Sensex, Nifty Snap Three-Day Losing Streak As RBI Maintains Neutral Stance

Indian equity benchmarks snapped their three-day losing streak after Reserve Bank of India maintained its neutral stance while raising repo rate by 25 basis points for first time since 2014 to keep inflation under check.

The S&P BSE Sensex rose 0.8 percent or 276 points to 35,179 and the NSE Nifty 50 index climbed 0.86 percent or 91 points to 10,685.

The stock market may have priced in the rate hike through a decline in the past three days, said Sushant Kumar, equities fund manager at Raay Global.

Stocks held gains as RBI kept neutral stance, Kumar added.

All sector gauges compiled by the National Stock Exchange ended higher led by the Nifty PSU Bank index's 2.5 percent surge.

The mid- and small-cap shares also rebounded strongly from losses in the previous session. The Nifty Midcap 100 index rose 1.4 percent and the Nifty Smallcap 100 index jumped 1.7 percent.

Sanjeev Prasad, senior executive director and co-head of institutional equities at Kotak Securities on RBI’s 25 basis points rate hike.

• Focus on politics will increase going forward
• Corporate and government bond yields have gone up
• Market rates have already moved up

Addressing the media after monetary policy meet, RBI governor Urjit Patel said inflation pressures have risen in key advanced and emerging economies.

Key highlights from the media briefing:

• Capacity utilisation has increased in the manufacturing sector
• Crude price rise and other developments have led to input cost pressures
• Households reported significant rise in inflation expectations in May
• Reiterate commitment to keep inflation at 4 percent in medium-term, remain vigilant
• Domestic economic activity has exhibited revival, output gap has almost closed
• Neutral stance leaves all options open
• No tension between the stance and the policy move
• Policy determined by the nominal anchor given via legislation, which is the CPI
• Farm loan waivers have been done through individual state budgets
• No direct implications of states’ farm loan waivers on banks’ books

Indian equity benchmarks resumed up move after the Reserve Bank of India maintained its neutral stance while raising repo rate by 25 basis points.

The S&P BSE Sensex rose 325 points or 0.9 percent to 35,220 and the NSE Nifty 50 index gained 0.9 percent or 95 points to 10,688.

Indian equity benchmarks came off intraday highs after the Reserve Bank of India hiked key rates by 25 basis points while maintaining its neutral stance.

The S&P BSE Sensex was up 0.39 percent or 135 points at 35,040 and the NSE Nifty 50 index rose 0.4 percent or 46 points to 10,639.

• Yield on the government of India’s 10-year bond rose while bond prices fell after the Reserve Bank of India hiked repo rate by 25 basis points.

Reserve Bank of India's monetary policy committee raised repo rate by 25 basis points to 6.25 percent from 6.00 percent while maintaining the neutral stance.

RBI in the policy document said:

• Decision of the MPC is consistent with the neutral stance of monetary policy
• RBI sees upside risk to inflation
• With improving capacity utilisation and credit offtake, investment activity is expected to remain robust even as there has been some tightening of financing conditions in recent months
• Global demand has also been buoyant, which should encourage exports and provide a further thrust to investment incomes
• Consumption, both rural and urban, remains healthy and is expected to strengthen further
• The MPC notes that domestic economic activity has exhibited sustained revival in recent quarters
• All MPC members voted in favour of rate hike

Infosys does not have a plan for large expansion in China, Infosys CEO Salil Parekh said on the sidelines of Morgan Stanley conference in Mumbai.

Key highlights from Morgan Stanley conference:

• Most of the cloud players provide an infra layer
• That's where we will make a difference and bring in capability to our clients
• Our business in China is smaller today
• We do not have a plan today to look at large expansion in China
• Digital is very competitive because there is no established leader right now
• There are small and large players in the digital arena
• Traditional businesses are already getting joined with digital
• If we can attack some of our weaker competitors, we can see growth in core services
• There is a huge amount of pride among employees
• Our pyramid does not have a huge amount inefficiency
• Our core services are also growing with digital services
• Artificial intelligence, automation and productivity to lead to gaining market share

• Indian equity benchmarks extended gains ahead of Reserve Bank of India's monetary policy review led by Infosys, ITC and Larsen & Toubro.
• The S&P BSE Sensex rose 0.7 percent or 245 points to 35,148 and the NSE Nifty 50 index advanced 0.7 percent or 86 points to 10,669.
• All sector gauges compiled by the National Stock Exchange were trading higher led by the Nifty PSU Bank index's 1.6 percent gain.
• The mid- and small-cap shares were in line with the larger peers as the Nifty Midcap 100 index rose 0.8 percent and the Nifty Smallcap 100 climbed over 1 percent.

Shares of the sugar manufacturers rose after the Union Cabinet approved a bailout package worth Rs 8,000 crore for sugar industry.

