Stocks rallied this morning on positive global cues but have since lost ground.
Hopes of a potential vaccine to tackle the coronavirus pandemic and the gradual easing of lockdown restrictions have enthused investors.
Join us as we follow the top business news through the day.
Fed purchases exceed Treasury issuance
Earnings of Sensex companies to decline up to 8%
Yet another estimate of the impact of the lockdown on businesses.
PTI reports: "Earnings of BSE Sensex companies will contract by up to 8 per cent in 2020-21 on the broader economic worries, and hopes of gains in equities should be pinned on a decrease in infections or a fiscal stimulus, an analyst said on Tuesday.
Majority of the countries world over like Singapore and the US have given large fiscal stimulus packages which India is yet to announce, Bank of America Securities’ India equity strategist Amish Shah said.
The GDP growth in India is set to contract by up to 5 percentage points in FY2021, according to various analysts and the RBI has also acknowledged that the economy will be shrinking this year. However, experts also feel that the equity markets do not reflect the real economic challenges.
“We are expecting a 7-8 per cent contraction in companies this fiscal and it will go up to 17 per cent in FY22,” Shah told reporters. Markets need a trigger and a growth in earnings is unlikely to be it.
They will look for how the COVID-19 infection curve goes, and if it goes down, and also a fiscal package which can generate demand, he said.
In a scenario where neither of it happens, that is, the infections continue to rise or a stimulus package does not come, investors will keep betting on the defensive sectors like information technology, pharma, fast-moving consumer goods and even telecom, Shah said.
At present, Indian indices are under-performing as compared to others and a package from the government can help cover the ground, he said."
Sensex surrenders early gains, ends 63 points lower
A summary of the day's trading action.
PTI reports: "Equity benchmark Sensex gave up all the day’s gains to end 63 points lower on Tuesday as spiking number of COVID-19 cases in the country created an uncertainty about lockdown measures going ahead.
After rallying 414.11 points during the day, the 30-share index declined 63.29 points or 0.21 per cent to 30,609.30.
Similarly, NSE Nifty ended 10.20 points or 0.11 per cent down at 9,029.05.
Bharti Airtel was the top loser in the Sensex pack, plunging around 6 per cent, followed by TCS, Bajaj Finance, Sun Pharma, Tech Mhindra, Infosys and Hero MotoCorp.
On the other hand, Titan, Ultratech Cement, IndusInd Bank, Nestle India and ITC were among the gainers.
“After opening up by more than 1 per cent, benchmark indices pared gains to close flat, with a negative bias. However, global market cues were positive, on the back of additional stimulus measures and slow reopening of economies globally,” Vinod Nair, Head of Research at Geojit Financial Services, said.
The unabated rise of infections continues in India, which throws up further uncertainties with regards to extension of lockdown measures, he added."
Uber India lays off 600 people
One more startup unicorn has laid off workers, following in the footsteps of Ola, Swiggy, and Zomato.
PTI reports: "Uber on Tuesday said it is laying off about 600 employees in India - about a quarter of its staff in the country - as business has taken a major hit amid COVID-19 pandemic.
The development comes days after rival Ola had announced laying off 1,400 people from its rides, financial services and food business.
Uber, in an e-mailed response, said the impacted positions include its driver and rider support operations, and other functions in India.
“The impact of COVID-19 and the unpredictable nature of the recovery has left Uber India South Asia with no choice but to reduce the size of its workforce. Around 600 full-time positions across driver and rider support, as well as other functions, are being impacted,” Uber India and South Asia President Pradeep Parameswaran said.
These reductions are part of previously announced global job cuts this month, he added.
Earlier this month, Uber had announced a reduction of customer support and recruiting teams by approximately 6,700 full-time employee roles and attributed the move to lower trip volumes and current hiring freeze.
Parameswaran said each impacted employee will receive a minimum 10 weeks payout, medical insurance coverage for the next six months, out-placement support, and will be allowed to retain their laptops and given the option to join the Uber talent directory."
India’s GDP growth seen at 1.2% for Q4 FY20: SBI report
The country’s GDP is estimated to have grown at 1.2% in the last quarter of the previous fiscal as economic activity came to a standstill in the last week of March due to the nationwide lockdown to contain spread of COVID-19, a report said.
According to the SBI’s research report — Ecowrap - the gross domestic product (GDP) growth is likely to be 4.2% for FY20 and (-) 6.8% for FY21.
