Sahaj Agrawal, Head of Research- Derivatives at Kotak Securities
Nifty trades with positive momentum for the Feb series. Support is placed at 17070 levels. Above 17500, open interest build-up is seen only at the 18000 strikes indicating possible resistance. FII segment has witnessed unwinding in the index options segment which is supportive of the positive bias.
On the sector front, we see value in the two-wheeler and BFSI space. Most of the frontline stocks trade in momentum and hence risk defined trading is suggested. Select energy stocks have broken trend levels and we expect underperformance/weakness in the space.
S Ranganathan, Head of Research at LKP securities:
After a quiet start ahead of US inflation data and state elections back home, indices recovered smartly post the accommodative stance of the RBI which held rates status quo.
As the volatility index cooled off, metals led the rally well supported by real rstate & mortgage companies in the broader market. Buoyed by a lower inflation forecast going forward, the rally percolated to IT & Financials in afternoon trade.
Vinod Nair, Head of Research at Geojit Financial Services:
The domestic market maintained its upward momentum aided by strong global cues and positive RBI policy. Though the market expected RBI to moderate its policy tone, the central bank surprised with a super dovish statement by maintaining its accommodative stance, modest inflation forecast and GDP growth of 7.8% in FY23.
Global market rallied ahead of the release of the US inflation data backed by healthy earnings results.
Rupak De, Senior Technical Analyst at LKP Securities:
On the daily chart a small bodied green candle with a significant lower wick is visible. On the higher end Nifty recovered about 80% of the previous fall and paused before any further movement. Going forward, the index may remain sideways to negative as long as the index sustains below 17635. On the lower end support is visible at 17330.
Market Close
: Market continues the winning streak on third day after RBI’s Monetary Policy Committee (MPC) kept the key interest rates unchanged and continued with its accommodative stance in it policy meeting on February 10.
At close, the Sensex was up 460.06 points or 0.79% at 58926.03, and the Nifty was up 142 points or 0.81% at 17605.80. About 1491 shares have advanced, 1761 shares declined, and 103 shares are unchanged.
ONGC, Tata Steel, Infosys, SBI Life Insurance and HDFC Bank were the top Nifty gainers, while losers were Maruti Suzuki, BPCL, Shree Cements, IOC and UltraTech Cement.
All the sectoral indices ended in the green with IT, bank, power, metal up 1 percent each. BSE midcap and smallcap indices ended flat.
Dr Lal PathLabs Q3 results:
Dr Lal PathLabs has reported 39.6 percent fall in its Q3 net profit at Rs 58.2 crore versus Rs 96.3 and revenue was down 0.3 percent at Rs 497 crore versus Rs 498.4 crore, QoQ.
Earnings before interest, tax, depreciation and amortization (EBITDA) was down 23 percent at Rs 109 crore versus Rs 141.5 crore and margin was at 22 percent versus 22.45, QoQ.
Dr Lal PathLabs was quoting at Rs 2,929.00, down Rs 30.75, or 1.04 percent.
Amar Ambani, Senior President and Head – Institutional Equities, Yes Securities:
RBI delivered an ultra-dovish policy by maintaining a status quo on the policy rates and the stance. The status quo has triggered strong rally in sovereign bonds, with benchmarks yields retreating from the recent highs. It clearly conveys that RBI is quite committed to orderly evolution of yields, notwithstanding the headwinds in the form of inflationary pressure, hawkish Fed and a large Indian government borrowing plan for FY23.
Its stance is backed by its expectation of easing of price pressures by end of the fourth quarter of FY22. This dovish policy is in line with our view that RBI will support growth and not turn hawkish for as long as it can, considering that the US Fed is looking to taper and raise its rates.
Hindustan Aeronautics Q3 results:
Hindustan Aeronautics’ Q3 net profit was up 9.4 percent at Rs 933.4 crore versus Rs 853.5 crore and revenue was up 8.6 percent at Rs 5,892 crore versus Rs 5,426 crore, YoY.
