Indices see biggest one-day fall in 2019, banks drag Sensex 554 points after a rate cut

06 Jun 2019

Market Closing:

Benchmark indices fell sharply and saw biggest one-day fall this year, dragged by banks after the RBI expectedly cut repo rate by 25 bps and changed policy stance to accommodative from neutral.

The BSE Sensex plunged 553.82 points or 1.38 percent to 39,529.72 and the Nifty50 slipped 177.90 points or 1.48 percent to 11,843.80.

GAIL was prominent loser among Nifty50, falling 12 percent followed by Indiabulls Housing, IndusInd Bank, Yes Bank and SBI which lost 4-8 percent.

Coal India, Titan Company, Hero Motocorp, Power Grid Corp and HUL bucked the trend, rising 1-2 percent.

Market Update:

Benchmark indices continued to trade sharply lower with the Sensex falling 565.33 points or 1.41 percent to 39,518.21.

The Nifty50 plunged 179.40 points or 1.49 percent to 11,842.30. About three shares declined for every share rising on the BSE.

Umesh Mehta, Head of Research, Samco Securities on RBI Policy:

This is the third consecutive time that RBI has cut rates by 25bps which shows that they are indeed taking care of the slowing growth and as expected are being supportive by loosening their purse. Indian economy has been experiencing a slowdown with unemployment at 45-year highs, CPI inflation excluding food and fuel down to 4.5 percent in April from 5.1 percent in March and a revision by the RBI on the GDP for FY20 from 7.2 percent to 7 percent indicates just that.

This is positive for the Street, however, as the rate cut was inline with expectations which had already been factored in, the indices did not cheer the rate cut and continued to trickle down.

If the international trade tensions continue to escalate further, the Fed might cut rates which will further create room for RBI to reduce rates in future.

Crude Update

Oil prices firmed after falling to near five-month lows in the previous session, but sentiment stayed weak due to rising US supply and a stalling global economy.

Front-month Brent crude futures were at $61.10 a barrel, up 47 cents or 0.78 percent. US West Texas Intermediate crude futures fetched $52.07, up 39 cents or 0.75 percent. Source: Reuters

Market Update: Indian indices are trading at day's low level on Thurday’s afternoon with Nifty around 11,850 level.

At 14:14 hrs IST, the Sensex is down 506.64 points at 39576.90, while Nifty is down 166.30 points at 11,855.40. About 652 shares have advanced, 1726 shares declined, and 125 shares are unchanged.

Market Update:

Benchmark indices remained under pressure in afternoon after the RBI expectedly cut repo rate by 25 bps and changed its policy stance to accommodative from neutral.

The Sensex fell 304.27 points to 39,779.27 and the Nifty50 slipped 102.50 points to 11,919.20.

The market breadth was in favour of bears. About two shares declined for every share rising on the BSE.

New NPA Norms

The Reserve Bank will issue a revised circular on bad loan recognition within the next three-four days, replacing the February 12 circular that was

struck down by the apex court.

On April 2, the Supreme Court had declared as "ultra vires" the February 12 circular that mandated banks to label even a day's default as NPA.

The RBI on February 12, 2018, issued a framework on resolution of stressed assets under which banks were asked to disclose defaults even of a day and have to find a resolution plan within 180 days in case of large account of Rs 2,000 crore and above failing which it would send for bankruptcy. Source: PTI

Anagha Deodhar - Economist, ICICI Securities on RBI Monetary Policy

The 25bps rate cut is in line with our expectation. Although inflation has started inching up, it is still closer to the lower end of MPC’s target range of 2-6 percent. Core inflation has also come down significantly indicating soft underlying inflation. Hence, purely from ‘inflation-targeting’ perspective, the MPC has enough room to cut rates.

Moreover, the recently-released GDP numbers show that growth is faltering. Given the challenging domestic and global environment, growth is likely to remain weak in H2FY20. Although supporting growth is not the MPC’s primary mandate, in the current environment it has assumed greater significance.

Given the lower growth and inflation expectations, it was apt to change the stance to ‘accommodative’. It indicates that more rate cuts are on the table – possibly in the next policy itself.

Suvodeep Rakshit, Sr. Economist, Kotak Institutional Equities:

RBI reduced repo rate by 25 bps as expected. The change in stance to ‘accommodative’ was a bit of a surprise. Debt markets will take this as a significant positive move though most of the rate cut cycle is probably over. The tone of the RBI policy was dovish and highlights the concerns on growth.

We maintain our call for another 25 bps rate cut in August factoring in the benign inflation trajectory and the growing concerns on growth. However, transmission of the rate cuts will be key and the RBI should aim to maintain the liquidity, at least, at neutral over the next few months.

Garima Kapoor, Economist, Elara Capital:

Drawing comfort from consistent softness in inflation trajectory, MPC cut policy repo rate for the third time this year to support benign growth conditions. A shift in the stance to accommodative is welcome as it will pave way for transmission to lending rates, which so far have been inadequate.

We expect MPC to cut rates by an additional 50 bps through the year while continuing to fine tune liquidity support through a combination of OMO purchases, forex swap and CRR cut.

Market Update: The Indian indices are volatile after the Monetary Policy Committee has cut the repo rate by 25 bps to 5.75 percent.

At 12:10 hrs IST, the Sensex is down 198.63 points at 39,884.91, while Nifty is down 78.20 points at 11,943.50. About 817 shares have advanced, 1375 shares declined, and 127 shares are unchanged.

