Key domestic benchmarks corrected on Friday, snapping their three-day rising streak. Weak global cues and rising COVID-19 cases in Indian triggered selling. Shares of banks and financial firms tumbled after the central bank extended loan moratorium by three more months. RBI Governor's projection of a likely negative GDP growth in FY21 further impacted sentiment.
The barometer S&P BSE Sensex fell 260.31 points or 0.84% at 30,672.59. The Nifty 50 index lost 67 points or 0.74% at 9,039.25.
The Nifty opened lower at 9067.90, but firmed up ahead of RBI Governor Shaktikanta Das' media briefing at 10 am. Following the RBI announcement to extend moratorium, the Nifty corrected due to steep selling in banks shares. The index hit an intraday low of 8968.55 in mid-morning trade. The benchmark traded sideways with modest losses for most part of the session before regaining 9000 mark.
In broader market, the S&P BSE Mid-Cap index shed 0.83% while the S&P BSE Small-Cap index slipped 0.23%.
The market breadth was negative. On the BSE, 968 shares rose and 1321 shares fell. A total of 161 shares were unchanged.
COVID-19 Update:
Total COVID-19 confirmed cases worldwide stood at 51,21,639 far with 3,33,323 deaths. India reported 66,330 active cases of COVID-19 infection and 3,583 deaths, according to the data from the Ministry of Health and Family Welfare, Government of India.
RBI Decision:
The Reserve bank of India (RBI) announced a surprise 40 basis points repo rate cut in an off-cycle policy review. The central bank also maintained an 'accommodative' stance. The short-term lending rate now stands at 4%, down from 4.4% earlier. The reverse repo rate has also been reduced by a similar measure to 3.35% from 3.75% earlier. The decision is in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4% within a band of +/-2%, while supporting growth.
RBI Governor Shaktikanta Das said that the GDP growth in India in 2020-21 is estimated to remain in the negative territory with a pick up in growth impulses in second half. However, these depend on the trajectory of the pandemic.
The Monetary Policy Committee (MPC) is of the view that the macroeconomic impact of the pandemic is turning out to be more severe than initially anticipated, and various sectors of the economy are experiencing acute stress. The impact of the shock has been compounded by the interaction of supply disruptions and demand compression. Beyond the destruction of economic and financial activity, livelihood and health are severely affected. Even as various measures initiated by the government and RBI work to mitigate the adverse impact of the pandemic on the economy, it is necessary to ease financial conditions further. This will facilitate the flow of funds at affordable rates and revive animal spirits. With the inflation outlook remaining benign as lockdown-related supply disruptions are mended, the policy space to address growth concerns needs to be used now rather than later to support the economy, even while maintaining headroom to back up the revival of activity when it takes hold.
Numbers to Track:
The yield on 10-year benchmark federal paper fell to 5.965% compared with previous closing of 6.034% in the previous trading session.
In the foreign exchange market, the partially convertible rupee edged lower to 75.95 compared with its previous closing of 75.615.
In the commodities market, Brent crude for July 2020 settlement was down $1.70 to $34.36 a barrel. The contract rose 31 cents or 0.87% to settle at $36.06 a barrel in the previous trading session.
MCX Gold futures for 5 June 2020 settlement gained 1.21% to Rs 46,947.
Global Markets:
Shares in Europe and Asia tumbled after China published a draft law proposal that could spell the effective end of Hong Kong's special status, risking further civil disorder. Hong Kong's Hang Seng index plunged nearly 6%.
China is poised to impose a new national security law on Hong Kong after months of anti-government protests in the territory. The move has sparked concerns the law will give Beijing more control over Hong Kong and incite further pro-democracy protests.
Details of the draft legislation were announced Friday when China's National People's Congress (NPC) — the country's parliament — held its annual session. The laws would reportedly ban secession, foreign interference, terrorism and all seditious activities aimed at toppling the central government and any external interference in the former British colony.
In US, Wall Street ended lower on Thursday, on a fresh wave of China-US tensions that raised doubts about the trade deal reached early this year between the world's two largest economies. The losses also came amid data that showed jobless claims reached 2.4 million for the week that ended on Saturday because of the coronavirus pandemic. The latest data pushed the figure's nine-week total to nearly 39 million, surpassing the 37 million Americans who filed for unemployment insurance during the 18-month Great Recession.
Markets were on the back foot after the Senate passed a bill aiming to delist Chinese companies from American exchanges. Lawmakers and the White House have repeatedly raised concerns about US-listed firms that may be under Chinese government control or receiving capital from state funds.