The government announced a bailout package of Rs 8,000 crore for the sugar industry to ensure the cash-starved mills clear cane farmer dues of Rs 22,000 crore.

Shares of IDBI Bank rose as much as 8.34 percent and Capital First surged as much as 6.6 percent after IDFC Bank said it has received RBI's approval for merger of Capital First.

"The Reserve Bank of India (RBI) has, via its letter dated June 4, 2018, conveyed its 'No Objection' for the voluntary amalgamation of Capital First Ltd, Capital First Home Finance Ltd and Capital First Securities Ltd with IDFC Bank," IDFC Bank said in an exchange filing.

Considering monsoon and rising oil prices there is a 50 percent chance of a hike today, Rohit Garg, emerging Asia fixed income and forex strategist at Bank of America Merrill Lynch, said in an interview to BloombergQuint.

Key highlights of the conversation:

• RBI has maintained OMO will be driven by liquidity needs, a bit unclear as of now
• RBI must do everything to address weakness in currency
• Important for RBI to give a clear message and stay ahead of the curve
• Strong case of RBI hiking rates
• RBI may give some breather on rates
• Fiscal slippage to also impact inflation

Shares of the Mumbai-based electrical power equipment maker rose as much as 4.5 percent to Rs 58.15 after it won an order worth Rs 319 crore from Indian Railways.

CG Power and Industrial Solutions bagged an order to supply Under Slung Electrics for Diesel Electric Tower Car.

Shares of the Mumbai-based construction company rose as much as 6.7 percent, the most in a week, to Rs 15.10.

Hindustan Construction Company in a joint venture with MAX Group has been awarded Rs 737 crore contract by Russia's State Nuclear Company, JSC Atomstroyexport, for civil works of Turbine Island for Unit 1 of Rooppur Nuclear Power Plant in Bangladesh.

Nifty Bank 26,500 strike price call was among the most active option contracts on the National Stock Exchange.

The premium on the contract rose 9.75 percent to Rs 86.15. Over 3.5 lakh shares were added to the open interest which stood at over 11.95 lakh shares.

Click here to see complete option chain

Expect mid- and small-cap shares to underperform frontline indices, Gautam Chhaochharia, head of India research at UBS, told BloombergQuint in an interview.

Key highlights of the conversation:

• Post correction, mid-cap index trading at 20 percent premium to forward earnings compared to historical performance
• Additional surveillance mechanism (ASM) would play a role in select mid-cap stocks
• Nifty base case target pegged at 10,500 by year-end
• Have not seen material selling from the FII's in the equity market
• Have seen higher rate of EPS cut for Nifty 100 Index versus Nifty Index

Shares of the Hyderabad-based chemical maker rose as much as 5 percent to Rs 211 on the back of heavy volumes.

As many as 7.44 lakh shares changed hands on the BSE compared with an average of 3.61 lakh shares traded daily in the past two weeks.

The company was part of a list of shares that was placed under the additional surveillance mechanism by the Bombay Stock Exchange.

Shares of the debt-ridden steel producer rose as much as 4.42 percent to Rs 1.18.

Electrosteel Steels spelled out steps to be taken for completion of its takeover by Vedanta Star and subsequent delisting from stock exchanges.

Since the liquidation value of the company as determined by the Resolution Professional is not sufficient to cover the debt of financial creditors in full, hence the liquidation value of the company in the hands of equity shareholder is nil, the company said in an exchange filing.

"On completion of Transaction Steps, Vedanta Star will make the delisting offer to the then shareholders of the company. The equivalent per share exit price post completion of Transaction Steps is Rs 9.54 per equity share (Post-capital Reduction Price)," Electrosteel Steels added.

• ITC has 10 lakh shares change hands in a single block. Stock up 0.6 percent at Rs 269.20.
• Axis Bank has 16 lakh shares change hands in a block on BSE. Stock up 0.3 percent at Rs 532.

Buyers and sellers were not immediately known

Source: Bloomberg

India is a fundamentally a 'mispriced' market and valuations here are 'appropriate' compared to other emerging market peers, Jonathan Garner of Morgan Stanley told BloombergQuint in an interview.

Key highlights of the conversation:

• Base case of India making one rate hike in Q4FY19
• Have a small 'overweight' on Indian markets
• Crude may touch $90 per barrel by 2019-end
• Averaging brent crude at $75 per barrel this year
• Currently unclear which way India will vote
• Can see earnings growth of as much as 20 percent in India
• Emerging markets last year had strong earnings growth; India did not participate in that
• Earnings expectations remain elevated
• Tightening monetary policy will be a big headwind
• Oil prices coming off will be helpful for Asia

Shares of the Raipur-based steel billets maker recovered from intraday lows and surged as much as 10 percent to Rs 370.

The company has been placed under the Additional Surveillance Measure (ASM) by the BSE.

