Indices end with slight gain following RBI rate hike; Cons Durable, Auto slide

Indian benchmark indices reacted in a meek manner to the RBI's rate hike of 50 basis points and ended the day with a slight jump. The Sensex added 89 points to close the week at 58,387. Nifty gained 15 points to finish at 17,397 on Friday.

Ultratech Cement and ICICI Bank were among the top gainers throughout the day and ended with a gain of more than 2%. Mahindra and Mahindra slipped by 2% following its quarterly report. Autos and Consumer Durables declined in today's session, whereas IT stocks gained the most.

RBI increased the interest rate by 50 basis points to 5.4% and has retained the FY23 GDP growth forecast at 7.2%.

Other Asian markets also ended in green on Friday. Tokyo shares closed higher following the Thursday tech gains on Wall Street. The benchmark Nikkei 225 index climbed 0.87%.

Chinese indices ended the week with a small gain as concerns over China's military drills around Taiwan eased. The Hang Seng Index added 0.14% and the Shanghai Composite Index climbed 1.19%.

European equities slipped slightly on Friday but were still set for a weekly gain.

The markets will be treading cautiously as they wait for U.S. jobs data due later in the session to give clues as to the health of the world's largest economy.

Amit Jain, co-founder of Ashika Global Family Office Service:

In line with expectation, the RBI has raised the repo rate by 50 bps which is an appropriate action keeping in mind the global inflationary environment. Yesterday for the first time after 1997 Bank of England raised 50bps in their policy rate. As of now, Indian 10-year Gsec is trading around 7.26% which we believe will peak out around 7.8% by the end of the CY2022.

Vivek Bansal, executive director & group CFO, InCred:

The hike is on expected lines and driven by strength of dollar, volatile macro situation and continued high inflation. It is expected that inflation will come down over next 3-6 months as commodity prices have already cooled down significantly from peak levels. Given strong growth momentum visible, it was prudent to focus on containing inflation to make growth more broad based.

Minister of State (MoS) for External Affairs V Muraleedharan on Friday rejected any claims that India is in talks with a bilateral trade agreement with Afghanistan for the import of Lithium.

"There is no proposal for such a bilateral trade agreement with Afghanistan," said Muraleedharan in response to an unstarred question in Lok Sabha.

Answering whether the Government is aware of the effect of extending China Pakistan Economic Corridor to Afghanistan, the Union Minister said, the government has seen reports regarding the proposed extension of the so-called CPEC.

The stress in the Indian startup sector especially in the ed-tech startup sector continues, with funding drying up and also schools opening up everywhere after remaining closed for two years due to the Covid-19 pandemic.

Edtech major Vedantu has reportedly handed over pink slips to more than 100 employees in the latest round after firing more than 600 employees in May in a bid to sustain itself in a tough external environment and fear of recession.

According to a report published in Inc42 quoting sources, more than 100 employees were told to put down their papers in the first week of July post the appraisal process got over. Employees from various teams like sales and training were laid off according to the report.

The spread between India’s five-year and liquid 10-year benchmark bond yields compresses, as market participants anticipate more rate hikes in the coming months after another 50 bps move from the Reserve Bank of India.

The five-year bond yield was trading at 7.06% at 0900 GMT, while the 10-year bond yield was at 7.30%, with the spread shrinking to 24 basis points against 30 basis points at the beginning of this week.

Gold in the national capital on Friday was marginally down by ₹9 to ₹52,592 per 10 grams, according to HDFC Securities.

The yellow metal had closed at ₹52,601 per 10 grams in the previous trade.

Silver also declined by ₹487 to ₹58,477 per kg from ₹58,964 per kg in the previous trade.

Prime Minister Narendra Modi will chair the seventh governing council meeting of the NITI Aayog on Sunday and this, his office said, will pave the way for a new era of collaboration between the Centre and the states.

This will be the first physical meeting of the council after July 2019 and its members include all the chief ministers.

As the country commemorates 75 years of its independence, there is a reinforced need for the states to be agile, resilient and self-reliant and move towards "Aatmanirbhar Bharat" in a spirit of cooperative federalism, the Prime Minister's Office (PMO) said.