Earnings before interest, tax, depreciation and amortization (EBITDA) rose 18 percent at Rs 1,427 crore versus Rs 1,209 crore and margin was at 24.2 percent versus 22.3 percent, YoY.
Hindustan Aeronautics Ltd. was quoting at Rs 1,399.65, down Rs 14.85, or 1.05 percent on the BSE.
Nilkamal Q3 earnings:
Nilkamal has posted 38.5 percent fall in Q3 net profit at Rs 33.4 crore versus Rs 54.3 crore and revenue was up 20.7 percent at Rs 756.4 crore versus Rs 626.6 crore.
Earnings before interest, tax, depreciation and amortization (EBITDA) was down 23.7 percent at Rs 74.1 crore versus Rs 97.2 crore and EBITDA margin was at 9.8 percent versus 15.5 percent, YoY.
Nilkamal was quoting at Rs 2,303.65, down Rs 8.15, or 0.35 percent on the BSE.
Nish Bhatt, Founder & CEO, Millwood Kane International:
The central bank keeping the key rates and policy stance unchanged is on expected lines. It is the right move as it will help sustain growth as the economy battles the challenges posed by the latest wave of the pandemic. The market has clearly cheered the RBI policy, the central bank has shown no sign of nervousness with regard to the government's borrowing program.
The central bank viewing the current inflation as transitory indicates easy monetary policy for a longer period of time. Elevated crude prices and the new variant of COVID19 remain a key risk to growth going forward.
Market at 3 PM
Benchmark indices were trading at day's high in the last hour of trade with Nifty above 17600.
The Sensex was up 530.32 points or 0.91% at 58996.29, and the Nifty was up 158.00 points or 0.90% at 17621.80. About 1473 shares have advanced, 1651 shares declined, and 98 shares are unchanged.
Alembic Pharma Q3:
Net profit went down 39.7% at Rs 176.4 crore against Rs 292.6 crore (YoY). Revenue slipped 3.2% at Rs 1,272 crore against Rs 1,314.3 crore (YoY).
EBITDA was down 30% at Rs 255.6 crore against Rs 365.1 crore (YoY). EBITDA margin at 20.1% against 27.8% (YoY).
US revenue was down 23% at Rs 393 crore against Rs 512 crore (YoY). India revenue was up 17% at Rs 488 crore against Rs 418 crore (YoY).
API revenue fell 7% at Rs 198 crore against Rs 214 crore (YoY).
The stock was trading at Rs 761.10, up Rs 7.35, or 0.98 percent.
SML Isuzu Q3 earnings:
SML Isuzu has posted net loss at Rs 25.8 crore in Q3FY22 versus loss of Rs 26.4 crore and revenue was up 35.9 percent at Rs 250 crore versus Rs 184 crore
Earnings before interest, tax, depreciation and amortization (EBITDA) loss at Rs 9.5 crore versus loss of Rs 9.2 crore, YoY.
SML Isuzu was quoting at Rs 644.00, up Rs 6.45, or 1.01 percent.
SpiceJet stock price jumps over 4%
SpiceJet has offered to pay Rs 600 crore in cash in the share transfer case with its former promoter Kalanithi Maran and his firm KAL Airways for a full and final settlement of all disputes. The offer was made during the hearing in the Supreme Court today. Out of the principal amount of Rs 578 crore awarded in arbitration, SpiceJet has already paid Rs 308 crore in cash and deposited a bank guarantee of Rs 270 crore.
Mukul Rohatgi, Senior Counsel appearing for SpiceJet proposed to pay the bank guarantee equivalent amount of Rs 270 crore in cash and top it up with additional Rs 22 crore aggregating the total payout to Rs 600 crore as full and final settlement of all disputes between the Parties.
The Court has advised the other side to consider the proposal of SpiceJet and has listed the matter on February 14, 2022. The stock was trading at Rs 63.30, up Rs 2.80, or 4.63 percent. It has touched an intraday high of Rs 63.80 and an intraday low of Rs 60.20. It was trading with volumes of 1,224,446 shares, compared to its five day average of 513,177 shares, an increase of 138.60 percent.
