity squeeze caused by the NBFCs. The policy will genuinely percolate liquidity into the system giving immediate relief to the economy.
Rupee rebound
The Indian rupee has recovered from the day's low after monetary policy committee reduced repo rate on August 7 for the third time in this financial year.
It is trading higher by17 paise at70.64 per dollar versus Tuesday's close 70.81.
Suvodeep Rakshit, Senior Economist at Kotak Institutional Equities
:
The RBI continued with the rate cut cycle but in a surprise change to the quantum, reduced repo rate by 35 bps. While this induces some uncertainty in market expectations of the quantum of rate changes, it provides the RBI MPC with a greater degree of flexibility in signalling their intent.
The 35 bps rate cut should be seen as a signal that the RBI MPC is quite concerned with the growth outlook beyond the usual 25 bps rate cut in a business-as-usual scenario (even though it does not reflect in the revised FY2020 GDP growth estimate).
The RBI MPC did not necessarily want to deliver a 50 bps rate cut and hence retains the scope to reduce rates further. With inflation expected to remain benign, and further downside to growth outlook, we see scope for 25-50 bps of further rate cuts through FY2020.
Transmission to lending rates will likely remain weak unless there is a clear visibility of adequate liquidity sustaining over the medium term.
Buzzing:
Shares of Jammu & Kashmir Bank were locked at 20 percent upper circuit on August 7 a day after reports made rounds that the government is looking at options to strengthen the Srinagar-based lender.
Cummins India Q1 results:
Net profit fell 17 percent at Rs 152.3 crore against Rs 184.1 crore, revenue was up at Rs 1,351.7 crore against Rs 1,337 crore, YoY.
Indices flat post RBI policy
Benchmark indices are trading flat in the volatile trading on August 7 after Reserve Bank of India (RBI) cut repo rate by 35 basis points to 5.40 percent.
The Sensex is up 10.41 points at 36987.26, while Nifty is down 7.10 points at 10,941.20. About 1248 shares have advanced, 838 shares declined, and 123 shares are unchanged.
JSW Energy gains 4% on strong Q1 show
Share price of JSW Energy rose 4 percent ascompany's Q1FY20 consolidated Q1 profit rose to Rs 244.38 crore versus Rs 229.17 crore and revenue increased to Rs 2,412.2 crore versus Rs 2,360.6 crore, YoY.
JUST IN
| Reserve Bank of India (RBI) has reduced the repo rate by 35 basis points to 5.40 percent in its policy meeting on August 7.
Reverse Repo Rate adjusted to 5.15 percent.RBI cut FY20 GDP growth target to 6.9 percent from 7 percent.
Cadila Healthcare classifies inspection as OAI
Cadila Healthcare has received a letter from the USFDA classifying the inspection conducted at the Company's Moraiya facility located at Ahmedabad, Gujarat from April 22, 2019 to May 3, 2019 as 'Official Action Indicated' (OAI).
Amar Ambani, President & Research Head, Institutional Equities, YES Securities:
With inflation risks benign, pick up in monsoon in recent weeks and growth slowing down, we expect MPC to cut Repo rate by 25 basis points in credit policy on August 7, while maintaining accommodative policy stance. RBI will take cognizance of currency depreciation, global trade war escalation and the need to maintain rate differentials with global bond yields and not go with a 50 basis points cut.
In addition, we also expect to see downward revision to RBI’s FY20 GDP growth forecast of 7.0%, cues on future monetary policy trajectory, and views on liquidity management and financial stability.
Buzzing
Shares of Deccan Cements surged nearly 11 percent on August 7 after company's Q1 profit rose to Rs 23.3 crore versus Rs 11.3 crore, revenue climbed 12.6 percent to Rs 182 crore versus Rs 161.7 crore, YoY.
Infomerics Valuation and Rating has assigned credit rating to Rushil Decor's long term and short term bank facilities as IVR BBB+ and IVR A2 respectively.
Market Update
Benchmark indices are trading flat with negative bias with Nifty below 10,950 ahead of RBI policy outcome.
The Sensex is down 14.81 points at 36,962.04, while Nifty is down 10.60 points at 10, 937.70. About 1189 shares have advanced, 711 shares declined, and 101 shares are unchanged.
Buzzing:
Cox & Kings touched 52-week low of Rs 8.93, locked at 5 percent lower circuit as company defaulted on Rs 5 crore payments on unsecured commercial paper.
Honda SIEL Power Climbs 4%
Company reported a whopping 34.1 percent year-on-year growth in Q1 profit at Rs17.6 crore and revenue increased 13.3 percent to Rs 205.4 crore compared to year-ago.
