Market Live: Sensex gains 150 pts, Nifty reclaims 10,050; LT, Kotak Bank lead
2:26 pm Analyst’s take on saving rate cut by SBI: Jimeet Modi, CEO of SAMCO Securities said SBI unlike its private sector peers offer plain vanilla savings accounts to public with minimum operating charges and hence heavily relies on interest income from such available float.
The rate cut by the SBI on savings bank account is a strategic move by the bank aimed at increasing profits. The bank has an above average CASA ratio of 45.58 percent for the year ended 31st March 2017 which shows that it has large savings pool.
This move will result in increasing its net interest margins which are currently below standards at 2.84% for the qtr ended 31st march 2017. This is purely a commercial move which will boost profitability and ratios for the bank.
2:20 pm Market Update: The 30-share BSE Sensex was up 144.83 points at 32,454.71 and the 50-share NSE Nifty rose 38.05 points to 10,052.55.
The market breadth turned negative as about 1,314 shares declined against 1,278 advancing shares on the BSE.
2:02 pm Interview: Sixty percent of the non-microfinance institution (MFI) book grew by 36 percent in Q1, PN Vasudevan, MD & CEO, Equitas Small Finance Bank said.
He further said that gross non-performing asset (NPA) of the non-MFI book has remained steady at 4.5-4.6 percent.
On farm loan front, he said MFI loans don’t form part of the farm loan waiver announced in Maharashtra.
Speaking about expansion, he said branch expansion has led to increase in operational expense. However, do not expect significant branch expansion over next 12-18 months, he added.
He said that lending rates in new products are lower.
He expects improvement in return on assets (ROA) due to healthy profile of new products. Equitas have made extra provisions in Q1 of worth Rs 23 crore.
1:42 pm Buzzing: Shriram Transport Finance’s Q1 profit grew by 20 percent year-on-year to Rs 448.7 crore from Rs 374.1 crore.
Total income increased 7.9 percent to Rs 2,898.4 crore from Rs 2,686.7 crore YoY.
At 13:42 hours IST, the stock price was quoting at Rs 999.55, up Rs 29.85, or 3.08 percent on the BSE.
1:22 pm Earnings: Shree Cement’s first quarter profit fell 13.3 percent to Rs 440.1 crore compared with Rs 507.7 crore in year-ago quarter despite lower tax rate. Weak operational performance hit profitability but revenue aided bottomline.
Revenue during the quarter surged 16.1 percent year-on-year to Rs 2,864.5 crore, with cement business registering a 22.4 percent growth but power segment degrew by 11.3 percent.
Operating profit fell 7 percent to Rs 680 crore compared with Rs 730.9 crore in same quarter last year due to increase in depreciation (up 50 percent YoY), power & fuel (up 39.5 percent) and freight & forwarding expenses (up 42.8 percent).
1:05 pm Market Check: Equity benchmarks extended gains in afternoon trade, with the Sensex up 157.01 points at 32,466.89 and the Nifty up 40.50 points at 10,055.
The rally was driven by banks, infra, technology and auto stocks but selling continued in healthcare, FMCG and HDFC group stocks.
The market breadth remained positive as about 1,330 shares advanced against 1,179 declining shares on the BSE.
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12:52 pm SBI concall: “SBI had to cut saving interest rates as real interest rate was very high. We had two options; either to raise MCLR or cut savings bank interest rates,” Rajnish Kumar, MD of SBI said while addressing press conference.
Savings bank interest rates have been static since 2011. Savings deposit rate was 3.5 percent from March 2003 to June 2011 and rate was 4 percent from June 2011 till date.
He said the bank would see at the end of August if savings bank interest rate cut impacts lending rates. Rate cut won’t result in outflows from savings deposits, he added.
About 90 percent of total 9 lakh savings accounts have deposits of below Rs 1 crore.
SBI’s asset-liability committee meets during last week of every month to take a call on rates.
Kumar said interest rate cut has nothing to do with RBI policy on August 2.
