Published on 27/03/2020 12:11:07 PM | Source: LKP Securities

RBI`s Repo Rate Cut Fails To Cheer Dalal Street - LKP Securities

Posted in Market Outlook| #Market Outlook #LKP Securities Ltd

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The repo rate cut by the Reserve Bank of India (RBI) failed to cheer the Dalal Street in late morning deals. RBI has cut its repo rate by 75 basis points (bps) to 4.40% from 5.15% earlier. The reverse repo rate has been reduced by 90 basis points to 4%. Key indices erased all its initial gains and were trading in red terrain, as Moody's Investors Service slashed its estimate of India's GDP growth during 2020 calendar year to 2.5 per cent from an earlier estimate of 5.3 per cent, on account of the rising economic cost of the coronavirus pandemic. This compares to 5 per cent growth in 2019. Moody's said, at the 2020 estimated growth rate, a sharp fall in incomes in India is likely, further weighing on domestic demand and the pace of recovery in 2021.

On the global front, Asian markets were trading in green, after South Korea's central bank said it will provide unlimited amount of money for three months through repo operations, in order to introduce more funds into the money market. The Bank of Korea will conduct auctions every week to stabilize financial markets. The bank has widened the targeted financial institutions and securities for the operation. The latest measure is expected to minimize the economic fallout caused by the spread of coronavirus.

The BSE Sensex is currently trading at 29423.34, down by 523.43 points or 1.75% after trading in a range of 29360.69 and 31126.03. There were 5 stocks advancing against 25 stocks declining on the index.

The broader indices were trading mixed; the BSE Mid cap index was down by 0.57%, while Small cap index was up by 0.02%.

The top gaining sectoral indices on the BSE were PSU up by 0.40%, Bankex up by 0.29%, Power up by 0.17% and Realty up by 0.14%, while Telecom down by 5.31%, Consumer Durables down by 2.57%, Auto down by 2.33%, Oil & Gas down by 2.23% and TECK down by 2.09% were the top losing indices on BSE.

The top gainers on the Sensex were Axis Bank up by 9.72%, SBI up by 1.76%, NTPC up by 1.49%, Indusind Bank up by 1.16% and Power Grid up by 0.38%. On the flip side, HCL Tech. down by 6.28%, Bharti Airtel down by 6.09%, Hero MotoCorp down by 5.39%, Maruti Suzuki down by 4.72% and Asian Paints down by 4.21% were the top losers.

Meanwhile, Ratings agency Fitch has said that the coronavirus-related worries are likely to aggravate difficulties for Indian banks. It also revised down the operating environment score for the critical sector to BB from BB+ earlier, given the uncertainty surrounding the severity and duration of the pandemic, and the associated effects on India's banks of restrictions on economic activity.

According to the ratings agency, the lockdown will impact industrial production and domestic demand and this will exacerbate the economic slowdown of the past few quarters that was partly caused by weaker credit availability from non-bank lenders from September 2018. However, it said that the closed nature will help restrict the impact on economic growth in India as compared with Asian peers.

Fitch further said Indian banking system is under-capitalised and continues to saddled with bad loans, despite some successes. It also believed that the recent developments will add to these issues and slow the resolution process and it will further test the underwriting standards of those banks that expanded the fastest in recent years, including the private-sector banks, as the sharp disruption in economic activity will lead to worsening asset quality.

The CNX Nifty is currently trading at 8579.70, down by 61.75 points or 0.71% after trading in a range of 8537.90 and 9038.90. There were 21 stocks advancing against 29 stocks declining on the index.

The top gainers on Nifty were Axis Bank up by 11.63%, Indusind Bank up by 3.84%, Cipla up by 3.47%, Coal India up by 3.04% and NTPC up by 2.82%. On the flip side, HCL Tech. down by 5.81%, Hero MotoCorp down by 4.99%, Bharti Airtel down by 4.77%, GAIL India down by 4.17% and Maruti Suzuki down by 4.01% were the top losers.

All Asian markets were trading higher; Nikkei 225 rose 724.83 points or 3.88% to 19,389.43, Straits Times gained 61.46 points or 2.47% to 2,549.02, Hang Seng added 281.80 points or 1.21% to 23,634.14, Taiwan Weighted increased 75.56 points or 0.78% to 9,811.92, KOSPI rose 38.33 points or 2.27% to 1,724.57, Jakarta Composite jumped 333.27 points or 7.68% to 4,672.17 and Shanghai Composite was up by 24.77 points or 0.90% to 2,789.68.


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