Back
PremiumIndian indices ended with gains on Friday after the announcement of RBI's policy decisions cheered the Street. The MPC held the lending rate, or the repo rate, at 4% as expected, as it sought to support economic growth even as inflation edged higher amid the Russia-Ukraine war. The reverse repo rate, or the key borrowing rate, was also kept unchanged at 3.35%. The central bank raised inflation projections for FY23 to 5.7% from 4.5%, and cut real GDP estimates to 7.2% from 7.8%
Indian indices ended higher on Friday snapping a three-day losing streak as RBI kept its key lending rate at a record low as expected.
Sensex ended at 59,447.18, up 412.23, while Nifty ended 0.8% higher at 17,784.35.
Indices swung between losses and gains amid the RBI's policy announcement. The Sensex touched a high of 59,654 and a low of 58,876 intraday.
The monetary policy committee (MPC) decided to hold repo rate at 4% and the reverse repo rate at 3.35%. While the RBI's rate-setting panel maintained its accommodative stance, it also voted unanimously to focus on “withdrawal of accommodation to ensure that inflation remains within the target going forward, while supporting growth."
The RBI raised its inflation forecast for the current fiscal year to 5.7%, 120 basis points above its forecast in February, and cut its economic growth forecast to 7.2% for 2022/23 from 7.8% earlier.
Barring Nifty IT, all sectoral indices ended in the green. Midcap and Smallcap indices also clocked decent gains.
The MPC sensibly decided to keep monetary policy accommodative despite inflation being marginally above its tolerance band. Two good reasons justify the policy: (a) inflation is high partly because of (external) supply shocks, so reducing aggregate demand (through monetary tightening) will not address the issue; (b) there is a considerable output gap, with the economy having contracted 6.6% in FY21, and estimated to have grown 8.9% in FY22 (far from closing the gap, in an economy with potential growth of 7% annually). Staying accommodative is thus the right approach: loan growth needs to accelerate to enable a rebound in domestic demand, but the RBI will also withdraw accommodation tactically if inflation gets too far from the target.
The department of telecommunications (DoT) has returned bank guarantees (BGs) to Bharti Airtel and Vodafone Idea, according to an affidavit filed by the department in the Supreme Court. The bank guarantees amount to nearly ₹23,000 crore.
Accenture’s investor and analyst conference held on 7 April points to the rising focus on costs among Europeans firms in the backdrop of the ongoing Russia-Ukraine war. It is also pertinent to global companies to a certain extent. Increased focus in costs could lead to an alteration in tech budgets and postponement or decline of discretionary spends. Even so, this has not affected Accenture’s operations so far.
World food prices jumped to a new record high in March as the war in Ukraine caused turmoil in markets for staples grains and edible oils, the U.N. food agency said on Friday.
The Food and Agriculture Organization's (FAO) food price index, which tracks the most globally traded food commodities, averaged 159.3 points last month versus an upwardly revised 141.4 for February
“Amidst the 'tectonic' shifts in global conditions, RBI has taken more than one step towards preparing the market for an eventual increase in the repo rate. This position is made clear as the governor indicated that the order of preference for RBI now is inflation, growth and financial stability, rather than the post COVID-19 preference of preserving and supporting growth momentum. The process of neutralizing monetary policy had already started with withdrawal of ultra-comfortable liquidity. In this policy, the operative rate was increased by 40bps with the institutionalization of the Standing Deposit Facility. With this, RBI has almost buried the reverse repo as an instrument. Towards the objective of an orderly completion of the government’s borrowings, the HTM limit was increased by 1% to 23%. Overall, we now expect the stance to be made 'NEUTRAL' in June and the first repo rate increase can come through in August."
Asian markets mostly rose Friday after a tough week dominated by the Federal Reserve's hawkish tone that has set it on an aggressive tightening path, while oil bounced back after another series of losses. Japan's Nikkei 225 closed 0.4% higher; Hong Kong - Hang Seng Index: fell marginally, Shanghai - Composite rose 0.5%.
PAT to grow 32% Y/Y
· Q4 FY22 and Q1 FY23 are likely to be challenging quarters for Corporate Inc as they try to strike a balance between rising input costs and demand
· Hike in prices has so far been well absorbed, with demand remaining intact. This can be reflected in revenue projections for our coverage universe, which is likely to grow by 25% y/y despite a higher base effect. In fact, Q1 FY23 revenue growth is also likely to remain robust given the depressed activity in the first quarter of the preceding fiscal year.