Shares of the Delhi-based real estate developer rose as much as 5.11 percent to Rs 180.95 after the company purchased its own shares in yesterday's session.

Indiabulls Real Estate bought 27 lakh shares or 0.6 percent equity at Rs 175.58 per share.

Shares of the Kota-based educational service provider fell as much as 2.71 percent to Rs 96.95 after KIFS Enterprises sold 1 lakh shares or 0.6 percent equity at Rs 102.64 each.

Shares of the Kolkata-based tea cultivator rose as much as 1.94 percent to Rs 136.75 after it decided to dispose of certain tea estates in Assam.

The company decided to dispose of Beesakopie Tea Estate, Raidang Tea Estate, Daimukhia Tea Estate, Samdang Tea Estate, Baghjan Tea Estate, Bordubi Tea Estate, Koomsong Tea Estate and Phillobari Tea Estate in Assam to M K Shah Exports for Rs 331 crore.

Shares of the Bengaluru-based liquor maker fell 1.23 percent to Rs 3,210 after shareholders' of the company approved a proposal to split shares of the company.

The shareholders of the company approved a proposal to split the stock in ratio of five stocks for every one share held by sub dividing the face value from Rs 10 to Rs 5.

Additional surveillance measure (ASM) is a move in the right direction and market participants are nervous about stocks in the ASM framework, Deven Choksey of KR Choksey Securities told BloombergQuint in an interview.

Key highlights of the conversation:

• Some funds may be forced to sell good quality stocks
• Fundamentally good stocks offer a buying opportunity to long term investors
• Tata Motors working towards cost structure rationalisation

Indian equity benchmarks were little changed as banking heavyweights HDFC Bank, State Bank of India, Kotak Mahindra Bank and IndusInd Bank fell ahead of Reserve Bank of India's monetary policy decision.

The S&P BSE Sensex was little changed at 34,930 and the NSE Nifty 50 index was also little changed at 10,597.

Seven out of 11 sector gauges compiled by National Stock Exchange were trading lower led by the Nifty Media index's 0.4 percent drop. On the other hand, the Nifty Metal index was top gainer, up 0.5 percent.

Mid- and small-cap shares were underperforming their larger peers as the Nifty Midcap 100 index fell 0.4 percent and the Nifty Smallcap 100 index declined 1 percent.

• Rupee opened higher at 67.08 per U.S. dollar against yesterday’s close of 67.15.

All eyes will be on the interest rates decision at 2:30 p.m. today with the rate call too close to call.

While 29 of the 43 economists polled in Bloomberg Survey expect no change, markets are expecting a 25-basis point rate hike.

The focus will be on RBI Governor Urjit Patel, who heads the six-member monetary policy committee. Viral Acharya, the deputy governor in charge of monetary policy, is set to vote for a ‘withdrawal of accommodation’ as he joins uber hawk Michael Patra, who heads the RBI’s research department, in preparing markets for a rate hike.

According to ICICI Securities Primary Dealership, the repo rate should be gradually raised to keep inflation expectations in check and maintain financial stability. The firm expects a 25-basis point hike in August and a total of 50-basis points raise in FY 2019.

The 10-year benchmark bond yield fell 4 basis points on Tuesday to end at 7.83 percent, declining for the first day in six.

Meanwhile, implied forwards suggest that the rupee will open at 67.09 per dollar, having lost some ground on Tuesday to end at 67.15. If the RBI does hike rates, the rupee could post gains later in the day, traders said.

The monetary policy committee concludes its three-day meeting today. While a majority of economists are still forecasting a status quo in the policy rate, some are expecting the rate hiking cycle to begin in June. Here’s the policy-day guide.

Here are more talking points:

• The Rate Debate: Will The MPC Be As Divided As Economists?
• Elevated Borrowing Costs May Rise Further If RBI Hikes Rates
• Emerging-Market Slide Pressures Indian Central Bank on Rates
• Monetary Policy: Managing Conflicting Choices And Puzzling Signals
• RBI Should Stick To Its Inflation Targeting Regime, Raghuram Rajan Says

Who’s Meeting Whom

• Tata Global Beverages to meet several fund houses including Morgan Stanley, Goldman Sachs, Sundaram AMC etc on June 6.
• Cipla to meet several fund houses including Oaktree Capital Mgmt, Arohi Asset Mgmt etc from June 6 – 8.
• UFO Moviez to meet Paradise Investment Management and others on June 6 and 7.

Insider Trades

• Centrum Capital promoter BG Advisory Services LLP acquired 1.83 lakh shares on June 1.
• Trident Ltd promoter Trident Corp Ltd. acquired 15,789 shares on June 4.
• Alembic Pharma promoter Alembic Ltd acquired 15,000 shares from June 1–5.
• Trident Ltd. promoter group Trident Corp Ltd acquired 15,700 shares on June 4.
• Laurus Labs promoter Dr. Satyanarayana Chava acquired 49,448 shares on May 30.

