Closing Bell: Nifty ends at 11,200, Sensex up 362 pts after RBI keeps rate unchanged

Taking Stock: RBI commentary helps bulls push Sensex higher; Nifty reclaims 11,200

Mild profit booking was seen in telecom (down 0.3 percent), capital goods (down 0.29 percent) and power (down 0.09 percent) stocks.... Read More

The short term trend of Nifty continues to be positive with volatile movement. Some more upside is left in the market and Nifty is expected to reach the upper resistance area of 11350 by next week. Immediate support is placed at 11100. The stoploss for positional long trades needs to be placed at 10900 levels.

The Nifty witnessed sharp swings in both the directions today. The pullback that started couple of days ago got stretched further on the upside. The index tapped at the 78.6% retracement of the previous fall, which is near 11240. The key Fibonacci level induced bears into the action to some extent. Structurally, the pullback seems to be in its terminal phase & is expected to be followed by the next leg down, which will push the Nifty below the swing low of 10882. On the other hand, any attempt to retest the 78.6% retracement mark is likely to attract fresh round of selling.

Nifty is once again within striking distance of the near term high of 11341 and it will be interesting to watch as to how easily it manages to break that.

Banking stocks have reacted positively to the outcome despite no rate cut as the feared extension of moratorium has not happened and they will be spared of the requirement of high provisions if by Sept 30, the new committee’s recommendations are implemented. The overall market is also excited by the prudent measures implemented. However the markets lack triggers and/or flows to take it higher and hence may keep running into resistances.

The Monetary Policy Committee (MPC) has decided to leave the interest rates unchanged while maintaining an accommodative stance. According to the RBI Governor, economic activity has started to pick up post the lockdown caused due to the pandemic. Recovery in the rural economy is likely to be robust and aid the overall economic recovery. The MPC expects inflation to be at elevated levels in Q2FY21. The MPC is open to further monetary policy action but would like to use the dry powder judiciously keeping in mind the near term view on inflation.

More than the policy rates, it is the additional measures announced by the RBI Governor that are a welcome move and shall aid economic recovery. Some of these measures include permitting restructuring of MSME debt till 31st March 2021 and including lending to start ups under Priority Sector Lending. The RBI has also increased the loan to value ratio of gold loans to 90%. While this move is positive from a credit standpoint it is negative from the point of view of the lender since it increases the risk of the lender not being able to auction the security and recover the money due to lower margin of safety.

: Benchmark indices closed higher on August 6 post Reserve Bank of India (RBI) kept the repo rate unchanged at 4 percent.

At close, the Sensex was up 362.12 points or 0.96% at 38025.45, and the Nifty was up 98.50 points or 0.89% at 11200.20. About 1567 shares have advanced, 1056 shares declined, and 167 shares are unchanged.

Infosys, Bajaj Finance, GAIL, HCL Tech and UPL were among major gainers on the Nifty, while losers were Shree Cements, Eicher Motors, Adani Ports, M&M and Bharti Airtel.

Among sectors, IT, metal, pharma and FMCG gained more than 1 percent. BSE Midcap and Smallcap indices rose 0.7 percent and 1 percent respectively.

For 1QFY2020, Whirlpool of India's top-line declined by ~48% yoy to Rs 1,027 crore. Top-line was negatively impacted mainly due COVID-19 lockdown. On the operating front, the company reported contraction in margins, down 1,078 bps yoy at 4.5%. Operating margin down mainly due to negative impact of operating leverage. On the bottom-line front, WIL reported de-growth of ~92% yoy to Rs 16 crore due to lower sales and poor operating performance.

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Blue Star has reported consolidated net loss at Rs 20 crore against profit of Rs 77 crore and revenue was down 60% at Rs 626 crore versus Rs 1,575.4 crore, reported CNBC-TV18.

Lupin in alliance with Concord Biotech announced that it has received approval from the United States Food and Drug Administration (USFDA) for Mycophenolate Mofetil Tablets USP, 500 mg, to market a generic version of CellCept Tablets of Roche Palo Alto LLC (Roche).

The company's consolidated net profit fell 12.5% YoY at R 9s 48.1 crore versus Rs 55 crore and revenue was down 10.5% at Rs 159 crore versus Rs 177.6 crore, reported CNBC-TV18.

"The outcome of MPC of RBI’s meeting on Aug 06 was on expected lines. Rates have been left unchanged, as expected while the committee has maintained accommodative stance. It also noted that the previous reduction of 250 bps is achieving the expected outcome," Dhiraj Relli, MD & CEO, HDFC Securities told Moneycontrol.

"Additional special liquidity facility to NHB and NABARD to help the housing sector and agriculture/rural activities is welcome. Raising of LTV on gold loans to 90% from 75% may have some

Unichem Laboratories has received ANDA approval for its Tolterodine Tartrate Tablets, USP 1 mg and 2 mg from the United States Food and Drug Administration (USFDA) to market a generic version of DETROL (tolterodine tartrate) tablets of Pfizer Inc.

The MPC’s decision to keep rates on hold is in line with our expectation. Although the committee delivered large rate cuts since the onset of COVID-19, credit growth has been falling consistently. This shows that the ability of monetary policy in stimulating growth is constrained in the current situation. The MPC’s unanimous decision to pause is an acknowledgment of the same.

However, the RBI took a series of measures outside the purview of MPC to provide support to stressed sectors. Measures such as loan restructuring, increased in LTV for gold loans, additional liquidity facilities for NHB and NABARD are expected to have favourable impact.