Weekly Market View – 13th June 2020

Indian Market Outlook:

The Key benchmark indices fell over 1% over the week due to Global cues, rising cases of COVID-19, and the United States Federal Reserve’s subdued growth outlook of the US. It projected that the US economy will shrink 6.5% in 2020. The Nifty ending the week 1.67 percent lowers at 9973 points while Sensex ended 1.48 percent lower at 33781 points. The BSE Midcap index ended 0.37 percent higher, while the BSE Small cap index fell 0.08 percent, during the course of the week. Foreign Institutional Investors were the net sellers during the week; sell equities worth Rs.17132 crore while the DIIs were the net sellers of Rs.400 crore. While the Nifty has ended lower this week, the sharp recovery from the lows on Friday indicates the bulls are not willing to give control to the bears. Going forward, Progression on containment of COVID-19 will be the key thing to watch. Given the uncertainties on both global and domestic front, focus should be on sectors and stocks which have strong revenue visibility and quality business franchises and avoid any stocks with weak fundamentals. On Macro front Industrial Production (YoY) of China and US for May and India’s WPI Inflation (YoY) data for May, amongst a host of data releases scheduled for next week. Key Results to watch next week are Ipca Lab, Navin fluorine, Pidilite Industries, IGL, JK Cement and LIC housing finance.

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Economic News:

• India’s industrial output contracted the most in at least two decades in April after the world’s biggest lockdown to contain the new coronavirus pandemic froze economic activities. The Index of Industrial Production contracted 55.5% year-on-year in April, the most since at least 1996. That compares with a revised contraction of 18.3% in March. A Bloomberg poll of 31 economists had estimated a contraction of 45% in April. A majority of industrial sectors were not operating after the nationwide lockdown was imposed, effective March 25. As such it’s not appropriate to compare IIP of April 2020 with earlier months, it said. These estimates will undergo revision in subsequent releases.

• India’s foreign exchange reserves rose $8.2 billion in the week of June 5 and has now crossed the milestone $500 billion mark for the first time in country’s history. The healthy surge in the forex kitty was largely on the back of capital raising rounds by Reliance and Kotak Mahindra as the foreign currency asset held by the Reserve Bank of India rose $8.4 billion and stood at a record $463 billion in the reporting week, data released by the central bank on Friday showed.

 Industry News:

• The Department of Telecommunications (DoT) and the Ministry of Finance (MoF) should closely engage to make multiple options available to facilitate domestic manufacturing or Make in India in line with the ambitious Atmanirbhar Bharat (self-reliant) initiative, a top regulatory official said. “DoT should coordinate with the Ministry of Finance for making financing options available, in line with the practices followed by other export-oriented economies, to indigenous telecom equipment manufacturers,” the Telecom Regulatory Authority of India (Trai) chairman Ram Sewak Sharma told ET Telecom.

• The country’s insurance regulator has directed all general and health insurers to offer a standard coronavirus cover by June. While the final details of the proposed cover are still in works, the Insurance Regulatory and Development Authority (IRDAI) has come up with draft guidelines. As per the terms devised by the regulator, the standard covid-19 cover will be a benefit-based product offering a 100% lump sum if a policyholder is tested positive and hospitalized. The minimum sum assured for the product will be Rs 50,000 and it can go upto a maximum of Rs 5 lakh.

 Company News:

• Eicher Motors Ltd.’s quarterly profit fell as the nationwide lockdown that was imposed to contain the Covid-19 outbreak battered its already slowing sales. Net profit of the maker of Royal Enfield motorcycles fell 44% year-on-year to Rs 304.3 crore in the quarter ended March, according to an exchange filing. That compares with the Rs 408-crore consensus estimate of analysts tracked by Bloomberg.

• Hindalco Industries Ltd. reported a sharp jump in profit in the quarter ended March but its revenue dropped. Standalone net profit rose 38% year-on-year to Rs 326 crore in the three-month period, the company said in a statement. This has been adjusted for impairment on financial assets amounting to Rs 22 crore. Revenue, however, fell 19.2% year-on-year to Rs 9,992 crore as sales of copper and aluminum declined during the period and the metals traded lower on the London Metal Exchange. The estimate for revenue was Rs 9,658.8 crore.

• State Bank of India has filed an application in the National Company Law Tribunal to recover more than Rs 1,200 crore from Anil Ambani under the personal guarantee clause of the bankruptcy law. Anil Ambani had given personal guarantee to the loans given to Reliance Communications and Reliance Infratel. The tribunal, presided over by BSV Prakash Kumar, on Thursday gave Ambani a week to file reply to the application.

Global News:

• Analysts expect an US unemployment rate of 13.4% in the second quarter, 2.7 percentage points lower than the prior month’s poll, according to median estimates in a Bloomberg survey conducted from June 5 to June 10. While the fourth-quarter projection came down by 0.8 point to 9.5%, the forecast for the end of 2021 was just 0.4 point lower, at 7%.

• The U.K. economy shrank a record 20.4% in April as businesses and workers reeled under the lockdown designed to control the coronavirus pandemic. The contraction means the nation has effectively seen almost 18 years of growth wiped out in two months. While a rebound is likely as businesses start to reopen, the grim figures will increase the pressure on the government and Bank of England to do more to support the recovery.

   (Source: Bloomberg Quint, Economic Times, Business Today, Business Standard, Financial Express Investing, Moneycontrol, livemint)

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