ArcelorMittal posts three-fold jump in Q4 net income at $4,045 million
The world's leading integrated steel and mining company ArcelorMittal on Thursday reported three-fold rise in net income at USD 4,045 million (around Rs 30,100 crore) for the fourth quarter ended December 31, 2021. The company had posted a net income of USD 1,207 million in the year-ago period. Sales rose to USD 20,806 million in October-December 2021, over USD 14,184 million in the year-ago period. The company follows January-December fiscal year.
The net income is "attributable to equity holders of the parent." In a statement, the company said "ArcelorMittal recorded net income for 4Q 2021 of USD 4,045 million (USD 3.93 basic earnings per common share), as compared to net income of USD 4,621 million for 3Q 2021 (USD 4.17 basic earnings per common share), and a net income of USD 1,207 million for 4Q 2020 (USD 1.01 basic earnings per common share)."
Bombay Dyeing Q3
Consolidated net loss at Rs 217.3 crore against loss of Rs 82.5 crore (YoY). One-time loss at Rs 232.6 crore. Revenue jumped 36.3% at Rs 526.5 crore against Rs 386.2 crore (YoY). EBITDA rose 77.8% at Rs 50.6 crore against Rs 28.5 crore (YoY). Margin at 9.6% against 7.4% (YoY). The stock was trading at Rs 121.10, up Rs 2.40, or 2.02 percent. It has touched an intraday high of Rs 123.45 and an intraday low of Rs 116.70.
European Markets Updates
Hindalco Industries Q3
The company reported all-time high consolidated PAT at Rs 3,675 crore, up 96% YoY. Consolidated EBITDA at Rs 7,624 crore, up 38% YoY. Novelis’ quarterly adjusted EBITDA at $506 million and EBITDA per tonne at $544, both up by 1% YoY. Novelis net income from continuing operations at $259 million, up 33% YoY. All-time high quarterly aluminium India EBITDA at Rs 3,376 crore, up 131% YoY; EBITDA margins of 41%. Consolidated net debt to EBITDA at 1.62x as of December 31, 2021 against 2.59x as of March 31, 2021. The stock was trading at Rs 544.60, up Rs 2.25, or 0.41 percent. It has touched an intraday high of Rs 551.50 and an intraday low of Rs 541.00.
Niraj Kumar, Chief Investment Officer, Future Generali India Life Insurance on RBI policy
Overall an ultra dovish policy with an overarching focus on ‘’Durability of Growth”. The dovish verdict comes at a time when the MPC is juxtaposed with a higher than expected government borrowing in FY23 and has chosen to stay put and not react to the incumbent global and domestic pressures warranting for maneuvering of the monetary policy. Belying the market expectations of a reverse repo rate hike, MPC has continued with its effective stealth tightening by way of Variable Rate Reverse Repo (VRRR’s) and has chosen to preserve its ammunition for later, and play the waiting game for now. While the lower Inflation forecasts coupled with the accommodative status quo have imparted short-term respite to the reeling bond markets post the Union Budget, we reckon the upside risks to Inflation may have been downplayed by MPC.
Man Industries Q3
Net profit was up 2.7% at Rs 31.3 crore against Rs 30.5 crore (YoY). Revenue wa up 13.8% at Rs 630.9 crore against Rs 554.5 crore (YoY). EBITDA was down 12.2% at Rs 59.2 crore against Rs 67.4 crore (YoY). Margin at 19% against 13.3% (YoY). The stock was trading at Rs 102.50, up Rs 2.20, or 2.19 percent. It has touched an intraday high of Rs 103.95 and an intraday low of Rs 99.75. It was trading with volumes of 27,494 shares, compared to its five day average of 14,577 shares, an increase of 88.61 percent.
Page Industries Q3:
Net profit was up 13.6% at Rs 174.6 crore against Rs 154 crore (YoY). Revenue jumped 28.4% at Rs 1,190 crore against Rs 927 crore (YoY). EBITDA rose 11.1% at Rs 251 crore against Rs 226 crore(YoY). Margin at 21.1% against 24% (YoY). The Board approved interim dividend of Rs 100 per share. The stock was trading at Rs 41,477.00, down Rs 916.60, or 2.16 percent. It has touched an intraday high of Rs 42,560.25 and an intraday low of Rs 40,850.