12:40 pm Europe opening: European markets opened slightly higher as investors awaited key economic data and digested earnings reports.
The pan-European Stoxx 600 edged up 0.15 percent, with sectors and major bourses pointing in opposite directions.
12:20 pm Max-HDFC deal: Max India has withdrawn the proposed merger agreement between Max Life and Max Financial Services with HDFC Standard Life Insurance.
“The confidentiality, exclusivity and standstill agreement dated June 17, 2016, entered among the parties is not being extended further. The proposed scheme and the applications filed in this regard with stock exchanges should be kindly treated as withdrawn,” Max India said in a BSE filing today.
Earlier this month, HDFC Standard Life Insurance had decided to come out with an IPO, but put on hold its proposed merger with Max Life in absence of regulatory approval.
Last month, Max India was confident of the proposed merger, saying both the parties were committed and “evaluating various options” post Irdai’s denial last November to the scheme because of the complex nature of merging an insurance business with a financial entity.
At present, it said, no structure prior to an IPO of HDFC Life has been identified that satisfies shareholders’ requirement.
12:00 pm Market Check: Equity benchmarks remained higher in noon, with the Sensex up 124.60 points at 32,434.48 and the Nifty up 27.90 points at 10,042.40.
About 1,288 shares advanced against 1,061 declining shares on the BSE.
State Bank of India and ICICI Bank gain up to 4 percent after the State Bank of India introduced a 2-tier saving bank interest rate structure with effect from today. Nifty Bank hit a fresh record high.
11:25 am SBI in focus: The State Bank of India (SBI) is introducing a 2-tier saving bank interest rate structure with effect from 31 July, Monday, the largest public sector bank said in a release.
The bank further clarified that balance above Rs 1 crore will continue to earn interest at 4 percent per annum, while interest at 3.5 percent per annum will be offered on balances of Rs 1 crore and below.
The decline in the rate of inflation and high real interest rates are primary considerations warranting a revision in the rate of interest on saving bank deposits, said the press release.
The bank had cut the MCLR by 90 bps effective from 1 Jan 2017 on the strength of large flows in savings and current accounts during the demonetisation period in the month of November and December 2016. There have been significant outflows of CASA deposits since then.
The revision in saving bank would enable the bank to maintain the MCLR at the existing rates, benefiting a lot of retail borrowers in SME, agricultural and affordable housing segments, said the release.
11:05 am Market Outlook: Devarsh Vakil, Head Advisory – Private Client Group, HDFC Securities said Nifty surpassed an important landmark of moving beyond 10000 this week. Nifty has risen at 18 percent CAGR since 2003 when it was last seen near 1000 levels.
This shows that Indian markets are in a structural long term bull markets. It is also heartening to see this rise is in back of money flow from India’s retail investors in form of Systematic Investment Plans. Indian retail investor is just warming up to the possibilities of investing in equities over the long term as many of their traditional investment areas like real estate and gold have been underperforming.
He expects Nifty to remain buoyant in the extreme short term on the back of short covering. August series of derivatives is likely to be the most interesting as many weak players will be forced to cover their shorts, while many others will choose to book profits on their long positions which are already reached their targets.
Short term target in Nifty is 10300. Traders are advised to keep 9900 in nifty as the stop loss for the short term or leveraged trading long positions.
For medium term, in global markets, we detect some signs of complacency. Volatility has collapsed across markets. There seems to be tremendous faith that central banks like US Fed, European central bank and Bank of Japan. Many market players believe these banks will keep pumping liquidity and will not allow large losses in the markets. The danger is that this complacency is not about markets, but rather the power of central banks and their ability to prevent a sharp downturn. If history is of any lesson, such faith has always turned out be a false hope. So it is better to be safe than sorry.
Long term investors should keep gradually raising cash as and when markets rally to newer heights. This dry powder will be used to buy stocks aggressively as and when the short term correction sets in. It is better to be safe than sorry.