India will allow the export of an additional 1.2 million tonnes of sugar, a government official said on Friday.

The notification allowing exports would be issued by the end of the day, federal food secretary Sudhanshu Pandey told reporters on the sidelines of a news conference.

Reuters reported last week that the government would allow additional sugar exports after allowing companies' requests to let them ship out stocks that had piled up in ports and warehouses.

European equities slipped slightly on Friday but were still set for a weekly gain, while traders waited for U.S. jobs data due later in the session to give clues as to the health of the world's largest economy.

The MSCI world equity index, which tracks shares in 47 countries, was up 0.2% and on track for a weekly gain of 0.7% - marking its third consecutive week of gains.

At 0823 GMT, the STOXX 600 was down 0.1%, France's CAC 40 and Germany's DAX were flat. London's FTSE 100 was down 0.2%.

After the announcement of Q1FY23 results on Thursday, BSE-listed Orissa Bengal Carrier shares have attracted strong buying interest among the market bulls on Friday. In the morning session, shares of the logistics company opened with an upside gap and went on to hit intraday high of ₹130.40 apiece levels on BSE, logging around 16 per cent from its Thursday close of ₹108.70 apiece levels. (Read More)

India's Pine Labs is targeting $4 billion to $5 billion in monthly transactions within two years for its new online payments business, its chief executive told Reuters.

At that point, online payments should contribute 20% of revenue, Pine Labs chief executive Amrish Rau said, disclosing the company's targets for the first time since it entered online payments.

Valued at $5 billion and with investors including Mastercard and Singapore's Temasek, Pine Labs has for years provided point-of-sale machines to offline merchants for card payments.

Ritika Chhabra- Economic and Quant Analyst, Prabhudas Lilladher: “Markets were expecting a rate hike between 35-50 bps, so the RBI hike of 50 bps is on the higher side of the expectations. The RBI emphasized that it remains committed to the withdrawal of the liquidity to the contain the inflation. However, the governor did mention that the signs of moderation in inflation are emerging in form of ease in metals and food commodities and inflation is expected to be within the tolerance limit at 5.8% by Q4FY23. There was no forward guidance on the rate trajectory going forward, however, we believe that with much of the front loading behind us and oil prices also easing, RBI will go for a 15bps - 25bps hike in the next MPC meeting.”

Digital payment platform Paytm, on Friday, assured to fix the issues hours after several users reported glitches while making the transactions through the app on social media.

"Due to a network error across Paytm, a few of you might be facing an issue in logging into the Paytm Money App/website. We are already working on fixing the issue at the earliest. We will update you as soon as it is resolved," a tweet read on Paytm Money's handle.

Online food aggregator and delivery platform Zomato on Friday said its board has rejected EY’s latest valuation report that lowered its share prices for acquiring quick commerce firm Blinkit. The board has decided to keep the preferential price at ₹70.76 as pegged by EY earlier. (Full report)

UK shares opened slightly lower on Friday, with energy stocks leading the declines, a day after the Bank of England raised interest rates by the most in 27 years.

The FTSE 100 index dipped 0.1%, while the midcaps index also shed 0.1%.

The FTSE 100 index ended flat on Thursday after the British central bank's Monetary Policy Committee raised its Bank Rate by half percentage point to 1.75% - the highest level since late-2008.

With an eye on the upcoming Onam season, Tata Motors, a home-grown automaker, plans to increase its sales in Kerala by 40% in the second quarter of the financial year 2022. Rajan Amba, the Vice-President, Sales, Marketing and Customer Care of Tata Motors Passenger Vehicles Ltd, said Kerala is a big market for the hatch and SUV segment of vehicles. Amba was in Kerala to announce the consumer offers for the automotive brand ahead of the Onam festival in Kerala.