Market update at 2 PM: Sensex is up 534.06 points or 0.91% at 59000.03, and the Nifty jumped 157.50 points or 0.90% at 17621.30.
Raghvendra Nath, MD of Ladderup Wealth Management:
The announcements were in line with our expectations. Post growth-oriented budget announcement it was necessary to maintain a conducive environment that would support the growth. Our economy is still at a stage where a lot of our industries are inching back to normalcy from the pandemic and any rate hikes at this stage could have hindered with their recovery especially for the small and medium enterprises where they need access to cheap capital to be back on track.
The GDP growth forecast for FY23 of 7.8% along with the inflation forecast of 4.5%, would result in a Nominal GDP growth of 12.5% for FY23 indicating strong economic recovery. Though with oil trading around $90 and projections of further price increases, it would be interesting to see the impact of oil on inflation, especially as the inflation is not only being affected by supply side challenges but also from demand side.
We believe that in near term, businesses will continue to benefit from lower interest rates and high liquidity in the system, especially those businesses with capex in pipeline.
BEML Q3 earnings:
The company has posted a net profit of Rs 78.6 crore in the quarter ended December 2021 versus Rs 27.7 crore in a year ago period and revenue was up 55.6 percent at Rs 1,133 crore versus Rs 728.2 crore, YoY.
Earnings before interest, tax, depreciation and amortization (EBITDA) rose 73.5 percent at Rs 74.3 crore versus Rs 42.8 crore and margin at 6.6 percent versus 5.9 percent, YoY.
BEML was quoting at Rs 1,897, up Rs 33.85, or 1.82 percent on the BSE.
Y. Viswanatha Gowd, MD & CEO of LIC Housing Finance
As the housing sales across major cities are at an all-time high, the unchanged policy rates will continue to invoke a sense of optimism for home and property buyers.
The policy rates have remained unchanged for the 10th time in a row and we expect the low home loan interest rate regime to continue for some more time. All this augurs well for the sector and will boost sentiments further.
Bharat Forge Q3 results
Bharat Forge has posted Q3 net profit at Rs 337.3 crore versus Rs 92.7 crore and revenue was up 54.7 percent at Rs 1,602 crore versus Rs 1,035.7 crore, YoY.
Earnings before interest, tax, depreciation and amortization (EBITDA) was up 89.8 percent at Rs 407.7 crore versus Rs 215 crore and margin was at 25.4 percent versus 20.7 percent, YoY.
Bharat Forge was quoting at Rs 720.55, down Rs 27.35, or 3.66 percent on the BSE.
Morgan Stanley view on Tata Power Company
The research firm Morgan Stanley has kept “equal-weight” rating on Tata Power Company with the target price at Rs 217, as the profit was a miss driven by lower other income and lower profitability in Tata Projects.
Mundra’s profits were lower-than-expected, while Indonesian coal profits were 15 percent higher.
Tata Power Company was quoting at Rs 242.55, up Rs 4.55, or 1.91 percent on the BSE.
CLSA view on ACC
Brokerage house CLSA has maintained buy rating on the stock with a target at Rs 2,710 per share.
The Q4 EBITDA missed the estimates on higher costs. EBITDA/t was down 18 percent YoY and 31 percent QoQ.
The volumes fell 4 percent YoY to 7.4 mt and blended realisations were flat QoQ and largely in-line.
ACC was quoting at Rs 2,295.45, down Rs 14.85, or 0.64 percent on the BSE.
Dr M Govinda Rao, Chief Economic Advisor, Brickwork Ratings:
The decision to hold policy rates by the MPC is on expected lines. The RBI’s continued focus is on reviving growth reinforced by potential downside risks to economic activity from the highly contagious Omicron variant. Improving inflation outlook provides comfort for the RBI to continue with the current policy stance.