· The 19% revenue growth (ex-financials & OMC) will be primarily driven by Oil & Gas, Chemical and IT.
· However, things are not rosy on operating margins front, which is expected to contract by 27bps sequentially and 97bps y/y basis. As commodity prices continue their surge, companies endeavour to further pass on the costs but remain cautious on the impact on demand. This will likely translate into margin pressure in the quarters ahead. However, we see that the price hikes could be a blessing in disguise in the medium term, especially when sales realisation remains intact even after commodity induced cost escalation subsides.
· Adjusted PAT is likely to grow by 32% y/y, largely driven by strong performance from Banks. Automobiles to see steep contraction of 50%, hampered by both supply side issues and rising input costs
· For Financials, NII growth is likely to be strongest in the last 8 quarters as credit offtake picked up during the festive season. However, PPOP (Operational performance) of Financials is likely to remain flat on y/y basis, translating into a meagre 4% growth despite a favourable base. PAT for Financials will grow at staggering 40%, aided by lower
To improve customer service in regulated entities, the Reserve Bank of India on Friday said it will set up a panel to review and strengthen consumer protection.
"The Reserve Bank has over the years taken a number of measures to enhance consumer protection. These measures include laying down regulatory frameworks on customer service, internal grievance redress and the Ombudsman mechanisms," RBI Governor Shaktikanta Das said while announcing bi-monthly monetary policy.
The Enforcement Directorate, which is investigating the case of alleged money laundering in the National Stock Exchange of India (NSE) colocation case, initiated a search operation at 10-15 locations across Delhi and Gurgaon on Friday morning.
“It is a broad-spectrum search operation being conducted on all brokers named in the ISB report," a person with direct knowledge of the matter said. (Full report)
Adani Enterprises Ltd., the group’s flagship firm, is raising ₹77 billion rupees ($1.02 billion) by issuing preferential shares to IHC while Adani Green Energy Ltd and Adani Transmission Ltd will receive ₹38.5 billion via the same equity instrument, according to Indian exchange filings Friday.
Driven by increasing consumer interest, government subsidies and new product launches, the share of electric vehicles (EV) in the two-wheeler industry is continuously increasing. In fact, in the month of March, the share of EVs in 2W reached 4.3%, according to Vahan registrations. (Read here)
"In the first monetary policy for the financial year 2023, the RBI has kept key policy rates unchanged and maintained its accommodative stance to revive growth. Despite a strong economic recovery and a less disruptive Omicron wave, the geopolitical tensions, supply chain disruptions, commodity inflation, and oil prices sky-rocketing, RBI revised its inflation estimates for FY23 upwards to 5.7% from 4.5% earlier. GDP growth is likely to be impacted and expected at 7.2% for FY23 (vs 7.8% earlier).
We believe, over the medium-term, policy rates are likely to gradually inch up."
Bengaluru-based real estate developer Sobha Ltd has seen robust performance in FY22 aided by the ongoing demand momentum for residential real estate projects despite the intial impact from the Omicron variant. The company saw highest ever sales of 4.91 million square feet (msf), up 22% year-on-year (y-o-y). In value terms, sales rose 23% y-o-y to Rs3,870 crore.
On NSE, Ruchi Soya share price today opened at ₹855 whereas on BSE it opened at ₹850 apiece levels, giving more than 30% premium to the subscribers of FPO
Yesterday’s session was a replica of the previous session as we first witnessed a gap down on the back of sluggish global cues and then despite some mid-session rebound, ended the session almost at day’s low. However, unlike Wednesday, the trading range was slightly bigger. Eventually, the Nifty ended the weekly expiry on a negative note tad below the 17650 mark by shedding another a percent.
The correction below 17700 was unexpected for us. Although both key indices gave a sharp bounce around the mid-session, the late correction poured complete water on this valiant attempt. Despite this, we still remain a bit hopeful and expect Nifty to recover from current levels. For the coming session, 17550 followed by 17400 are likely to provide support for the index and till the time, we do not close below key levels, we would continue with our ‘Buy on decline’ strategy. On the flipside, 17800 – 17900 are to be seen as immediate hurdles. The first sign of strength would be visible after surpassing the 17900 mark.
The only positive take away from yesterday’s session was the resilience from the banking space. We did see sheer outperformance from this heavyweight basket ahead of the RBI policy; bodes well for the bulls. Also, lot of midcaps continued to do well and despite some tail end profit booking in most of them, we still expect the action to continue in cash segment stocks.