10:45 am Rate cut likely?: Andrew Holland, CEO at Avendus Capital expects a 25 bps rate cut by the Reserve Bank of India on August 2. This is given, but there is room for the central bank to cut more and surprise the Street with a 50 bps cut.
With liquidity continuing across the globe and weak dollar all favours a rate cut.
A 25 bps rate cut is already priced in the market, but a 50 bps cut could lead to a sharp rally, suggests Holland.
10.22 am Market Check: Equity benchmarks continued to trade higher, with the Sensex rising 84.66 points to 32,394.54 and the Nifty up 17.30 points at 10,031.80.
The rally was driven by Kotak Mahindra Bank, L&T, ICICI Bank, Maruti Suzuki, ONGC and Tata Steel that gained up to 3 percent.
Healthcare stocks were under pressure today, with Sun Pharma, Dr Reddy’s Labs, Lupin and Cipla down up to 2 percent.
HDFC slipped 0.5 percent again after recovery in early trade. FMCG majors ITC and HUL were also down up to 1 percent.
The market breadth was positive as about 1,161 shares advanced against 899 declining shares on the BSE.
10:10 am FII View: Sakthi Siva of Credit Suisse said percentage of negative returns in August over the last ten years for MSCI Asia ex-Japan and MSCI Asia Pacific ex-Japan is 71 percent.
MSCI Asia ex-Japan has passed the year-end target of 640, and investors may be tempted to lock in profits given this year’s gains exceeding 25 percent in dollar terms, she added.
While it is only four days, foreigners have turned net sellers of Emerging Asia ex-China of USD 1.01 billion over the last four days, he said.
With the theme being the best return on equity fundamentals in six years with Asia Pacific ex-Japan return on equity rising from a low of 10 percent to 10.6 percent, continue to suggest buying the dips, he feels.
9:55 am IPO: HDFC announced that it is going to divest 9.57 percent of its stake in HDFC Life.
We are not supposed to discuss the timeline but our intention is to get the initial public offering (IPO) out as soon as possible, said Amitabh Chaudhry, MD & CEO of HDFC Life.
Had started work on HDFC Life’s IPO last year itself, he added.
He further said that a lot of the general insurance companies have been filing for IPOs lately.
Chaudhry said that chairmen of both HDFC Life and Max Life mentioned that merger is off the table.
9:37 am Analysts on L&T post earnings: Bank of America Merrill Lynch has maintained buy call on the stock with a target price of Rs 1,322, saying Q1 surprised positively on strong domestic execution. Large order backlog & execution pick-up would help meet FY18 guidance, it feels.
Jefferies has also retained its buy rating on L&T, with 32 percent upside to target price of Rs 1,533. It said order pipeline of USD 50 billion should help co meet the full year guidance and macro tailwinds needed for the next leg of upside.
9:26 am Rupee opening: The Indian rupee started off the week on a positive note. It has opened at 64.11 against the US dollar, up 4 paise from Friday’s closing value of 64.15.
Pramit Brahmbhatt of Veracity feels the rupee will trade positive below 64.20 against the US dollar.
Weak Dollar Index will help rupee to appreciate further, he said.
Trading range for the spot USD-INR pair will be 63.80-64.20 per dollar, according to him.
9:15 am Market Check: Equity benchmarks started off the week on a positive note, with the Nifty holding 10,000-mark. Investors awaited the decision of two-day monetary policy committee meeting that will begin on Tuesday.
The 30-share BSE Sensex was up 45.59 points at 32,355.47 and the 50-share NSE Nifty rose 10.05 points to 10,024.55. About two shares advanced for every share falling on the BSE.
L&T was top gainer among Sensex stocks, up 2.2 percent followed by Lupin, ICICI Bank, Vedanta, Kotak Mahindra Bank with moderate gains. HDFC rebounded after initial fall.
Sarda Energy, Coromandel, Capital First and Cholamandalam Finance gained up to 5 percent.
Central Bank of India, Dena Bank, Equitas Holdings, Oberoi Realty and Kitex Garments fell up to 5 percent.
