Sensex, Nifty Cap Weekly Gains As RBI Lowers Growth Outlook

Indian equity benchmarks declined as the central bank kept borrowing costs at a record low level and lowered its economic growth projection.

The S&P BSE Sensex slid 0.2% to 52,100.05, paring gains of as much as 0.3%, but closed the week 1.3% higher. The NSE Nifty 50 fell 0.13% at 15,670.25, capping its weekly advance to 1.5%.

The broader market outperformed their larger peers. The S&P BSE MidCap gained 0.63% and S&P BSE SmallCap advanced 0.78%. Fourteen of the 19 sector sub-indices compiled by BSE Ltd. advanced, led by a gauge of industrials. The S&P BankEx was the worst performer, down 0.95%.

The market breadth was slightly skewed in favour of the bulls. About 1,877 stocks gained, 1,300 declined and 146 remained unchanged.

Meanwhile, the combined value of all shares traded in India rose above $3 trillion for the first time, according to Bloomberg. India’s market value surpassed Germany’s last month and is now nipping at the heels of Canada and France.

The non-banking finance company rose as much as 9.7% on heavy volumes.

• Trading volume was 38.4 million shares, double the 20-day average of 16.9 million shares for this time of day.
• Trading in the company's call options totalled 26,012 contracts, compared with the average of 11,578 over the past 20 days. Trading in the company's put options totalled 6,721 contracts, compared with the average of 3,383 over the same period.
• The relative strength index on the stock was above 70, indicating it may be overbought.
• Indiabulls Housing trades at 9.1 times its estimated earnings per share for the coming year. It trades at 8.9 times trailing EPS.
• Analysts have two buy, no hold, and one sell recommendations on the stock.
• The price target of Rs 185 represents a 25% decrease from the last price

• Grasim options volume 2.9x the 20-day average, with 22,997 calls changing hands vs 4,436 puts
  • Stock up 2.9%, volume 1.1x the 20-day average for this time of day
• ONGC options volume 2.5x the average, with 27,757 calls vs 7,189 puts
  • Stock up 2.5%, volume 2.2x the average
• Bajaj Finserv options volume 1.7x the average, with 9,407 calls vs 2,401 puts
  • Stock up 2.4%, volume 0.9x the average
• Nifty 50 options volume 0.4x the average, with 3.55 million calls vs 3.41 million puts; gauge down 0.2%
  • Cost of hedging as measured by the 90/110, one-month skew ranks in the 97th percentile over the past year

Shares of Oil & Natural Gas Corp. gained for the sixth straight session, making them the best on Sensex this week, as JPMorgan retained its bullish stance on the oil explorer, citing its attractive risk-reward ratio.

JPMorgan sees a large consensus earnings upgrade cycle ahead for ONGC as three key parts of its business — India operations, overseas assets in ONGC Videsh Ltd., and India gas — are all levered to oil prices.

To read the full report here.

Gujarat State Petronet Ltd. shares climb after company’s quarterly profit beat analysts estimates, mainly helped by lower financing costs.

• Q4 net profit stood at Rs 206 crore, beating consensus estimate of Rs 195 crore
• Finance costs fell 50% YoY to Rs 17.37 crore, ICICI Securities analysts Vidyadhar Ginde and Aksh Vashishth write in a note, noting the drop helped offset a drop in transmission volumes and tariffs of 8% and 14% YoY respectively
• While rising spot LNG prices and impact of Covid-19 on customers’ businesses are headwinds, volumes at co.’s unit Gujarat Gas Ltd., which supplies piped natural gas to residential customers, remain steady
  • Shares of Gujarat Gas have risen 57% this year, outperforming ~36% rise in parent
• ICICI Securities retains buy rating while raising the price target by 16% to Rs 368, reflecting the performance of Gujarat Gas

State-run Bank of Maharashtra and Indian Overseas Bank surged after The New Indian Express newspaper reported the lenders may have been shortlisted as candidates for privatization.

• Government think tank Niti Ayog Thursday submitted recommendations on candidates for bank privatization to the panel handling the divestment plan, the report said, quoting a senior financial ministry official it didn’t name

Spandana shares jump as much as 19.7% to the highest intraday level since Jan. 15 after a Moneycontrol report that a proposed deal for Axis Bank to acquire small-cap lender has been in the works for some time.

The micro-finance lender is exploring a complete sale, according to website reports, citing people it didn’t identify.

Axis Bank expects the deal to help reduce its priority sector lending costs, expand customer base and give opportunities to cross-sell products and services.

Shares of hotel and travel companies advanced after the central bank announced a liquidity window of Rs 15,000 crore ($2 billion) to allow banks to provide lending support to the two sectors hit by the pandemic.

• EIH +7.4% -- highest since mid-March
• Indian Hotels Co. +5%
• Thomas Cook India +5%
• Lemon Tree Hotels +4%
• Mahindra Holidays+3.7%
• SpiceJet +2.3%

Bharat Forge reported net income for the fourth quarter that beat the average analyst estimate.

