Daily Archives: October 5, 2016

Oct 05

Daily Market Commentary : 4th Oct. 2016

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Indian stocks rallied for the third consecutive day today after the Reserve Bank of India (RBI) cut its key lending rate or the repo rate by 25 basis points to a six-year low of 6.25%, from 6.5% earlier. The RBI Governor, Urjit R. Patel said in the policy review that global growth has been slowing more than anticipated through 2016 so far, with weak investment and trade damping aggregate demand. Coming back to domestic action, oil & gas stocks staged a strong rally as is reflected in the gain of over 2% today in the BSE oil & gas index.The BSE telecom index was up 1.3% in today’s trade. Realty, utilities, IT, finance and banking indices were up 1% each and the pharma index was up by 0.5%. On the other hand, capital goods and consumer discretionary stocks were among the major losers. Nifty closed with a gain of 31 points at 8,769, while BSE Sensex ended with a gain of 91 points at 28,335.

On the global front, Asian stocks traded firm with the Hong Kong’s Hang Seng advancing 0.82% and China’s Shanghai Composite too ending marginally higher.

In Europe, the FTSE 100 and DAX have gained 1% each, while the CAC 40 is up 0.60%.

Amtek Auto rallied 7.2% to Rs.48.45 on the BSE after Mahindra CIE Automotive was interested in buying the assets of the debt-ridden auto component maker.

Majesco climbed 4% after the company announced a five-year partnership with IBM to jointly offer a new cognitive, cloud based platform to help insurance carriers worldwide to create new services on IBM Cloud.

HPL Electric shares got listed on the NSE at a discount, ie at Rs.190 to an issue price of Rs.202. The stock ended at Rs.189.05, lower by Rs.12.95 or 6.41% to its issue price.

Piramal Enterprises slipped 1%. SEBI has fined Piramal Enterprises Ltd and its promoters – Ajay G. Piramal, Swati A. Piramal, Nandini Piramal and N. Santhanam – for violating insider trading norms while selling its healthcare business to Abbott Laboratories Ltd in May 2010.

Wockhardt rallied 3% after the pharma company said the US health regulator has excluded Ceftriazone Sodium from import alerts issued earlier against its active pharmaceutical ingredient manufacturing facility at Ankleshwar.

Hero MotoCorp inched up 0.24% on the BSE. The company reported an 11.24% increase in sales at 6,74,961 units in September.

The rupee was trading up by 5 paise at 66.53 per US dollar.

Out of 1,406 stocks traded on the NSE, 574 declined and 777 advanced today.

Top 5 Nifty Gainers: Asian Paints (1.91%), Hind. Unilever (1.40%), SBI (1.33%), Tata Motors (1.12%) and Maruti Suzuki (0.91%)

Top 5 Nifty Losers: ONGC (-1.37%), Axis Bank (-1.03%), M&M (-0.97%), Wipro (-0.91%) and Infosys Ltd (-0.91%)

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Oct 05

ECB taper on the table

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unnamedThe ECB is thinking about tapering bond purchases, according to a Bloomberg report. The question is: when?
 The euro jumped nearly a cent on the initial headlines on the impression that the tapering could start in 10 million euro increments as soon as December. Later, the gains were halved on the idea that the ECB is more talking about theoretically tapering when the time is right.
 The story itself seems to swing both ways. They highlight that the ECB is running out of assets to buy (true) and wants to put pressure on governments to reform (true) but don’t explicitly say when the ECB might consider tapering.
Naturally, the ECB denied it but even the denial only went half-way. They said the ECB didn’t discuss tapering at the Governing Council meeting. But the story said it was something discussed later. The market remains skeptical, but tapering now (and maintaining the size of the balance sheet) would fit in with the more-optimistic tone from the ECB.
Aside from the ECB story, markets were volatile on Tuesday and the US dollar caught a strong bid against the yen and commodity currencies despite another rally in oil prices. Bonds and stocks sold off at the same time.
The dollar gains came in spite of the IMF lowering its US growth forecast this year to 1.6% from 2.2%. USD has shown time and again that it’s tough to hold down. USD/JPY broke above the downtrend since May and is approaching the 100-day moving average at 103.76.

Oct 05

RBI 4th Bi-Monthly Monetary Policy 2016-17

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montearyThe Monetary Policy Committee of RBI made its first policy statement yesterday. On the basis of an assessment of the current and evolving macroeconomic situation at its meeting today, the Monetary Policy Committee (MPC) decided to reduce the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 6.5 per cent to 6.25 per cent with immediate effect.
Overall the Committee sounded neutral on the macroeconomic and monetary conditions and very accommodative, as it expected the domestic momentum to get somewhat offset by the global slowdown.
The Committee said, “The momentum of growth is expected to quicken with a normal monsoon raising agricultural growth and rural demand, as well as by the stimulus to the urban consumption spending from the pay commission’s award. The accommodative stance of monetary policy and comfortable liquidity conditions should support a revival of credit to the productive sectors. The continuing sluggishness in world trade and smaller terms of trade gains than in the past point, however, to further slackening of external demand going forward. Accordingly, the projection of growth of real gross value added (GVA) for 2016-17 is retained at 7.6 per cent, with risks evenly balanced around it.”
In this context it is pertinent to note that the rating agency CRISIL in its latest report has observed material improvement in the credit quality of Indian companies during 1HFY17. As per the rating agency, for the first time in the last 10 semi-annual periods, the number of debt upgrades outnumbered the number of debt downgrades. The ratio for 1HFY17 stood at 1.2 compared with 0.8 2HFY16.
The report highlights that there were 646 upgrades to 553 downgrades in the first half. Upgrades were concentrated in the domestic consumption-linked sectors such as auto ancillaries and packaging, and in the exports-linked pharmaceutical sector. On other hand, downgrades were mainly in the investment-linked sectors such as construction, industrial machinery, real estate and metals. Financial (capital structure, debt protection and liquidity) and business (demand, profitability and working capital cycle) reasons contributed equally to rating actions.
CRISIL forecasts the overall ratio to stay above 1 in the near term led by an expected rural leg-up to private consumption following a near-normal monsoon. However, the agency warns that the debt downgrades in value terms are expected to be more in the second half because of continuing pressure on the investment-linked sectors.
In view of the rating agency the investment cycle is yet to pick up, there hasn’t been a material deleveraging in corporate balance sheets, and weak assets continue to mount in banking. The focus therefore has to be on the sustainability of this improvement in credit ratio.
                                                                                                                                                                                                                                             Source: Adroit Financial