The fourth quarter GDP growth number for FY20 will be announced by the National Statistical Office (NSO) on May 29.
In the third quarter of FY20, GDP growth slipped to a nearly seven-year low of 4.7%. In Q1 and Q2 of FY20, GDP growth was 5.1% and 5.6%, respectively.
States deficit jumps to 4.5% of GDP; revenue gap seen to soar 7-times to 2.8%
The lockdown has hit the finances of state governments, which were already reeling under heavy debt, pretty hard.
PTI reports: "Led by a massive spike in revenue deficit of 2.8 per cent of GDP, the aggregate fiscal deficit of the states will rise to 4.5 per cent of the GDP in 2020-21 at Rs 8.5 lakh crore as against the earlier forecast of 3 per cent of GDP, says a report.
According to a report by domestic rating agency India Ratings on Tuesday, the combined gross and net market borrowings of the states will be 4.5 per cent of GDP and 3.3 per cent of GDP, respectively, in the current fiscal (FY21).
States’ borrowing ceiling is Rs 6.4 lakh crore based on 3 per cent of GSDP for FY21 and the enhanced limit would enable them to borrow an additional Rs 4.28 lakh crore or 5 per cent in FY21.
But of this, only 0.5 per cent is immediate and without conditions as the remaining 150 bps more borrowing is linked to states’ performance on milestone-based achievement in at least three out of four reform areas outlined by the Centre—reforms in ration cards (one-nation-one-card), power distribution, ease of doing business among others.
The agency has also revised budget estimates for FY2020 and FY21 of 20 states, finalized before the lockdown, the nominal gross state domestic product (GSDP) growth projected for FY2020 by these states is mostly upwards of an aggressive 10 per cent.
“The fallout of the pandemic will be severe on the economy. The extended nation-wide lockdown will exacerbate the economic downturn as our estimate pegs the nominal GDP growth at 0.9 per cent for FY21, says the report.
States have already been faced with a lower-than-budgeted share in central taxes and subdued own revenue growth, when the 21-day lockdown was imposed from March 25."
Rupee settles 29 paise higher at 75.66 against US dollar
The rupee managed to hold on to its morning gains even though equities have slipped.
PTI reports: "The rupee appreciated 29 paise to close at 75.66 against the US dollar on Tuesday tracking weakness in the American currency, while easing of COVID-19 lockdown measures fuelled growth optimism.
At the interbank foreign exchange, the rupee opened at 75.69, then gained ground and finally settled for the day at 75.66, registering a rise of 29 paise over its previous close.
On Friday, rupee had settled at 75.95 against the US dollar.
Forex market was closed on Monday for Id-Ul-Fitr.
During the trading session, the rupee witnessed an intra-day high of 75.62 and a low of 75.74.
Forex traders said weakness of the US dollar against other currencies overseas and easing of lockdown restriction across the world boosted investor sentiment and supported the local unit.
In the equity market, domestic bourses pared initial gains and were trading on a negative note with the benchmark Sensex down 151.66 points at 30,520.93 and broader Nifty 41.65 points lower at 8,997.60.
The dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading 0.44 per cent down at 99.42."
HDFC shares fall around 2% after Q4 earnings
The banking behemoth's earnings have dropped owing to the coronavirus pandemic.
PTI reports: "Shares of housing finance firm HDFC Ltd on Tuesday fell by nearly 2 per cent after the company reported a 10 per cent decline in consolidated net profit for the fourth quarter ended March 31.
On BSE, the stocks declined 1.55 per cent to Rs 1,493. They fell 1.55 per cent to Rs 1,492.60 on NSE.
The housing finance firm on Monday reported a 10 per cent decline in consolidated net profit to Rs 4,341.58 crore for the fourth quarter ended March 31.
The company’s net profit (before adjustment of minority interest) was Rs 4,811.26 crore in January-March quarter of 2018-19.
On standalone basis, the profit of HDFC during the quarter slipped by 22 per cent at Rs 2,232.55 crore as against Rs 2,861.58 crore in the same quarter previous fiscal.
“In the fourth quarter, the factors that impacted the result include - extra provisioning due to COVID-19 requirement, dividend income was Rs 2 crore compared to Rs 537 crore last year and profit on sale of investments was Rs 2 crore as against Rs 321 crore,” HDFC Ltd vice chairman and CEO Keki Mistry said.
