Monday, 27 July 2020

BoB forced to pay more for perpetual bond | Concentration risk rising in markets | Liquidity glut making metals shine

MORNING NEWSLETTER

28 Jul, 2020 | 08:51 AM IST


Good Morning!

Billionaire investor Ray Dalio is alarmed by the rapidly deteriorating relations between the US and China. He says the two nations are in conflict on multiple fronts: a trade war, a technology war, a geopolitical war, and it may now degenerate into a capital war! "If you say by law, don't invest in China or even possibly withhold payment on bonds that the US owes payment on in China, they can have big implications," he warns. These, he says, can have a fallout on the dollar, as investors are not used to the government dictating those things.

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MARKET CUES: Where do we stand >>>

    Nifty futures on the Singapore Exchange traded 55 points higher at 7 am (IST) this morning, in signs of a positive opening ahead for Dalal Street.

    On Monday, Nifty50 saw selling pressure from the word go. It ended up forming a 'Bearish Belt Hold' pattern which suggests bear domination all through the session. Analysts expect the index to face resistance near the 11,300 level.

    Asian stocks had a muted start on Tuesday ahead of a US Fed meeting. Japan's shares were flat, while South Korea outperformed. Australia edged higher.

    Major US stock indices finished higher on Monday, as investors watched lawmakers haggle over a coronavirus rescue program and braced for the busiest week of earnings season. The Dow rose 114.88 points, or 0.4%, the S&P 500 23.78 points, or 0.7%, and the tech-heavy Nasdaq 173.09 points, or 1.7%.

    The rupee pared its initial gains and settled flat at 74.83 against the US dollar on Monday

    The US dollar plumbed two-year lows as investors wagered the Federal Reserve would reaffirm its super-easy policy outlook this week, and a tolerance for higher inflation. The yen rose 0.1% per dollar as did the offshore yuan. The euro also rose by a similar measure after increasing 0.8 per cent on Monday.

    Oil prices rose for a third straight day, buoyed by support for demand from efforts to stimulate the US economy's recovery and a weakening of the dollar that makes crude cheaper for global buyers. Brent crude futures climbed 35 cents, or 0.8%, to $43.76 a barrel while WTI crude gained 27 cents, or 0.7%, to $41.87

    Gold prices jumped to Rs 52,000 from Rs 51,160 per 10 gm, while silver climbed to Rs 64,700 a kg. On MCX, August gold futures climbed 2.09 per cent to Rs 52,101 while silver September futures jumped to Rs 65,528. In global markets, gold rocketed to record peaks at $1,975 on Tuesday.

LOOK WHO'S

Glut of liquidity making metals shine… Funds being infused by central banks, uncertainties caused by the pandemic and US-China tensions are sending metal prices soaring. While gold hit an all-time high, silver is at more than double its March rate. Copper too has risen by over 40%. According to MCX data, in India, gold is trading at over Rs 52,000 per 10gm, silver above Rs 65,000 a kg while copper costs Rs 506 a kg. Experts say an expected weakness of the dollar against some currencies is also driving investors towards the metals. Read More

Markets glued to tomorrow's Fed outcome … Fed policy makers go into a rate-setting huddle today and are widely expected to reinforce a dovish message on Wednesday. Investors are betting setbacks in the global fight against coronavirus will push Chairman Jerome Powell to signal that rates will stay near zero for longer. US lawmakers continued efforts toward the country's next fiscal stimulus. Senate Republicans presented a $1 trillion proposal as a first step toward negotiating a compromise with Democrats, who've offered their own $3.5 trillion plan. Read More

Finance Panel mulls PSU bank recap… The government is in discussions with the 15th Finance Commission on the issue of bank recapitalisation and will decide on the requirements of the sector for a five-year period, said the chairman of the commission NK Singh. He, however, said recapitalisation is not a panacea for the banking sector and much deeper reforms are needed. Singh said India will see a sharp V-shaped recovery in the third and fourth quarters of this financial year, but GDP growth for the fiscal will be in negative territory. Read More

Indian job mart comes alive… For the first time in four months, the Indian job market has seen an increase in open positions with close to 150,000 listed in July, going by data from official company pages on LinkedIn and direct postings on top job boards. That's a recovery from June, which saw a dip in jobs to 130,000 open positions from 200,000 in April and 167,000 in May. Read More