Mahindra and Mahindra (M&M) reported Q1 FY23 results on Friday in which its standalone net profit rose more than 67% to ₹1,430 crore as compared to ₹855 crore year-on-year (YoY). Its revenue increased by 67% to ₹19,613 crore from ₹11,765 in the year-ago quarter. (Full Report)

Sameet Chavan, chief analyst-technical and derivatives, Angel One Ltd

"On the technical front, 17450-17500 still holds the sturdy wall for the bulls, and a decisive closure above the same could only trigger fresh longs in the system. Meanwhile, any dip towards the 17200 zone is likely to get bought into, while the sacrosanct support lies around the unfilled gap and psychological mark of the 17000.

Hence, looking at index placements and the recent price action that construes the undertone to favor the bulls, participants are advised to avoid aggressive bets and stay abreast with global and domestic developments. Also, we advocate continuing with a stock-centric approach for better trading opportunities."

Tirthankar Das, technical & derivative analyst, retail, Ashika Stock Broking Ltd

“Past two consecutive days of similar pattern formation indicates that volatility is likely to rule in the coming sessions and inability to surpass the immediate resistance level of 17500 makes the viewpoint stronger. The pattern specifies of an upcoming reversal in the market but no signs of exhaustion can be seen yet through oscillators, though the indicator has flattened during the period. On the downside, the psychological level of 17000 which further coincides with the 200dma would be the immediate short-term trend deciding level for the market. On the upside, the elevated target level for Nifty is around 17500 (being 80% retracement of two-month decline (18100-15183). Hence, during the day Index is likely to witness gap up opening tracking global cues and is expected to head northward to challenge the 17500 levels, use intraday dip towards 17200-17250 to create long position for the target of 17575.”

Credit Information Companies (CICs)

It has been decided to bring CICs under the RBI – Integrated Ombudsman Scheme.

As per the RBI, this has been done to provide cost-free alternate redress mechanism to customers for grievances against CICs.

Potential impact: This will foster more discipline on the part of CICs in terms of how they analyse borrower data before making hitherto unilateral numerical pronouncements about borrower creditworthiness.

The Reserve Bank of India (RBI) raised the key policy repo rate by 50 basis points while Governor Shaktikanta Das remained optimistic about domestic growth. He said that the domestic economic recovery is getting more broad-based despite a lot of uncertainties on the global front. (Full Report)

Shriram Housing Finance Ltd plans to raise ₹580 million through the sale of bonds maturing in four years, three merchant bankers said on Friday.

The non-banking finance company will pay an annual coupon of 8% on the issue and has invited commitment bids from bankers and investors on Monday, according to the merchant bankers.

The bonds are rated AA by CARE Ratings and the issue will close for subscription next week.

JB Pharmaceuticals recorded a revenue of ₹785 crores in the quarter ended June, up 30% over the corresponding quarter of last year. Profit after tax, however, declined to ₹105 crore in Q1FY23 as compared to ₹119 crores on account of finance costs and acquisition of brands. (Full report)

Ultratech Cement and ICICI lead the rally with a gain of 2%; Reliance and Maruti Suzuki are trading 1% down 

Tokyo shares closed higher on Friday following tech gains on Wall Street while traders awaited the US job data due later in the day.

The benchmark Nikkei 225 index climbed 0.87%, or 243.67 points, to end at 28,175.87, while the broader Topix index rose 0.85%, or 16.44 points, to 1,947.17.

The Reserve Bank of India (RBI) today raised repo rate by 50 bps to 5.40 per cent, thus reaching to pre-Covid levels. Aiming to contain inflation by squeezing the liquidity in the market, RBI Governor Shaktikanta Das-led Monetary Policy Committee (MPC) hiked the policy repo rate for the third time in a row on Friday.

Home loan EMI of new borrowers is expected to shoot up by near ₹1,000 per month, if banks raise home loan interest rate by 50 bps, say experts. (Full Report)

India has logged more than 20,551 covid cases and 70 deaths in the last 24 hours. There are around 1,35,364 active cases at present, the union health ministry data stated on Friday.

India has administered more than 205.58 crore vaccination doses under the nationwide vaccination drive.