The MPC was of the view that continued policy support is warranted for a sustained, durable and broad-based recovery. On the GDP guidance, the RBI forecasts 7.8% growth for FY23, which is slightly lower than the 8% to 8.5% GDP forecast made by the Economic Survey 2021-22. This, in part, may be due to the base effect arising from the revision of GDP for 2020-21 from (-) 7.1% to (-) 6.6%.
The growth concerns arising from the uncertainties related to Omicron and global spillovers, has warranted the RBI to maintain the policy rate stable to sustain the economic recovery. It has sounded a note of caution, as the persistent increase in international commodity prices, surge in the volatility of global financial markets and global supply bottlenecks can exacerbate risks to the outlook.
On the inflation front, the RBI sees prices softening from the current levels and forecasts a 4.5% inflation for FY23. The expectation of inflation moving within the MPC’s upper range provides scope for the continuation.
Market Close:
Benchmark indices were trading higher with Nifty above 17600 led by the metal, power realty and banking names.
The Sensex was up 517.58 points or 0.89% at 58983.55, and the Nifty was up 154.10 points or 0.88% at 17617.90. About 1512 shares have advanced, 1567 shares declined, and 100 shares are unchanged.
Sundaram Clayton's Q3FY22 profit falls to Rs 127.3 crore
Sundaram Clayton has posted lower profit at Rs 127.3 crore in Q3FY22 against Rs 202.3 crore in Q3FY21, while revenue rose to Rs 6,915.6 crore from Rs 6,374.4 crore, YoY.
Sundaram Clayton was quoting at Rs 4,047.45, down Rs 151.85, or 3.62 percent on the BSE.
Nish Bhatt, Founder & CEO, Millwood Kane International:
The central bank keeping the key rates and policy stance unchanged is on expected lines. It is the right move as it will help sustain growth as the economy battles the challenges posed by the latest wave of the pandemic. The market has clearly cheered the RBI policy, the central bank has shown no sign of nervousness with regard to the government's borrowing program.
The central bank viewing the current inflation as transitory indicates easy monetary policy for a longer period of time. Elevated crude prices and the new variant of COVID19 remain a key risk to growth going forward.
Mahindra and Mahindra Q3 net profit at Rs 1,798 crore
Mahindra and Mahindra has posted Q3 net profit at Rs 1,798 crore and revenue was at Rs 15,329 crore.
Mahindra and Mahindra was quoting at Rs 846, up Rs 5.80, or 0.69 percent on the BSE.
CLSA view on Tata Power Company:
The broking house CLSA has kept the “sell” call on the stock, with the target at Rs 195 as it was a weak Q3 with the coal business disappointing.
Coal now accounts for 78 percent of EBITDA. The MSCI addition and a retail frenzy provide an exit opportunity.
However, the valuations are expensive at current levels.
Tata Power Company was quoting at Rs 242.10, up Rs 4.10, or 1.72 percent on the BSE.
Dhaval Ajmera, Director, Ajmera Realty & Infra India:
RBI’s announcement to continue with its accommodative stance is a welcome move to revive and sustain growth and limit any disruption to economic activity. It is a clear signal that regulators have chosen growth over any other factor like inflation or even aggressive stance taken by global central bankers and policy makers.
The Indian economy has weathered COVID Pandemic well and it will continue to be the fastest-growing economy in coming future. After a heavy-duty CAPEX budget by the government, MPC has provided room to remain accommodative, improving inflation outlook with continuous policy support warranted for a durable and broad based recovery.
The real GDP growth projected at 7.8% for 2022-2023 and inflation targets are seen to be milder than expected. We welcome these measures as it will continue lower rate regime for industry in general and also focus on rate sensitive real estate sector. With this move, consumers and home buyers will continue to enjoy decade low interest rates prevailing from past few months and continue to drive robust demand for the sector.
MRF Q3 earnings:
MRF has posted 71 percent fall in its Q3 net profit at Rs 149.3 crore versus Rs 520.5 crore and revenue was up 6 percent at Rs 4,920 crore against Rs 4,641.6 crore, YoY.