AND WHO'S

Asia seeing Covid second wave... Countries around Asia are confronting a second wave of coronavirus infections and are clamping down again to try to contain the disease, with Australia recording a record daily rise in cases and Vietnam locking down the city of Danang. Mainland China is battling the most aggressive return of Covid-19 in months, confirming 57 new locally transmitted cases on Sunday, the highest level since early March, driven by fresh infections in the far western region of Xinjiang. Australian authorities warned a six-week lockdown in parts of the southeastern Victoria state may last longer. Read More

Indian market depth shrinking… The depth of the equity market is shrinking even as the benchmark indices are on an upward swing. The share of the 'A' group companies, which represent the popular and liquid stocks, in the BSE's market capitalisation rose to a record high of 93.7% in the first four months of FY21 compared with an average of 84% in the last two decades, according to the data from the stock exchanges. The market cap of the 'A' group stocks grew by 32%, while that of the 'B' group stocks rose by around 16% during the period. Read More

Chinese app clones banned… The government has banned 47 variants, or clones, of 59 Chinese mobile applications that it had banned last month, including Helo Lite, Bigo Lite and CamScanner Advanced, among others, a top government official told ET. Google and Apple Inc were directed last week to remove these apps from their app stores, and they are expected to comply with the order soon after "due process is followed", the official added. Read More

Meanwhile...
Rush to withdraw EPFO money… As much as Rs 30,000 crore has been withdrawn in under four months starting April by 8 million subscribers of the Employee Provident Fund Organisation. EPFO manages a corpus of Rs 10 lakh crore built on mandatory contributions from nearly 60 million salaried people and their employers. The huge outgo is likely to impact the fund's earnings in FY21, officials said. Read More
KEY INDICES
15,324  -204.75
12,840  -127.01
21,849  -813.3
17,627 + 340.75
Price Movers|Volume Movers|Near 52 Week High|Near 52 Week Low

For in-depth stock analysis, live market updates & more, download ET Markets App

Stocks to Watch >>>

Reeling under the pandemic's onslaught, IndiGo has deepened pay cuts to 15-35% for its top management and pilots from September 1 after deciding to lay off 10% of almost 25,000 employees.

SpiceJet has taken an Airbus A330-900neo on wet lease from Portuguese firm Hi Fly to become the country's first low-cost carrier to operate a widebody aircraft on medium- and long-haul routes.

Indian Oil has announced an equal JV with French energy major Total for manufacturing speciality bitumen derivatives with an eye on the country's rapid expansion of road infrastructure

After SBI's Rajnish Kumar, HDFC chairman Deepak Parekh has urged the Reserve Bank of India not to extend the payments moratorium beyond August 31.

IndusInd Bank is likely to announce a fund-raise of nearly $400-500 million after its board meeting Tuesday. Nearly half the fund may come from hedge fund Route One Investment Co.

India's biggest multiplex chains PVR and Inox Leisure will reduce ticket prices for the first few weeks after re-opening to bring back cinema goers who were confined to their homes due to the lockdown and other restrictions.

UnQuote: FOMO GONE?
FOMO is overrated, time for investors to take a breather
Ajay Srivastava, Dimensions Corporate Finance

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OUTLOOK Gold rising as store of value
    Hiren Ved of Alchemy Capital says both equities and gold are moving up in the same direction. "Gold is going up more because whenever there are times of uncertainty and with the kind of massive stimulus that has been injected into the economies worldwide, it is likely to debase currencies, the printed money. That is what has been happening with every crisis -- we are printing more and more money. Interest rates are becoming low to negative and therefore gold, while it is an unproductive investment, but as a store of value keeps going up," says he. Read More

Kotak balance sheet resilient
    Krishnan ASV of SBICAP Securities says he is not looking at Kotak Bank earnings as a bottom. "We are looking at a resilient balance sheet and the more you can shrink them during these times like providing for what is likely to come in the next say 12-18 months, that only augurs well. Plus, they have plans to raise fresh capital. So I think, there are these four or five banks in the private sector space which have been doing all these right things in terms of at least preparing or just bracing themselves for what is likely to come post Covid moratorium," says he. Read More

Bank stress likely in Nov
    Deepak Shenoy of Capital Mind says the whole banking system is going to come under stress after November. "The moratoriums end on August 31, if they are not extended, and I do not think they will be, and then NPAs will start to emerge. Given that there is a lot of retail impact of the Covid-19 lockdowns, we are going to see the impact of the situation around NPAs only in November. We will see the impact only in the December quarter. So, we should wait and watch those situations," says he. Read More

STOCKS RECOMMENDATIONS
Larsen & Toubro Ltd. 27 Jul, 2020 | 02:31 PM IST buyBuy
State Bank of India 27 Jul, 2020 | 12:57 PM IST buyBuy


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