(As reported on June 5)

Bulk Deals

HCL Technologies

• Promoter Vama Sundari Investments (Delhi) Pvt. Ltd bought 75 lakh shares or 0.5 percent equity at Rs 900 each.

India Energy Exchange

• Morgan Stanley Mauritius Company sold 1.78 lakh shares or 0.6 percent equity at Rs 1,595 each.

Lakshmi Vilas Bank

• India Infoline Investment Services bought 1.05 crore shares or 4.1 percent equity at Rs 100.1 each.

Career Point

• KIFS Enterprise sold 1 lakh shares or 0.6 percent equity at Rs 102.64 each.

Indiabulls Real Estate

• Indiabulls Real Estate bought 27 lakh shares or 0.6 percent equity at Rs 175.58 each.

Trading Tweaks

• HDFC Bank and IndusInd Bank FII window open.
• Godawari Power & Ispat placed under additional surveillance measure by BSE.
• Viaan Industries, Fiberweb and Chartered Logistics circuit filter revised to 10 percent.
• Gruh Finance ex-date for 1:1 bonus.
• Akzo Nobel ex-date to determine buyback eligibility.
• Lumax Auto Technologies last trading day before ex-date for stock split.

F&O Cues

• Nifty June futures closed trading at 10,596.4, at a premium of 3.3 points versus discount of 29.8 points.
• June series-Nifty open interest (OI) up 0.6 percent while Bank Nifty OI falls 5 percent.
• India VIX ended 13.3, down 4 percent.
• Max OI for June series call at 11,000 strike price call option, OI at 45.6 lakh shares, up 15 percent.
• Max OI for June series put at 10,200 strike price put option, OI at 35.5 lakh shares, up 1 percent.

• Sugar Stocks: Consumer affairs, food and public distribution minister Ram Vilas Paswan said cabinet will consider sugar subsidy proposal soon.
• HDFC raised retail prime lending rate by 10 basis points.
• NMDC March-May iron ore output at 4.53 million tonnes; Sales at 4.53 million tonnes.
• United Spirits receives shareholders’ approval for 1:5 stock split.
• McLeod Russel to sell certain tea estates of the company in Assam to M.K. Shah Exports for Rs 331 crore.
• ADF Foods to buyback 10 lakh equity shares or 4.71 percent equity at a price of Rs 300 each.
• Kirloskar Oil Engines to hike price of power generator sets by 5-8 percent due to rising raw material cost.
• Infosys Finacle banking solutions software wins Bank Sohar deal.
• Nalco sets capex target of Rs 1,100 crore for FY 18-19.

• Patanjali cancels proposed Rs 6,000 crore mega food processing park in Uttar Pradesh
• India sees record low solar prices returning on China reforms
• Rs 8,000 crore package for sugar industry on the anvil
• Finance ministry to soon meet power ministry on stricter bad loan norms
• Beware of carrying excess luggage in trains
• From cabbages to oil, inflation has many fathers
• How government’s latest resolution plan for stressed power assets could work
• Honeywell to make flying safer by decoding 100 accents in India
• U.S. asks OPEC for 1 million barrel a day oil output hike
• Government to share unclaimed IGST between centre and states
• How to sell Air India
• Facebook again botches a data crisis

Good Morning!

The Singapore-traded SGX Nifty, an early indicator of NSE Nifty 50 Index’s performance in India fell 0.22 percent to 10,584 as of 6:50 a.m.

Stocks in Asia opened mixed Wednesday as a global rally in risk assets that sent U.S. equities to three-months highs stalled amid a backdrop of protectionism and geopolitical issues. Treasury yields ticked higher and the dollar pared gains.

Equities were little changed in Japan and rose in Australia, while South Korean markets were closed for a holiday. Earlier, advances in megacap tech shares helped support the Nasdaq indexes, pushing them to fresh records for a second straight day.

Bonds

• The yield on 10-year Treasuries rose one basis point to 2.94 percent.
• Australia’s 10-year bond yield rose almost two basis points to 2.74 percent.

Commodities

• West Texas Intermediate crude increased 0.2 percent to $65.66 a barrel.
• Gold rose 0.1 percent to $1,297.37 an ounce.

Here are some key events to watch this week:

• Reserve Bank of India rate decision on Wednesday.
• U.S. trade balance and Australia GDP also out on Wednesday.
• On Thursday, Japanese Prime Minister Shinzo Abe meets with U.S. President Trump at the White House to discuss the planned U.S. summit with North Korea’s Kim Jong Un.
• Also on Thursday, euro-zone GDP.
• Turkey rate decision is due on Thursday.
• G-7 Leaders’ Summit starts in Quebec Friday through to June 9.