Weekly Market View – 27th June 2020

Indian Market Outlook:

The Key benchmark indices rose over 1% over the week led the positive global cues while Global markets were in a consolidation mode after previous weeks of strong rally. The Nifty ending the week 1.35 percent higher at 10383 points while Sensex ended 1.27 percent higher at 35171 points. The BSE Midcap index ended 3.55 percent higher, while the BSE Small cap index rose 2.88 percent, during the course of the week. Foreign Institutional Investors were the net buyers during the week; bought equities worth Rs.556 crore while the DIIs were the net sellers of Rs.1309 crore. The Reserve Bank of India has started the ground work for a one-time restructuring scheme to help companies which are affected by the Covid-19 pandemic. A onetime loan restructuring scheme will allow banks to give more time for borrowers to pay back money, reduce interest rate, even take a haircut or a combination of all these depending upon the nature of the cases. Going Forward, geopolitical concerns and possibility of second wave of Covid-19 remain the near term risks which could impact investors sentiments. On Macro front Manufacturing PMI (Jun) of China, Nikkei Markit Manufacturing PMI of India, ISM Manufacturing PMI (Jun) of US are amongst a host of data releases scheduled for next week. Key Results to watch next week are BEL, Central Bank, Ircon international, Future Consumer, ONGC, PC Jeweller, Rites, NBCC, Tata Steel, Deepak Fertilizers, and SAIL.

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Economic News:

• S&P Global Ratings on Thursday said Indian economy is in deep trouble with growth expected to contract by 5% this fiscal. “India’s economy is in deep trouble. Difficulties in containing the virus, an anemic policy response, and underlying vulnerabilities, especially across the financial sector, are leading us to expect growth to fall by 5% this fiscal year before rebounding in 2021,” S&P said in a report. In its report titled ‘Asia-Pacific losses near USD 3 trillion as balance sheet recession looms’, S&P projected the region’s economy to shrink by 1.3% in 2020, but grow by 6.9 % in 2021.

• The Reserve Bank of India has started the ground work for a one-time restructuring scheme to help companies which are affected by the Covid-19 pandemic. The regulator is discussing contours of the plan internally and informally with senior bankers before a final decision is taken, said two people with direct knowledge of the matter, who spoke on condition of anonymity. A onetime loan restructuring scheme will allow banks to give more time for borrowers to pay back money, reduce interest rate, even take a haircut or a combination of all these depending upon the nature of the cases.

 Industry News:

• Airlines have been allowed to increase domestic flight operations to 45 per cent capacity from the existing 33 per cent. The civil aviation ministry has asked Directorate General of Civil Aviation (DGCA) to prepare the new schedule with additional routes under the new arrangement. The decision has been taken after a review of the current status of domestic scheduled operations as compared to the demand for air travel, according to a circular by Ministry of Civil Aviation. The order comes close on the heels of DGCA announcement that international scheduled commercial flights will remain suspended till July 15. However, international scheduled flights might be allowed to operate on selected routes, the aviation regulator had noted in a circular on Friday.

• With severe economic disruptions impacting cash flows of borrowers, the asset quality of housing finance companies (HFCs) is likely to worsen, said rating agency ICRA on Friday. Gross non-performing assets (NPAs) of HFCs are estimated to increase to 2.5-3 per cent in FY21 from an estimate of 1.7 per cent as of March this year. The situation in the non-housing segment is expected to be worse, leading to overall GNPAs of 3-4.5 per cent by the end of FY21, from an estimated 2.5 per cent as of FY20.

  Company News:

• Coal India Ltd. reported a decline in quarterly profit due to flat sales growth and lower realizations. Net profit fell 23% year-on-year to Rs 4,638 crore in the quarter ended March, the world’s largest coal miner said in an exchange filing. During the quarter, Coal India reported sales volume of 164.5 million tonnes compared with 163 million tonnes in the same period a year ago. Volume remained flat particularly due to the lower demand from the power sector in the second half of March as India implemented the world’s harshest lockdown to curb the spread of Covid-19.

• ITC on Friday reported a 9% year-on-year jump in its standalone net profit to Rs 3,797.08 crore for the fourth quarter ended March 31, on the back of lower tax expenses, although its gross revenue witnessed a fall of around 6% year-on-year. The cigarette-to-FMCG-to-hotel major had posted Rs 3,481.90 crore net profit for the fourth quarter of FY19. Its gross revenue from sale for the period January-March this year decreased by 6.33% y-o-y at Rs 11,300.05 crore. The company’s tax expenses during the period under review fell 51.4% y-o-y at Rs 714.76 crore from Rs 1,472.01 crore from the year-ago period.

• Carlyle Group will purchase a 20% stake in Indian billionaire Ajay Piramal’s pharmaceutical business, according to an exchange filing. The private equity fund will pay $490 million for the holding, valuing the business at an enterprise value of $2.7 billion. In addition to helping expand capacity of the pharmaceutical operations, the Piramal group will use the money to repay some of parent Piramal Enterprises Ltd.’s debt, the filing said. “This infusion of funds will further strengthen our balance sheet and provide us with a war chest for the next phase of our strategy,” Ajay Piramal, chairman of Piramal Enterprises, said in the filing.

Global News:

• S. consumer spending surged by a record in May — while remaining well below pre-pandemic levels — as Americans spent relief payments and ventured out of their homes to newly reopened stores and restaurants.

• The Federal Reserve told the biggest U.S. banks they can’t increase dividends or resume buybacks through at least the third quarter as uncertainty over the course of a global pandemic weighs on lenders. The industry performed well in annual stress tests, according to a statement Thursday from the central bank, but a separate review of the effects of the coronavirus on the economy and financial system uncovered potential risks that left the fate of their dividends in question.

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

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