Pharma stocks bleed; all eyes on progress of monsoons..
Friday, the market gained strength in last hour of trade amid consolidation and
snapped two-day losing streak, led by recovery in most beaten down stocks like
and oil marketing companies also led support to the market but the correction
in Reliance Industries and healthcare stocks capped gains. Equity benchmarks
opened lower and remained rangebound till recovery in later part of the
30-share BSE Sensex recovered more than 200 points from day's low to end up
87.53 points at 32,325.41 while the 50-share NSE Nifty closed near its record
high, up 52.75 points at 10,066.40 despite weak market breadth and sluggish
global cues. About 1,388 shares declined against 1,204 advancing shares on the
the holding of 10,000-mark by Nifty could be on hopes of better September quarter
earnings, especially after stable June quarter numbers (which were expected to
be weak). Positive monsoon forecast is also expected to support the growth,
the Indian Meteorological Department said that the actual cumulative area
weighted rainfall for the country as a whole till August 2, equaled normal
rainfall and monsoon activity would pick up in next 3-4 days.
week, the Sensex was up 0.04 percent and the Nifty gained 0.5 percent. However,
among these developments, around 25 stocks added to investors’ gains by
clocking a fresh all-time high mark.
IPOs in action
Mahindra Logistics Ltd, a unit of automobile major Mahindra and Mahindra Ltd,
has filed for an initial public offering of shares.
The promoter, Mahindra and Mahindra
Ltd, will be selling 9.7 million shares while Normandy Holdings Limited will
sell 9.3 million shares as part of IPO, according to a filing with market
regulator Securities and Exchange Board of India.
Mahindra Logistics provides
services such as warehouse solutions and transport management.
Kotak Mahindra Capital Company
Limited and Axis Capital Limited are the book-running managers to the IPO.
India's IPO market has been on a
roll with money raised through IPOs surging 116.3 percent to $2.6 billion in
the first half of 2017, data released last month showed.
Foreign exchange reserves surge..
The country's foreign exchange
reserves surged by USD 1.536 billion to touch a fresh life-time high of USD
392.867 billion during the week to July 28, helped by rise in foreign currency
assets (FCAs), the RBI data showedIn the previous week, the reserves had increased by USD
2.27 billion to USD 391.33 billion.
FCAs, a major component of the overall reserves, rose by
USD 1.609 billion to USD 368.759 billion, the data showed.Expressed in US dollar terms, FCAs
include effect of appreciation or depreciation of non-US currencies such as the
euro, the pound and the yen held in the reserves.Gold reserves remained unchanged at
USD 20.35 billion.The special drawing rights with the International
Monetary Fund (IMF) went up by USD 3.9 million to USD 1.495 billion.The country's reserve position with
the IMF declined by USD 77.2 million to USD 2.263 billion, the apex bank said.
repo rate by 25 bps…
The Reserve Bank of India (RBI) in the monetary and
credit policy review earlier this week slashed the repo rate by 25 basis points
from 6.25 percent to 6 percent with immediate effect.
Consequently, the reverse repo rate under the LAF stands
adjusted to 5.75 percent and the marginal standing facility (MSF) rate and the
Bank Rate to 6.25 percent.
4 MPC members were in favour of a 25bps rate cut, one
member sought a 50bps cut in policy rate and one member sought no change in
The RBI has however maintained their neutral stance
given the likely upward movement of inflation from the current levels during
the second half of the year. The RBI remains focused on its commitment to
keeping headline inflation close to 4 percent on a durable basis. However, the
central banker has also highlighted the fact that slowdown in growth and
manufacturing activity is an issue of concern to it.
In terms of inflation, while the trajectory of CPI
inflation has been lower than projected, RBI points out to the fact that there
are several factors contributing to the uncertainty around the baseline
inflation trajectory. Factors such as farm loan waivers by states as well as
the implementation of the state of the pay commission could have a bearing on
the inflation trajectory for the second half of the year.
RBI projections now incorporate the first round impact
of the implementation of the HRA (House Rent Allowance) award by the Centre
under the 7th Pay Commission.
While RBI believes that banks have been able to transmit
lower policy rates to new loans under the MCLR regime (marginal cost lending
rate), the rate transmission for the existing loans has been slow especially
under the base rate regime.
The transmission of lending rates under the MCLR regime has
been faster than the base rate. RBI is looking into this matter and setting up
a committee to do so.
Banks have been facing pressure on Net Interest Margins
(NIMs) despite fall in the cost of funds on account of the muted trends in
credit growth and the fact that incrementally banks are focusing mainly on
lending to better-rated corporates.
The excess liquidity in the system is also adding to
pressure on NIMs and the recent cut in savings bank rate by SBI is an outcome
of the same.
current levels, Indian markets are trading (P/E of 22x) at a premium of 25
percent above long-period averages and 19 percent premium to January 2008
levels. The index has rallied over 50 percent from its peak seen back in 2008.We
believe Q1 quarterly earnings so far has been a mixed bag and growth in Q1FY18
may not be as per expectations.
been on a upmove since beginning of this year. There is strong positive sentiment among investors due to ample
liquidity, with stable inflow from both domestic and foreign institutions. Institutional
buying is expected to continue, as domestic mutual funds still get impressive
flow. In addition, the India Meteorological Department (IMD) in its weather
report said that so far the south-west monsoons for the country as a whole have
been 5% above the long-period average (LPA) which would augur well for
fertilser and auto sector.We expect a recovery in corporate
earnings to be the key headwind in the medium to long term. Although the
markets have scaled new heights in the past two years, growth in earnings per
share (EPS) has been flattish and expect earnings to improve in H2FY18. We
believe at current levels it is risky to enter expensive midcaps and smallcaps
and rather advise profit booking. A sharp correction in the market is not ruled
at this junction which we believe will be healthy for markets. We recommend
investors to be stock specific and consider companies with good earnings
visibility at a decent valuation.