The active cases stand at 0.31% while the recovery rate is currently at 98.50%. At least 21,595 people have recovered from the infection in the last 24 hours increases with total recoveries reaching to 43445624 so far.

Upasna Bhardwaj, chief economist, Kotak Mahindra Bank said, "The MPC decisions have been in line with our expectations. Given the increasing external sector imbalances and global uncertainties the need for frontloaded action was imperative. We continue to see 5.75% repo rate by Dec 2022."

ndia’s Tata Capital Housing Finance has accepted bids worth an aggregate 4.92 billion rupees ($62.20 million)on its two-part bond issuance, three merchant bankers said on Friday.

The housing finance company has accepted bids worth 2.92 billion rupees on three-year bonds and will pay an annual coupon of 7.55%.

It has accepted bids worth two billion rupees on five-year bonds and will pay an annual coupon of 7.80% to investors.

Despite the drawdown of foreign exchange reserves to limit rupee volatility, India’s reserves remain the fourth largest globally: RBI Governor Shaktikanta Das

Mortgage lender HDFC Ltd on Friday said it has raised USD 1.1 billion (around ₹8,700 crore) from a clutch of investors under 'Syndicated Social Loan Facility' to cater to the affordable housing segment.

HDFC Ltd has raised the amount by way of external commercial borrowings (ECBs).

"This landmark financing further promotes HDFC's longstanding mission to be the leading provider of housing finance in India. Proceeds from the social loan would go towards financing affordable housing loans," the company said.

Foreign Direct Investment at 13.6 billion dollars in the first quarter of the current financial year was robust, as compared to 11.6 billion dollars in the first quarter of last year: RBI Governor Shaktikanta Das

Surplus liquidity in the banking system has come down to ₹3.8 lakh crore, from ₹6.7 lakh crore in April-May, said the RBI Governor, adding that a rise in term deposit rates should increase liquidity for the financial sector.

Britannia Industries (BRIT IN): HOLD | CMP: Rs3,775 | TP: Rs3,880

Avenue Supermarts (DMART IN): BUY | CMP: Rs4,239 | TP: Rs4,636

KEC International (KECI IN): ACCUMULATE | CMP: Rs444 | TP: Rs473

GAIL (India) (GAIL IN): BUY | CMP: Rs140 | TP: Rs180

Consumer price index (CPI) inflation remains uncomfortably high and is expected to remain above 6%: RBI Governor.

The RBI has retained its FY23 gross domestic product (GDP) growth forecast at 7.2%

RBI Governor stated that successive shocks to the global economy are taking a toll, but India is expected to be amongst the fastest growing economy in the world

The rate hike of 50 basis points will go into effect immediately

In what may come as a relief for the common man, the price of edible oils may see a further reduction in the coming days. The development took place after the edible oil processors and manufacturers agreed to cut prices by ₹10-12 to pass on the benefits of a decline in global prices to consumers, according to a report.

“Cooking oil manufacturers have agreed to further slash edible oil prices by ₹10-12 in view of softening global prices. We had a good meeting with them where we made a detailed presentation with data," said one of the officials, asking not to be named as reported by Hindustan Times.

India’s Power Finance Corp plans to raise funds through sale of bonds maturing in three years as well as 10 years, four merchant bankers said on Friday.

The state-run company plans to raise at least five billion rupees ($63.20 million) through each issue, with the three-year bonds having a greenshoe option to retain an additional 20 billion rupees, and the 10-year notes to retaiin additional 10 billion rupees.

The company has invited coupon and commitment bids from bankers and investors for the same on Monday.

STOCK IN FOCUS

SAIL (CMP Rs.77)

We have a BUY rating on the company with a Target Price of Rs94.

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The Indian rupee firmed ahead of a central bank monetary policy decision on Friday, supported by overnight weakness in oil prices and the dollar.

The partially convertible rupee was trading at 79.15 per dollar in the early morning, compared to its previous close of 79.4650.

Markets are keenly awaiting the Reserve Bank of India's policy decision at the end of a three-day meeting, where it's widely expected to increase its key interest rate from anywhere between 25 basis points and 50 basis points.