Buzzing Segment:
The Nifty Bank index slipped 2.57% to 17,278.90 after RBI further extended the loan repayment moratorium for another three months up to 31 August. The EMI payments will restart only once the moratorium period expires on 31 August.
Axis Bank (down 5.65%), Federal Bank (down 5.08%), ICICI Bank (down 4.32%), RBL Bank (down 4.2%), Bandhan Bank (down 3.53%), IndusInd Bank (down 2.52%), HDFC Bank (down 2.43%), Punjab National Bank (down 1.3%), State Bank of India (down 0.72%), IDFC First Bank (down 0.26%) and Bank of Baroda (down 0.13%) tumbled. Kotak Mahindra Bank rose 0.91%.
Meanwhile, the Nifty Financial Services index fell 3.06% to 8,651.70, extending losses for second day. The index has lost 3.69% in two sessions.
Mahindra & Mahindra Financial Services (down 6.31%), SBI Cards and Payment Services (down 6.14%), Shriram Transport Finance Company (down 5.78%), Cholamandalam Investment and Finance Company (down 5.12%), Indiabulls Housing Finance (down 4.93%), Housing Development Finance Corporation (down 4.99%), Bajaj Finserv (down 4.83%), Bajaj Finance (down 4.67%) and Edelweiss Financial Services (down 4.26%) declined.
The RBI also raised the group exposure limit of banks to 30% from 25% for a temporary period till 30 June 2021. Group exposure limit determines the maximum amount a bank can lend to one business house. The central bank relaxed rules governing borrowing by states to help them meet their own liabilities and expenditure requirements. In order to ease the pressures of bond redemption on states, rules governing withdrawal from consolidated sinking fund (CSF) have been eased. CSF is maintained by the state governments with the RBI as a buffer for repayment of their liabilities. This change in withdrawal norms will come into force with immediate effect and will remain valid till 31 March 2021.
Earnings Impact:
Godrej Industries shed 0.12%. On a consolidated basis, the company's net profit slumped 91.3% to Rs 25.90 crore on a 6.4% rise in net sales to Rs 3,120.67 in Q4 March 2020 over Q4 March 2019.
Hawkins Cookers tumbled 6.93% after the kitchenware maker's net profit slumped 30.6% to Rs 9.36 crore on 21% decline in net sales to Rs 145.97 crore in Q4 March 2020 over Q4 March 2019. The company said that its operations were impacted due to the lockdown announced by the government in March 2020 and most of April 2020. Both sales and production have partially resumed in May 2020, it added.
VST Industries rose 1.59%. The tobacco products manufacturer's net profit rose 33.15% to Rs 70.61 crore on 7.2% rise in total income to Rs 303.81 crore in Q4 March 2020 over Q4 March 2019. The board of directors recommended a final dividend of Rs 103 per equity share. The announcement was made after market hours yesterday, 21 May 2020
Stocks in Spotlight:
Index heavyweight Reliance Industries (RIL) fell 0.59%. RIL said that KKR will invest Rs 11,367 crore into Jio Platforms. The transaction values Jio Platforms at an equity value of Rs 4.91 lakh crore and an enterprise value of Rs 5.16 lakh crore. RIL said this is KKR's largest investment in Asia and will translate into a 2.32% equity stake in Jio Platforms on a fully diluted basis. Over the last one month, leading technology investors, such as Facebook, Silver Lake, Vista, General Atlantic and KKR have announced aggregate investments of Rs 78,562 crore into Jio Platforms. KKR is making the investment from its Asia private equity and growth technology funds.
IT major Infosys jumped 3.01% after a class action lawsuit filed against the IT major and some of its employees in the United States District Court stands dismissed. In October 2019, a class action lawsuit was filed in the United States District Court against Infosys and certain of its current and former officers. The complaint, which was filed in the Eastern District of New York, was brought on behalf of a class consisting of persons or entities who purchased the company's publicly traded securities between 7 July 2018 and 20 October 2019, and alleged claims for violations of the US federal securities laws. On 21 May 2020, the plaintiff voluntarily dismissed the lawsuit without prejudice.
Bandhan Bank dropped 3.53% after the bank said that that the business of around 65,000 of micro banking borrowers, amounting to exposure of approximately Rs 260 crore, could be impacted due to the Amphan cyclone. Cyclone Amphan struck five districts in southern West Bengal and northern coastal Odisha starting in the afternoon of 20 May and lasting till the wee hours of the morning of 21 May. As per the initial assessment, 49 banking units (micro banking outlets) in five districts were impacted, of which 45 have resumed operations today, Bandhan Bank said in a filing. It further informed that the bank will not be able to continue services in five branches due to issues in accessibility.
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