• Net income Rs 205 crore vs. loss Rs 73.30 crore YoY, estimate Rs 145 crore (Bloomberg Consensus)
• Revenue Rs 1,307 crore, +49% YoY, estimate Rs 1,200 crore
• Total costs Rs 1,060 crore, +18% YoY
• Other income Rs 31.96 crore
• Dividend per share Rs 2

India’s central bank will buy Rs 1.2 lakh core ($16.4 billion) of bonds under its government-securities-acquisition programme in the July-September quarter, Governor Shaktikanta Das said.

• The RBI will buy the remaining Rs 40,000 crore of bonds for the current quarter on June 17, he said; RBI had committed to buy Rs 1 lakh crore of bond in the April-June quarter
• Of the June 17 purchase, Rs 10,000 crore will be purchases of state bonds
• USD/INR rises 0.1% to 73.0025; rose as much as 0.3%
• 10-year yields up 2bps at 6.01%; 6.64% 2035 bond yield up 1bp to 6.66%

The RBI’s Monetary Policy Committee kept borrowing costs at a record low for the sixth straight meeting, as the second wave of Covid-19 threatens to hold back the economy’s recovery.

The Monetary Policy Committee voted to keep the benchmark repurchase rate at 4%, Governor Shaktikanta Das said in an online broadcast on Friday. The decision was predicted by all 44 economists surveyed by Bloomberg.

The six-member committee, which has been on pause mode for more than a year, retained its accommodative policy stance for as long as necessary, signalling there’s still room to cut rates further.

The central bank said it now expects gross domestic product to expand 9.5% in the current fiscal year, down from 10.5% previously.

Sovereign bonds traded higher, with the yield on benchmark 10-year bonds down two basis points at 5.98%, while the rupee was slightly lower.

Catch the live updates here.

Indian equity benchmarks climbed ahead of the RBI's Monetary Policy Committee's interest rate decision.

The S&P BSE Sensex added 0.1% to 52,298.76, set for a weekly gain of 1.7%. The NSE Nifty 50 Index rose by the same magnitude. Thirteen of the 19 sector sub-indices compiled by BSE Ltd. climbed, led by a gauge of capital goods companies.

Indian bond traders will be awaiting the central bank’s monetary policy decision for guidance on rates and how much debt the RBI plans to purchase in the July- Sept. quarter under its government-securities-acquisition program. Rupee traders will closely watch comments on inflation and whether the currency is a tool in inflation management.

• RBI decision is due at 10 am in Mumbai followed by Governor Shaktikanta Das’s press briefing at noon
• There is unlikely to be any change in the conventional rates or liquidity measures, Kaushik Das, chief India economist at Deutsche Bank wrote in note
  • Rates are already at a record low and there is no point in penalizing savers anymore, who are already earning negative real returns
  • The MPC will ensure that the tone of the forward guidance is dovish, even while highlighting upside risks to inflation from potential supply disruptions and further strengthening of the global commodity cycle
  • Supporting growth will continue to be the main priority at this stage, particularly as genuine demand-side inflationary pressure is expected to remain muted due to weak labour market and the persistent negative output gap
  • RBI will likely announce one more GSAP of Rs 40,000 crore for the remainder of April-June along with GSAP2.0 for July-Sept. of another Rs 1 lakh crore
• USD/INR fell 0.2% to 72.9100 on Thursday
  
  • Implied opening from forwards suggest spot may start trading around 73.06
• 10-year yields little changed at 6% on Thursday

Good Morning!

Most Asian stocks fell Friday after Wall Street sagged amid robust U.S. economic data that stoked concerns about a pullback in central bank stimulus. Treasury yields and the dollar held advances.

Shares edged back in Japan, China and Hong Kong, but posted modest gains in Australia. India’s SGX Nifty 50 Index futures for June delivery fell 0.1% to 15,678.50, while MSCI Asia Pacific Index lost 0.4%. The NSE Nifty 50 Index added 0.7% Thursday to 15,690.35.

S&P 500 and Nasdaq 100 futures slipped after the gauges fell overnight, though they came off lows on signs President Joe Biden may be willing to compromise on corporate taxes. Strong U.S. jobs data and record service-sector growth underscored the recovery from the pandemic.

China’s markets are digesting Biden’s order amending a ban on U.S. investment in Chinese companies.

Gold remained lower after coming under pressure as yields and the dollar pushed higher, while the rally in crude oil has stalled. Meme stocks including AMC Entertainment Holdings Inc. had another volatile U.S. session. Bitcoin fell after a cryptic Elon Musk tweet hinting at a split with the token.

Back home, Gujarat Petronet, Quess Corp, Nilkamal may react as the companies reported quarterly results after the market closed Thursday. Punjab National Bank, Bharat Forge, Bank of India, Jubilant Pharmova are among the companies scheduled to report earnings Friday. Foreign investors bought net Rs 1,090 crore of stocks on June 2, according to the NSDL website.

India’s central bank to announce its 2nd bi-monthly monetary policy for FY22 at 10 a.m. RBI policymakers will likely maintain interest rates at a record low for a sixth straight meeting, while retaining their dovish bias for as long as needed to revive the economy from the pandemic. The Reserve Bank of India’s six-member Monetary Policy Committee will keep the benchmark repurchase rate at 4% Friday, according to all 44 economists surveyed by Bloomberg as of Thursday afternoon.