Market was closed on Monday for ‘Id-Ul-Fitr’"
Crude oil futures rise on spot demand, global cues
The rally in crude oil over the last few weeks has led more investors to ride the trend.
PTI reports: "Crude oil prices on Tuesday rose Rs 42 to Rs 2,619 per barrel as participants widened their positions on firm global cues.
On the Multi Commodity Exchange, crude oil for delivery in June traded higher by Rs 42, or 1.63 per cent, to Rs 2,619 per barrel in 5,622 lots.
Crude oil for July delivery was up by Rs 32, or 1.21 per cent, at Rs 2,669 per barrel with an open interest of 249 lots.
Analysts said raising of bets by participants kept crude prices higher in futures trade here.
Globally, West Texas Intermediate crude oil was trading up by 3.58 per cent at USD 34.44 per barrel and Brent crude rose 2.17 per cent to USD 36.30 per barrel in New York."
India looks to store cheap oil in United States, says oil minister
India is keen on capitalizing on low oil prices by hoarding more of the commodity.
Reuters reports: "India is looking at storing some low priced U.S. oil in facilities there as its domestic storage is full, oil minister Dharmendra Pradhan told CNBC TV18 news channel.
India's plan could be similar to a move by Australia, which last month said it would build up an emergency oil stockpile initially by buying crude to store in the U.S. Strategic Petroleum Reserve to take advantage of low oil prices.
“We are exploring some possibility if we can store some of our investment in a different country ... we are exploring the possibility in the USA if we can store some of the low priced oil,” Pradhan said.
Oil prices have dropped more than 40% so far in 2020 but have picked up in the past few weeks partly due to efforts by the Organization of the Petroleum Exporting Countries and allies to reduce supply.
Pradhan said India, which is the world's third biggest oil consumer and importer, had already filled its 5.33 million tonnes of strategic storage and parked about 8.5-9 million tonnes of oil on ships in different parts of the world, primarily in the Gulf.
Indian refiners have also filled their commercial tanks and pipelines with refined fuel and oil.
Pradhan said stored oil and products amounted to about 20% of India's annual needs. India imports more than 80% of its oil requirements."
TVS Motor implements temporary pay cuts for employees
TVS Motor Company has cut staff salaries by up to 20% for a period of six months, beginning May, amid the coronavirus pandemic.
The two-wheeler major has decided to reduce salaries at executive level, barring entry level workmen, from May till October this year.
“In the wake of the unprecedent crisis, the company has rolled out a temporary salary reduction across different levels for a period of six months (May to Oct, 2020),” a TVS Motor Company spokesperson told PTI.
There will be no salary reduction at the workmen level, the spokesperson added.
Glenmark to study potential COVID-19 drug combination
The company is betting on a combination of drugs to battle the coronavirus.
Reuters reports: "Glenmark Pharmaceuticals Ltd said on Tuesday it will begin a new clinical trial in India to test a combination of two anti-viral drugs, favipiravir and umifenovir, as a potential COVID-19 treatment.
The study will look to enroll 158 hospitalized patients suffering from moderate COVID-19 infections in India, the company said.
Drugmakers across the world have been rushing to develop a treatment or vaccine for the fast-spreading coronavirus, which has infected 5.5 million people globally, killing more than 345,000, according to a Reuters tally.
In India, now among the 10 most affected nations, the death toll from COVID-19 reached 4,167 on Tuesday.
Favipiravir is made under the brand name Avigan by Japan's Fujifilm Holdings Corp and was approved for use as an anti-flu drug there in 2014, while umifenovir is licensed as a treatment of some types of flu infections in Russia and China.
Glenmark is already conducting clinical trials in India of just favipiravir as a potential treatment for COVID-19, for which it expects results by July or August. Favipiravir is also undergoing trials in other countries.
The company said it had received Indian regulatory approval for the trial of the combination drug candidate."
Mercedes-Benz India unveils 10-year extended loan tenure to boost demand
German luxury car manufacturer Mercedes-Benz India has come out with flexible financing solutions, including an extended 10-year loan tenure, to create demand for its products in the current subdued market.
Under ‘Wishbox 2.0’ the company has introduces a host of mobility solutions not only to woo customers, but also to help them financially to purchase a Mercedes-Benz.
‘Wishbox’ mobility solutions first launched by Mercedes-Benz in August 2019, was instrumental in creating customer excitement and driving positive sentiments in the luxury car market amid the subdued market conditions that prevailed then.
