Sensex, Nifty hit day's high as banks rally

·5-min read

Domestic equity benchmarks hit fresh intraday high in afternoon trade, supported by firmness in banks shares. Meanwhile, the Reserve Bank of India (RBI) on Thursday decided to keep key lending rate unchanged. RBI also decided to permit one-time restructuring of corporate loans.

At 13:24 IST, the barometer index, the S&P BSE Sensex, surged 528.73 points or 1.40% at 38,192.06. The Nifty 50 index added 142.75 points or 1.29% at 11,244.40.

In broader market, the S&P BSE Mid-Cap index gained 0.82% while the S&P BSE Small-Cap index rose 1.16%.

The market breadth was strong. On the BSE, 1559 shares rose and 931 shares fell. A total of 152 shares were unchanged.

COVID-19 Update:

Total COVID-19 confirmed cases worldwide stood at 18,752,917 with 706,761 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.

RBI MPC Outcome:

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).

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.

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.

Stocks in Spotlight:

Bajaj Finance (up 3.46%), ICICI Bank (up 3.07%), HDFC Bank (up 2.37%), HCL Technologies (up 2.16%) and Tata Steel (up 2.24%) were the top gainers.

Eicher Motors (down 1.10%), Shree Cement (down 0.92%), Adani Ports and Special Economic Zone (down 0.81%), Mahindra & Mahindra (down 0.65%) and Bajaj Auto (down 0.26%) were the top losers.

HDFC gained 0.74% to Rs 1790. The company declared the opening of the qualified institutional placement (QIP) issue on Wednesday (5 August). HDFC has set the floor price at Rs 1,838.94 per share for its qualified institutional placement (QIP) issue that opened on Wednesday. On 30 July, the board of HDFC had approved raising funds by way of issuance of equity shares and secured redeemable non-convertible debentures simultaneously with warrants aggregating up to a cumulative amount of Rs 14,000 crore on a QIP basis.

DLF was up 0.91% to Rs 143.70. 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.

Global Markets:

Most European shares declined while most Asian shares advanced. 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.

On Wednesday, US Secretary of State Mike Pompeo said that President Donald Trump's administration wants to ban "untrusted" Chinese apps such as TikTok and WeChat from US app stores. That development followed tensions between Washington and Beijing heating up in recent weeks.

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.

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.

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.