The benchmark stock indices have opened the day with modest gains after the mild losses suffered yesterday.
Retail price inflation rose to well over 6% as food prices shot up.
Join us as we follow the top business news through the day.
Swifter lockdowns helped soften death toll
Sensex tanks 433 points; Nifty gives up 11,200 level
The benchmark stock indices that opened the day with gains only managed to go downhill from there.
PTI reports: "Domestic equity benchmark Sensex plunged 433 points on Friday, tracking heavy losses in banking, consumption and auto stocks amid a selloff in global markets.
Tanking 663 points from the day’s high, the 30-share BSE index settled 433.15 points or 1.13 per cent lower at 37,877.34.
The broader NSE Nifty slumped 122.05 points or 1.08 per cent to close at 11,178.40.
Axis Bank was the top loser in the Sensex pack, falling around 3 per cent, followed by SBI, M&M, Bajaj Finance, ITC, HDFC Bank, HCL Tech and IndusInd Bank.
On the other hand, Sun Pharma, NTPC, Tata Steel, Titan and Infosys were the gainers.
According to traders, key indices made a U-turn after trading on a positive note in the first half of the session following massive losses in European equities.
Stock exchanges in Paris, Frankfurt and London plunged up to 2 per cent in early deals.
Bourses in Hong Kong and Seoul ended in the red, while Shanghai and Tokyo settled with gains.
Global oil benchmark Brent crude was trading 0.65 per cent lower at USD 44.67 per barrel.
In the forex market, the rupee settled 6 paise lower at 74.90 against US dollar."
Indian Bank Q1 net profit up marginally at Rs 369 crore
The public sector lender has managed to beat last year's performance despite the pandemic.
PTI reports: "State-owned Indian Bank on Friday reported a marginal 1 per cent rise in its standalone net profit at Rs 369.26 crore in the first quarter ended June 2020.
Its net profit stood at Rs 365.37 crore in the same period a year ago. Sequentially, the lender had posted a net loss of Rs 217.73 crore in preceding quarter ended March 2020.
Total income of the bank almost doubled to Rs 11,446.71 crore during the April-June period of 2020-21 from Rs 5,832.12 crore in the year-ago same period, Indian Bank said in a regulatory filing.
With regard to June 2019 quarter and sequential January-March 2020 period numbers, the bank said the figures are related to standalone Indian Bank financials for pre-amalgamation period, hence not comparable with post amalgamation financials for the quarter ended June 30, 2020.
Allahabad Bank was merged into Indian Bank with effect from April 1, 2020.
Asset quality of the bank witnessed worsening with the gross non-performing assets (NPAs) rising to 10.90 per cent of the gross advances as on June 30, 2020 as against 7.33 per cent by the year-ago same period.
In value terms, the gross NPAs stood at Rs 39,965.02 crore as against Rs 13,511.21 crore.
Net NPAs or bad loans on the other hand came down to 3.76 per cent from 3.84 per cent. In value terms, they were higher at Rs 12,754.74 crore as on June 30, 2020 as against Rs 6,824.24 crore by June 2019.
Bank’s provisioning for bad loans and contingencies for the June quarter of FY’21 rose to Rs 2,139.12 crore from Rs 794.82 crore parked aside for the same quarter of FY’20.
Stock of Indian Bank traded at Rs 61.70 apiece on the BSE, down 2.76 per cent from the previous close."
Gold is still cheap compared to stocks
Oil slips below $45 on demand doubts, rising supply
Demand concerns have weighed on the price of oil today.
Reuters reports: "Oil slipped further below $45 a barrel on Friday, giving up this week's gains, under pressure from doubts about demand recovery due to the coronavirus pandemic and rising supply.
Two prominent forecasters, the International Energy Agency and the Organization of the Petroleum Exporting Countries, trimmed their 2020 oil demand forecasts this week. OPEC and its allies are increasing output this month.
“Pessimism about this year's oil demand growth prospects is due to the weakening outlook in the coming months,” said Stephen Brennock of oil broker PVM.
“To make matters worse, global oil supply is on the upswing.”
Brent crude was 29 cents, or 0.7%, lower at $44.67 by 0810 GMT, heading for a flat week. U.S. West Texas Intermediate slipped 25 cents, or 0.6%, to $41.99.
“Although both contracts continue to consolidate at the upper end of their two-month trading ranges, they lack the momentum to stage meaningful rallies at this stage,” said Jeffrey Halley of brokerage OANDA.
Prices had been bolstered this week by U.S. government data showing crude oil, gasoline and distillate inventories all fell last week as refiners ramped up production and demand for oil products rose.
Oil has recovered from lows touched in April, when WTI briefly turned negative. Still, a rise in the number of coronavirus infections has limited gains. India reported another record daily rise in cases on Thursday.
OPEC and allies including Russia, a group known as OPEC+, have cut output since May by around 10% of pre-pandemic global demand to support the market. The deal calls for an increase in output this month as demand recovers.
An OPEC+ panel meets next week to review the market and is not expected to tweak the agreement."
