Key benchmarks ended a volatile session with strong gains on Thursday. Trading was volatile due to weekly expiry of index options. Banks and financial stocks were in action after the Reserve Bank of India (RBI) left key interest rates unchanged and allowed banks to restructure certain loans as part of efforts to revive the economy.
The barometer index, the S&P BSE Sensex spurted 362.12 points or 0.96% at 38,025.45. The Nifty 50 index jumped 98.50 points or 0.89% at 11,200.15.
Infosys (up 2.60%), TCS (up 2.16%), HDFC Bank (up 1.24%) and ICICI Bank (up 1.97%) were major index movers.
In the broader market, the BSE Mid-Cap index rose 0.77% and the BSE Small-Cap index gained 0.99%.
The market breadth was strong. On the BSE, 1586 shares rose and 1072 shares fell. A total of 172 shares were unchanged.
Total COVID-19 confirmed cases worldwide stood at 18,824,259 with 707,905 deaths. India reported 5,95,501 active cases of COVID-19 infection and 40,699 deaths while 13,28,336 patients have been discharged, according to the data from the Ministry of Health and Family Welfare, Government of India.
The six-member monetary policy committee (MPC), headed by RBI governor Shaktikanta Das, kept repo rate untouched at 4% and reverse repo rate at 3.35% while maintaining the accommodative stance. The MPC had convened the three-day meeting on Tuesday, 4 August.
RBI governor Shaktikanta Das said inflation is expected to stay elevated in Q2 FY21 but it is likely to ease in H2 aided by favourable base effects. Real GDP growth will remain in the negative, Das said. However, he added that any positive news on the COVID-19 containment efforts would change this scenario. RBI is taking measures to enhance liquidity support, further ease financial stress.
Das said Rs 10,000 crore additional liquidity facility will be provided by NHB (National Housing Bank), NABARD (National Bank for Agriculture and Rural Development) to ameliorate the stress being faced by smaller non-bank finance companies (NBFCs) and micro-finance institutions in obtaining access to liquidity.
RBI has decided to permit one-time restructuring of corporate loans. The details of this exercise will be spelt out by a committee headed by veteran banker KV Kamath. Das said a window under the 7 June 2020 stressed asset resolution framework will be provided which will enable lenders to implement a resolution plan, without a change in ownership.
RBI also provided a fresh lifeline to millions of stressed small businesses by extending the provision of restructuring of loans. A restructuring framework for MSMEs that were in default, but were standard on 1 January 2020 is already in place. Accordingly, it has been decided that stressed MSME borrowers will be made eligible for restructuring their debt under the existing framework, provided their accounts with the concerned lender were classified as standard as on 1 March 2020. This restructuring will have to be implemented by 31 March 2021.
With a view to mitigating the impact of COVID-19 on households, the RBI decided to increase the permissible loan to value ratio (LTV) for loans against pledge of gold ornaments and jewellery for non-agricultural purposes to 90% from 75% earlier and has this relaxation available till 31 March 2021.
Meanwhile, RBI has brought in startups and renewable energy sectors (including solar power and compressed bio-gas plants) into the purview of Priority Sector Lending (PSL). The RBI has also amended the priority sector guidelines to do away with regional disparity.
Numbers to Watch:
The yield on 10-year benchmark federal paper rose to 5.864% as compared with 5.826% at close in the previous trading session.
In the foreign exchange market, the rupee was flat against the dollar. The partially convertible rupee was hovering at 74.94, compared with its close of 74.94 during the previous trading session.
In the commodities market, Brent crude for October 2020 settlement fell 3 cents at $45.14 a barrel. The contract rose 74 cents, or 1.67% to settle at $45.17 a barrel in the previous trading session.
European markets declined while most Asian markets closed higher on Thursday. The Bank of England (BOE) on Thursday kept benchmark interest rates at an all-time low of 0.1% and left the size of its bond-buying program unchanged at £745 billion ($981 billion).
The BOE said the UK's gross domestic product (GDP) was expected to have fallen 20% in the second quarter when compared to the final three months of last year. The Monetary Policy Committee's central projection was for UK GDP to continue to recover beyond the near term, but it warned that the economy was unlikely to exceed its pre-pandemic level until the end of 2021.
In US, Wall Street's main indexes rose on August 5 after Disney delivered a surprise quarterly profit, with sentiment aided by signs that a coronavirus fiscal relief package was imminent.
In economic news, the final monthly reading of the closely-watched ISM service sector purchasing managers index jumped to a reading of 58.1 in July, signalling stronger economic growth.
US services industry activity gained momentum in July as new orders jumped to a record high, but hiring declined, supporting views that the labor market recovery was faltering amid a resurgence in new COVID-19 infections across the country. The Institute for Supply Management (ISM) said on August 5 its non-manufacturing activity index increased to a reading of 58.1 last month, the highest since March 2019, from 57.1 in June. The index slumped to 41.8 in April, which was the lowest reading since March 2009.
Indian Stocks in Spotlight:
HDFC gained 0.49% after the company declared the opening of the qualified institutional placement (QIP) issue on Wednesday (5 August). The company has set the floor price at Rs 1,838.94 per share for the QIP issue.
InterGlobe Aviation fell 2.53%. The air carrier said its board will meet on 10 August 2020 to consider raising funds through equity, debt and/or any other permitted means.
DLF rose 0.21%. The realty major reported a consolidated net loss of Rs 70.65 crore in Q1 FY21 as against a net profit of Rs 414.72 crore in Q1 FY20. Revenue from operations in the June quarter declined 58.8% to Rs 548.63 crore as compared to the same period last year. EBITDA fell 78% to Rs 99 crore in Q1 June 2020 from Rs 449 crore crore in Q1 June 2019. The company reported a pre-tax loss of Rs 179.48 crore in Q1 FY21 compared with pre-tax profit of Rs 158.86 crore in Q1 FY20.
With respect to outlook, DLF said that the company remains optimistic about the business and its growth returning to levels of normalcy.
Adani Power fell 0.14%. The firm reported a consolidated net loss of Rs 682.46 crore in Q1 June 2020 as against net loss of Rs 263.39 crore in Q1 June 2019. Revenue from operations during the quarter fell 33.3% on a year-on-year (YoY) basis to Rs 5203.83 crore. The company reported a pre-tax loss of Rs 633.62 crore in Q1 FY21 as against pre-tax loss of Rs 121.75 crore in Q1 FY20. Current tax expense declined 75.9% to Rs 22.18 crore in Q1 June 2020 over Q1 June 2019. Average Plant Load Factor (PLF) achieved during the first quarter of FY21 is 51%, as compared to 78% achieved in Q1 FY20.
National Fertilizers (NFL) rose 2.19% after the company's total fertilizer sales increased by 20.14% to 18.79 lakh MT in April-July 2020 from 15.64 LMT recorded during the same period last year (CPLY). This includes the sale of urea, DAP, MoP, NPK, SSP and bentonite sulphur during the said period.
PNC Infratech spurted 4.73% after the company executed agreements with National Highways Authority of India (NHAI) on 5 August 2020 for three HAM and two EPC projects aggregating to Rs 6731.8 crore.
Shares of Aarti group of companies were in demand. Aarti Drugs (up 18.30%), Valiant Organics (up 10.23%), Aarti Surfactants (up 5%) and Aarti Industries (up 3.31%) surged.