Wednesday, 29 July 2020

Fed support pledge buoys stocks | YES Bank takes over R-ADAG HQ | PBOC picks stakes in Asian Paints, Ambuja

MORNING NEWSLETTER

30 Jul, 2020 | 08:55 AM IST


Good Morning!

Second batch of Q1 earnings may have given a reality check, but Morgan Stanley's Ridham Desai remains gung-ho on Indian equity. He says we have a 'ferocious bull' market ahead. "If a correction comes along, you got to be prepared to put money to work, because there is a lot more to go before this market peaks out," says he. India has underperformed emerging markets since the start of the year and continues to struggle on a relative basis. Plus, he says stocks of companies that are more sensitive to the economic cycle will probably start doing better if cash flows are persistent. Food for thought!

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MARKET CUES: Where do we stand >>>

    Nifty futures on the Singapore Exchange traded 24 points higher at 7 am (IST) this morning, signaling a positive start for Dalal Street.

    On Wednesday, Nifty50 fell nearly 100 points despite decisively breaking above a crucial resistance level in the previous session. The index formed a 'Spinning Top' candle on the daily chart, suggesting indecisiveness among traders at higher levels.

    Asian stocks saw modest gains after a signal from the US Fed that more stimulus will be provided pushed US equities higher. Shares climbed in Hong Kong and Sydney with stocks in Seoul given a boost as earnings at Samsung Electronics topped estimates. Gains fizzled in Japan.

    Wall Street ended upbeat overnight after the Fed kept interest rates at ultra-low levels and repeated a pledge to use its 'full range of tools' to support the economy. The Dow ended 0.6% higher, while the S&P500 gained 1.24% and the Nasdaq 1.35%.

    The rupee gained 4 paise to settle at 74.80 against the American dollar on Wednesday tracking weakness in the greenback.

    The dollar fell to a two-year low after the Fed announcement. The euro slipped 0.1%, the yen fell 0.2% and the Aussie dollar 0.2%. The Sterling gained 0.45 per cent and the offshore yuan traded steady.

    Oil prices dipped as a surge of coronavirus infections around the globe raised fears a rebound in fuel demand. WTI crude futures fell 6 cents, or 0.2%, to $41.21 a barrel, while Brent futures lost 7 cents, or 0.2%, to $43.68

    Gold prices rose to Rs 52,700 per 10 gram, while silver climbed to Rs 66,050 per kg on Thursday. On MCX, August gold futures fell 0.1% to Rs 52,540 while silver futures advanced 0.18% to Rs 65,123. In global markets, spot gold was little changed at $1,957.84 per ounce.

LOOK WHO'S

Fed pledges full backing to economy... The US Fed left their benchmark interest rate unchanged near zero and again vowed to use all their tools to support the US economy amid a shaky recovery from the coronavirus pandemic. "The path of the economy will depend significantly on the course of the virus," the the U.S. central bank's Federal Open Market Committee said in a statement Wednesday following a two-day policy meeting. The announcement buoyed stocks on Wall Street, but the dollar fell to a two-year low. Read More

RBI weighs loan recast options… RBI is debating options beyond a one-time restructuring of loans and extending the repayment moratorium, with industry divided over how to relieve the pain of the Covid-19-induced lockdown, ET reported. As the country opens up gradually from the severe lockdown of April and May, there is a view that the financial sector and the industry also should accept the new normal and look for solutions within the current environment and not return to imprudent practices of the past, they said. Read More

PBOC bets on Asian Paints, Ambuja… At a time when Chinese investments in Indian equities are in the crosshairs, the People's Bank of China increased stake by 25% and 34.3% in Asian Paints and Ambuja Cements, respectively, last financial year. The Chinese central bank held 30.9 lakh shares in Asian Paints and 62.8 lakh shares in Ambuja Cements or 0.32% stake in each of the two companies, latest available annual reports of Nifty50 companies revealed. Read More

Brokerages still bullish on IndusInd… Brokerages have maintained a bullish view on IndusInd Bank even as the lender reported a 64.37% yearon-year fall in consolidated net profit for the June quarter at Rs 510.3 crore. The lender also announced a preferential allotment of Rs 3,288 crore worth of shares at Rs 524 apiece. Antique, CLSA, HSBC, IDBI Capital and Motilal Oswal have maintained 'buy' ratings while Kotak Institutional Equities has maintained 'add' rating. Read More

Good demand outlook may prop up Maruti... Maruti Suzuki posted its first loss as a listed company, but that was not a surprise to the Street as production and sales had come to a complete halt for a large part of the past quarter. The management's commentary on demand recovery in the semi-urban and rural markets continues to be encouraging. This should lend support to the stock to maintain its high valuation. Read More