Earnings before interest, tax, depreciation and amortization (EBITDA) was down 49.5% at Rs 493 crore versus Rs 977 crore and margin was down at 10% versus 21%, YoY.
MRF was quoting at Rs 69,589.90, down Rs 836.70, or 1.19 percent on the BSE.
Lupin signs distribution agreement with Medis for Orphan Drug NaMuscla
Lupin has entered into a distribution agreement with Medis for Lupin's orphan drug NaMuscla (mexiletine). Medis will commercialize NaMuscla for the symptomatic treatment of myotonia in adults with non-dystrophic myotonic (NDM) disorders in Central and Eastern European countries. NaMuscla is the first and only licensed product for this indication.
Lupin was quoting at Rs 802.10, up Rs 1.15, or 0.14 percent on the BSE.
Engineers India Q3FY22 net profit dips to Rs 40.6 crore
Engineers India reported lower profit at Rs 40.6 crore in Q3FY22 against Rs 88 crore in Q3FY21.
Also, it revenue declined to Rs 692.1 crore from Rs 845.4 crore, YoY.
Engineers India was quoting at Rs 68.80, down Rs 1.05, or 1.50 percent.
DRE Reddy, CEO and Managing Partner at CRCL LLP
It is a welcome move to keep repo rate and reverse repo rates unchanged, reiterating an accommodative stance on both rates and liquidity. The economic growth momentum softens amid pandemic uncertainties, it was likely for RBI to keep the repo rate and reverse repo rate unchanged.
The softening of food prices, improving prospects for food grain production and expected easing of vegetable prices on fresh winter crop arrival may give some relief. Increase in crude oil prices is one of the drivers of inflation though inflationary pressure is being set off by tax cuts relating to petrol and diesel.
In line with the upcoming CPI expectation, we are hopeful to expect the easing of food prices to continue adding optimism while also ensuring a strong and sustainable economic recovery.
Market at 12 PM
Benchmark indices extended the gains and trading at day's high with Nifty above 17600.
The Sensex was up 518.83 points or 0.89% at 58984.80, and the Nifty was up 153.50 points or 0.88% at 17617.30. About 1491 shares have advanced, 1556 shares declined, and 102 shares are unchanged.
Nitin Shanbhag, Executive Group Vice President – Investment Products, Motilal Oswal Private Wealth:
Policy rates remaining unchanged indicates that RBI is more focused on domestic macro variables rather than tracking global central bank actions. While the US Fed has clearly indicated multiple rate hikes going forward to combat rising inflation, the RBI seems far more calibrated in approach given its own projection of domestic CPI peaking in Q4FY22 and moderating in FY23.
On the external front, the projection of CAD at 2% of GDP is also positive. Although bond yields will take a breather for now, with the RBI continuing on the path to normalization, we maintain that the yield curve is likely to flatten going forward. Hence, for core fixed income allocation, a barbell approach i.e. having core allocation to high quality accrual oriented funds with short maturities (3-5 years), complemented by 20-30% allocation towards long maturity and high quality roll down strategies, would remain the preferred strategy.
V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services:
RBI has again voted for growth by continuing the accommodative stance and retaining the current repo and reverse repo rates. Even though this might invite criticism of the central bank being behind the curve, the RBI governor has categorically communicated that "continued policy support is warranted for a durable and broad-based recovery." This clear pro-growth stance is desirable at the current juncture.
Market has responded positively to the policy as of now with banking stocks exhibiting strength.
However, the short to medium- term trend of the market is likely to be influenced by the inflation data in US expected late tonight.
Shishir Baijal, Chairman & Managing Director, Knight Frank India:
At this critical juncture when the economy is just recovering from the instability caused by the third wave of pandemic, RBI’s decision to keep the policy interest rate unchanged is a welcome move. There are still lingering growth concerns in the economy and RBI’s accommodative monetary policy stance will be supportive of growth.
The Housing market has been showing a healthy bounce back from the covid crisis and low interest rates will help in improving affordability and sustaining the growth momentum. The sustenance of housing market recovery will have a strong multiplier effect on overall economic growth.