Rupee surges 30 paise to 75.65 against US dollar in early trade
The positive sentiment in domestic equities has helped the rupee appreciate against the US dollar this morning.
PTI reports: "The rupee appreciated 30 paise to 75.65 against the US dollar in early trade on Tuesday tracking positive opening of domestic equities and weakness in the American currency.
Forex traders said a positive start of domestic stocks supported the local unit, while sustained foreign fund outflows and concerns over coronavirus outbreak weighed on the local unit.
At the interbank foreign exchange, the rupee opened at 75.69, then gained ground to touch 75.65, registering a rise of 30 paise over its previous close.
On Friday, rupee had settled at 75.95 against the US dollar.
Forex market was closed on Monday for Id-Ul-Fitr.
Traders said rupee tracked positive Asian equities and opened on a positive note.
“Asian shares are firm amid optimism that re-opening of businesses in several countries could fuel growth as investors look past the US-China tensions that has weighed on sentiments over the last week,” Reliance Securities said in a research note.
Domestic bourses were trading on a positive note on Tuesday with the benchmark Sensex trading 280.45 points higher at 30,953.04 and broader Nifty rising 82.25 points to 9,121.50."
Indian stocks' performance this year to be worst since 2011
Not very encouraging news for investors in Indian equities.
Reuters reports: "Indian stocks will not recoup this year's losses anytime soon and 2020 will mark the worst annual performance in nine years on fears of a deep downturn in the economy and business activity, a Reuters poll of market strategists found.
Over 55% of 34 strategists who answered a separate question said the benchmark BSE Sensex Index would revisit this year's low of 25,638.90 hit on March 24. All but one said it would happen by the end of September.
While the index has recovered nearly 20% since hitting a record low - a day before the nationwide lockdown started on March 25 - it is still down around 26% so far this year.
That is despite $266 billion of economic stimulus announced by the government and the aggressive liquidity measures and interest rate cuts from the Reserve Bank of India.
The BSE index was forecast to gain 4.2% to 31,960 by the end of 2020 from Friday's close above 30,672, according to the median forecast from the latest poll. It was taken before the RBI's latest unscheduled meeting on Friday, where it cut the repo rate by another 40 basis points to a record low of 4.00%.
If the poll forecast is correct, that would leave the index down by 22.5% for this calendar year, its worst performance since 2011 and a massive downgrade from 43,560 predicted in the last Reuters poll three months ago."
‘An opportune time to invest in markets’
Markets are likely to remain volatile with a downward bias as COVID-19 will continue to impact companies; the current fiscal is set to be a washout in terms of earnings, said Lav Chaturvedi, ED and CEO, Reliance Securities. Interview excerpts:
Do you think the stock markets have reached their bottom?
Given the current economic scenario and ambiguity over corporate earnings, market momentum will remain volatile with a downward bias.
From a valuation perspective, Nifty currently trades at 21.5x of earnings and 2.7x of book value, which looks to be fairly valued. However, given the about 17% contraction in IIP for March 2020 and expectation of a persistent decline in subsequent months, earnings growth visibility looks cloudy.
Sensex rallies over 400 points in opening session; Nifty tops 9,100
The benchmark indices have rallied at open on the back of positive global cues.
PTI reports: "Equity benchmark Sensex rallied over 400 points in early trade on Tuesday led by gains in index-heavyweights HDFC twins, ITC and Reliance Industries amid positive cues from global markets.
After touching a high of 31,086.70 in opening session, the 30-share index was trading 373.67 points or 1.22 per cent higher at 31,046.26.
Similarly, NSE Nifty surged 108.70 points or 1.20 per cent to 9,147.95.
ITC was the top gainer in the Sensex pack, rallying over 4 per cent, followed by IndusInd Bank, HDFC Bank, Tata Steel, Titan, UltraTech Cement and L&T.
On the other hand, Bharti Airtel, TCS, Hero MotoCorp and Infosys were among the laggards.
In the previous session on Friday, the BSE barometer ended 260.31 points or 0.84 per cent lower at 30,672.59, while the broader Nifty settled 67 points or 0.74 per cent down at 9,039.25.
Foreign portfolio investors offloaded equities worth Rs 1,353.90 crore in the capital market on Friday, provisional exchange data showed.
Markets were closed on Monday for ‘Id-Ul-Fitr’
Besides stock-specific action, domestic investors were enthused by positive cues from global markets as lockdown restrictions eased world over, traders said."