Buzzing: Natco Pharma shares fell 2 percent after the US health regulator issued nine observations to company's formulation facility in Kothur village in Hyderabad.

Rupee Update: The Indian rupee has recovered from day's low buy trading lower at 69.34 per dollar, down 8 paise against Tuesday's close of 69.26.

Gold Update: Gold prices were stable on June 6, hovering below the 15-week high hit in the previous session, supported by trade worries and a possible US rate cut, even as some investors locked in profits in bullion after a recent rally.

Market Update: The benchmark indices continues to trade lower on May 6 as investors remain caution ahead of MPC meeting outcome today.

The Sensex is down 116.57 points at 39,966.97, while Nifty is down 56.80 points at 11,964.90. About 697 shares have advanced, 1070 shares declined, and 104 shares are unchanged.

Buzzing: Shares of PSP Projects touched 52-week high of Rs 544, rising 4 percent in the early trade on Thursday as company won orders worth Rs 155.61 crore in the Financial Year 2019-20.

Market Opens: It is a flat start for the Indian indices on May 6 with Nifty below 12,000 ahead of Monetary Policy Committee meeting.

At 09:17 hrs IST, the Sensex is down 50.85 points at 40032.69, while Nifty is down 22.70 points or 0.19% at 11999. About 423 shares have advanced, 401 shares declined, and 63 shares are unchanged.

IndusInd Bank, SBI, ICICI Bank, DHFL Gail, Indiabulls Housing, Yes Bank, Zee Ent, Tech Mahindra, Ultratech Cement, Grasim, Bharti Infratel are among major losers, while gainers are IOC, Tata Motors Bajaj Auto, Lupin and NTPC.

Among the sectors, PSU banks and IT space trading under pressure, while auto, FMCG and metal trading with marginal gains.

Market at pre-open: Benchmark indices are trading firm in the pre-opening session on Thursday.

At 09:01 hrs IST, the Sensex is up 66.37 points or 0.17% at 40149.91, and the Nifty up 9.60 points or 0.08% at 12031.30.

Asian markets trade mixed: Asian shares got off to a hesitant start on Thursday as investors feared a looming US trade war with Mexico would further depress global growth, even as they wagered central banks would have to respond with fresh stimulus.

US markets end higher: Wall Street's major indexes rose on Wednesday as investors bet on a Federal Reserve interest rate cut after weak private sector jobs data and hopes grew that the United States and Mexico would reach an agreement to avoid US tariffs on Mexican goods.

CLSA on Eicher Motors

Retain outperform rating with a target of Rs 22,500 per share

At its analyst meeting, co unveiled a new network expansion strategy

Nomura on Eicher Motors

Maintain reduce call, target at Rs 16,922 per share

Co sees current volume slowdown being linked to eco slowdown & not brand fatigue

Morgan Stanley on Eicher Motors

Equal-weight call, target at Rs 21,331 per share

Near-term visibility on RE’s volumes is low

CLSA on Adani Ports

Buy rating, raise target to Rs 510 from Rs 475 per share

After buyback, ROEs would get a boost of 96 bps, EPS could fall by 1%

CLSA on HUL

Have an outperform call on the stock

Margin set to expand 100 bps optically in FY20

Lease rental will move to depreciation with minimal impact on earnings/cashflows

CLSA on Dr Reddy's Laboratories

Maintain buy rating with a target of Rs 3,330 per share

Highlight in FY19 was 160% increase in FCF to Rs 2,300 Cr

Nomura on Autos

Weak north impacts Tata Motors more compared to Ashok Leyland

For 2-wheelers, healthy north demand benefitting Hero Moto

For 3-wheelers, weak demand in Maharashtra impacts industry growth

In passenger vehicles, Maruti sustains market share gains

Neutral rating on Ashok Leyland, Bajaj Auto, Hero Moto, Maruti & Tata Motors

Have buy rating only on M&M

Nomura on Bharat Forge

Maintain neutral call, target at Rs 498 per share

Order inflows for class 8 trucks in North America in May contracted sharply to 10,800 units

BofAML on RBI Policy

Expect RBI MPC to cut another 75-100 bps by March 2020 from 50 bps in 2019

Fed/PBoC to cut 75 bps by early 2020 to offset trade war

RBI MPC should cut rates By 35 bps today

DB on Realty Sector

Rate cycle turning favourable for Indian real estate

A muted recovery with market share gains for organized developers

Morgan Stanley on ICICI Prudential

Overweight call, target at Rs 450 per share

APE premiums up 5% YoY in may vs 9% YoY in April

Morgan Stanley on Financials

Rating downgrade after payment miss could make the market nervous

Stocks of wholesale lending NBFCs could be affected

CLSA on Financials

DHFL’s default can accentuate contagion risk

Expect higher rates & tight liquidity; RBI intervention may be needed

DHFL default can expose Rs 1 lakh crore in borrowing to risk of default/haircuts

Prefer banks over NBFCs; ICICI, IndusInd, HDFC & ICICI Lombard are top picks

CLSA on GAIL

Downgrade to underperform from Buy, target cut to Rs 365 from Rs 420 per share

Disappointing tariff revision for key pipeline

SGX Nifty: Trends on SGX Nifty indicate a negative opening for the broader indices in India, a fall of 39.50 points or 0.33 percent. Nifty futures were trading around 12,041.50 level on the Singaporean Exchange.