Govt of Karnataka declares ACC as successful bidder for Kannur limestone block
Dept. of Mines & Geolog (DMG), Government of Karnataka has declared ACC as the auccessful Bidder for Kannur, Wadi Area, Limestone Block in the State of Karnataka.
The Company had participated in an e-auction of Kannur Limestone Block in the Wadi Area, District Kalburgi, Karnataka conducted by the Dept. of Mines & Geology ('DMG'), Government of Karnataka.
Through this mining block, the company has secured estimated limestone resources in excess of 250 million tonnes. This limestone block is in close proximity to the company’s existing Wadi cement plant.
ACC was quoting at Rs 2,310.90, up Rs 0.60, or 0.03 percent on the BSE.
BSE Realty Index added 1 percent supported by the Macrotech Developers, Indiabulls Real Estate, Sobha
Dr Reddy's announces launch of authorized generic version of VASOSTRICT
Dr. Reddy’s Laboratories announced the launch of its authorized generic version of Par Pharmaceutical’s VASOSTRICT (vasopressin injection, USP) Vials in the US Market approved by the US Food and Drug Administration (USFDA).
The company has received the Establishment Inspection Report (EIR) from US FDA, for the API manufacturing plant at Middleburg, New York, indicating closure of the audit and the inspection classification of this facility is determined as ‘Voluntary action indicated’ (VAI).
Dr Reddy's Laboratories was quoting at Rs 4,345.20, down Rs 23.55, or 0.54 percent.
Jyoti Roy - DVP- Equity Strategist, Angel One:
The RBI in its MPC kept the repo rate and the reverse repo rates unchanged at 4.0% and 3.35% respectively. While the decision to keep repo rates unchanged was in line with expectations markets were expecting a 25bps hike in the reverse repo rates to 3.5%. The RBI expects GDP growth for FY23 to be at 7.8% while they expect inflation to peak out in Q4FY2022 at 5.7% before moderating to 4.5% in FY2023, though hardening crude prices could pose upside risks to inflation. The RBI also maintained that they will continue to use variable rate reverse repo (VRRR) as the main instrument for draining out excess liquidity from the markets.
Limits under the Voluntary Retention Route (VRR) have also been hiked from Rs 1.5 lakh crore to Rs 2.5 lakh crore with effect from April 1, 2022. This will provide access to additional sources of capital for the domestic debt market including g-secs. The RBIs decision not to hike reverse repo rates and keep an accommodative stance surprised the markets as the RBI was largely expected to change its stance to neutral.
While the RBIs decisions came as a pleasant surprise for the markets, concerns remain over aggressive Fed tightening, large government borrowings along with upside risks to inflation due to high commodity and crude prices.
BSE Bankex index rose 1 percent led by the Kotak Mahindra Bank, HDFC Bank, Federal Bank
Madhavi
Arora, Lead Economist, Emkay Global Financial Services:The MPC expectedly kept the key rates unchanged unanimously and reiterated its accommodative stance both on rates and liquidity. However, Jayanth Varma’s dissent on continuation of accommodative stance for foreseeable future continues to keep MPC in split state. The possible hike in fixed reverse repo was a close call and it seems the RBI gauged that markets need to be assuaged over material tightening of financial conditions ahead as global dynamics change and decided to stay put.
The gradualist approach toward liquidity and rate normalization may be challenged by various global and domestic push-and-pull factors. Nonetheless, a huge bond supply in FY23 (even with upside surprise on tax revenues) will require the RBI’s invisible hand in a more visible fashion, implying return of a pre-committed GSAPs going ahead. An uncomfortable RBI may neutralize that with CRR hikes, albeit it will face some communication challenges.
We note the macro adjustment owing to changing global and domestic dynamics has so far been borne by the rates market while the FX market has been resilient. Amid ultra-elevated term premia, India’s current real rates look reasonable againstEMs, given the present crosscurrents. This could give some leeway to the RBI to conduct shallow normalization.