AND WHO'S

YES Bank takes over R-ADAG HQ…. Private lender Yes Bank has taken possession of Reliance Centre, the headquarters of the Anil Dhirubhai Ambani Group in Mumbai. Possession of the 21,000 square feet building in Santacruz took place as on July 22 under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (Sarfaesi Act), the private lender said. In its notice, the bank said it was effecting recovery against a Rs 2,892 crore loan to Reliance Infrastructure. Read More

End of season sales washout… Fashion retailers' end-of-season sales are turning out to be a washout this time with consumers mostly staying away from malls and resisting impulse buying online despite many top brands offering up to 70% discounts as the Covid-19 pandemic continues to rage. Some brands like US Polo, Gap, and Benetton have decided not to go on sales, as they believe it would hardly make any difference as consumers are staying away from malls and markets, and are reluctant to spend in any case. Read More

PM tells lenders to fund bankable projects… PM Narendra Modi on Wednesday urged the country's top lenders to fund bankable projects undeterred by the nonperforming assets generated in the past, and promised to fully back the executives. He also prodded bankers to push loans to MSMEs, farmers, micro-finance institutions and non-banking finance companies, which were provided special thrust during the package announced by finance minister Nirmala Sitharaman two months ago. Read More

Meanwhile...
GST panel to take call on aid to states… The attorney general has said the GST Council can decide whether a market borrowing mechanism can be established to compensate states for revenue losses due to implementation of the indirect tax. States are saying if revenues fall short, funds should be raised by the council from the market to compensate them. The Centre has expressed its inability to do so for FY21 because of the Covid-19 impact on tax revenues. Read More
KEY INDICES
15,535 + 74.95
12,972 + 54.93
22,077  -28.6
17,880  -162.25
Price Movers|Volume Movers|Near 52 Week High|Near 52 Week Low

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Stocks to Watch >>>

ICICI Lombard and Bharti Axa General Insurance are exploring a proposal where the latter will merge with the former.

Billionaire Ajay Piramal is looking for buyers for Piramal Glass for a potential $800 million to $1 billion sale

The government is set to extend the deadline for inviting expressions of interest for BPCL for a third time, giving more time for potential bidders.

IndiGo has reported a loss of Rs 2,844 crore in the April-June 2020 period — the highest-ever quarterly loss for an Indian airline, with no scheduled flights in 60% of Q1.

SpiceJet has reported its highest-ever quarterly loss of Rs 807 crore for the January-March 2020 period, as opposed to a profit of Rs 56 crore in same period in the previous year

Bharti Airtel on Wednesday went deeper into the red as its losses in first quarter of FY21 widened to Rs 15,933 crore due to provisioning made towards the SC-mandated AGR payment and statutory dues.

UnQuote: BULLISH VIEW
Expect ferocious bull market leading to V-shaped recovery over next few months
Ridham Desai, MD, Morgan Stanley India

The DAY PLANNER
    Earnings: Dabur | DB Realty | HDFC | RIL | Reliance Infra | Reliance Power
    India July Series F&O Expiry
    Japan June Retail Sales (05.20 am)
    UK July Nationwide Housing Prices (11.30 am)
    UK June Car Production (01.30 pm)
    EU June Unemployment Rate (02.30 pm)
    EU July Economic Sentiment (02.30 pm)
    US Q2 GDP Growth Rate Advance Estimate (06.00 pm)
    US July 25 Initial Jobless Claims (06.00 pm)

OUTLOOK

Can YES Bank bounce back?
    YES Bank MD & CEO Prashant Kumar says for a bank which was under moratorium just four months back, not only has it been able to register decent deposit growth and maintain liquidity coverage ratio, it has also managed to return almost 50% of borrowings from RBI. "We have also been able to raise Rs 15,000 crore through one of the largest FPOs in the country. With the liquidity position improving, now we need to grow on the loan side. We would like to grow on the retail and MSME side," says he. Read More

Are consumer staples expensive?
    Krishna Sanghavi of Mahindra Manulife Mutual Fund says consumer staple possibly has quite a resilient demand. "It does not go up and down much vis-à-vis what happens to the economy. "There might be some premiumisation effect here and there, but conceptually, demand does not really get impacted because of any slowdown. That is what the word staple actually suggests. While valuation for consumer staples historically has been on a relatively higher scale, what we are seeing right now is not a very material difference vis-à-vis a long period average for almost all of these companies," says he. Read More

It may be a long haul for Maruti
    Gurmeet Chadha of Complete Circle Consultants says Maruti numbers are much lower than what the Street and the analysts were baking in. "The only thing which stands in favour of it is that petrol-diesel mix is the best. For the industry, now it is 68-32, 70-30. For Maruti it is like 93-7. Also there is clear downtrading happening in models because of the underlying economic conditions. So, it is going to be a bit of a long haul in my view," says he. Read More

STOCKS RECOMMENDATIONS
IndusInd Bank Ltd. 29 Jul, 2020 | 10:59 AM IST buyBuy
United Spirits Ltd. 29 Jul, 2020 | 12:02 PM IST buyBuy


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