HDFC Bank unveils Shaurya card to provide agri loan to members of armed forces
HDFC Bank Ltd. on Friday announced the introduction of ‘Shaurya KGC Card’, a loan product for the armed forces personnel.
Targeted at 45 Indian armed and paramilitary forces, this product comes with unique features and eligibility criteria specially crafted for the people who are posted far away from their homes, HDFC Bank said.
The product is based on the Kisan Credit Card guidelines by the government, it added. Through this scheme, agriculture loans will be given to the personnel based on their land holdings and requirements.
The product comes with life cover of ₹ 10 lakh as against ₹ 2 lakh for an average card.
WPI inflation falls 0.58% in July, food prices spike
An interesting divergence between wholesale and retail inflation.
PTI reports: "The wholesale price-based inflation declined 0.58 per cent in July, even as food items turned costlier.
WPI inflation in June was at (-) 1.81 per cent, while for the month of May and April it was (-) 3.37 per cent and (-) 1.57 per cent respectively.
“The annual rate of inflation, based on monthly WPI (Wholesale Price Index), stood at (- 0.58 per cent) (provisional) for the month of July, 2020 as compared to 1.17 per cent during the corresponding month of the previous year,” the commerce and industry ministry said in a statement.
Inflation in food articles during July stood at 4.08 per cent, as against 2.04 per cent in June.
However, fuel and power basket inflation fell 9.84 per cent in July, compared to 13.60 per cent in the previous month.
Manufactured products, however, witnessed inflation of 0.51 per cent in July, as against 0.08 per cent in June.
The RBI in its policy review last week, kept interest rates unchaged and said it sees an upside risk to inflation. The apex bank expects retail inflation to moderate in October-March period.
July retail inflation was at 6.93 per cent, as against 6.23 per cent in June."
Eicher Motors shares tank nearly 5% on weak Q1 numbers
Looks like there is no light at the end of the tunnel yet for the auto sector.
PTI reports: "Shares of Eicher Motors on Friday tanked nearly 5 per cent after the company reported a consolidated net loss of Rs 55 crore for the first quarter ended June 30.
The stock tumbled 4.54 per cent to Rs 20,686.05 on the BSE.
At the NSE, it plunged 4.57 per cent to Rs 20,682.
Eicher Motors on Thursday reported a consolidated net loss of Rs 55 crore for the first quarter ended June 30, as sales were adversely hit due to COVID-19 pandemic.
The company had posted a net profit of Rs 452 crore in April-June period of last fiscal.
Total revenue declined 66 per cent in first quarter to Rs 818 crore, as compared with Rs 2,382 crore in the same period of 2019-20, Eicher Motors said in a statement.
“The previous quarter put forth unprecedented challenges for the industry and for Eicher Motors. However, we believe that the long term potential for both Royal Enfield and VECV is very promising,” Eicher Motors Managing Director Siddhartha Lal said."
Consumers supported small businesses during lockdown: Survey
Local retail seems to have found support from consumers during COVID-19 with 60% preferring to engage with small businesses and online retailers over national retailers, and 75% saying that they support small businesses in their respective capacities, a survey released on Wednesday by Adobe conducted in Asia Pacific Region said.
“Among all countries surveyed, Indian consumers (88%) were the most likely to support small businesses,” it added.
During the lockdown, 58% of consumers increased their online shopping frequency while three quarters (74%) cited an intention to change their future shopping habits with Indian and Singaporean consumers reporting the strongest intention, the findings said.
Chinese household debt hits record high
Mutual fund SIP inflows hit 22-month low in July at ₹7,831 crore
Investments in mutual funds through Systematic Investment Plans (SIPs) hit a 22-month low of ₹7,831 crore in July amid market volatility.
Inflows through SIP have slowed down in the past four months but experts believe the route still continues to be the preferred one for retail investors to invest in mutual funds as it helps them reduce market timing risk.
Besides, equity mutual funds, which mainly depend on SIP for flows, saw a withdrawal of ₹2,480 crore, data from Association of Mutual Funds in India (Amfi) showed.
This was the first outflow in more than four years.
Rupee inches 3 paise higher to 74.81 against US dollar in early trade
The rupee has opened with gains despite stock paring some opening gains.
PTI reports: "The rupee inched 3 paise higher against the US dollar to 74.81 in opening trade on Friday tracking positive domestic equities and sustained foreign fund inflows.
At the interbank forex market, the domestic unit opened at 74.85 against the US dollar, gained ground and touched 74.81 against the US dollar, registering a marginal rise of 3 paise over its previous close of 74.84.
“Asian currencies were trading mixed against the US dollar this morning ahead of the meeting between US and Chinese officials this weekend,” Reliance Securities said in a research note.
Markets participants will also track Wholesale Price Index (WPI) data, and trade data scheduled to be released later in the day for further cues, traders said.
Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, fell 0.10 per cent to 93.23.
On the domestic equity market front, the 30-share BSE benchmark Sensex was trading 110.52 points higher at 38,421.01 and broader NSE Nifty advanced 30.15 points to 11,330.60.
Foreign institutional investors were net buyers in the capital market as they purchased shares worth Rs 416.28 crore on Thursday, according to provisional exchange data.
Brent crude futures, the global oil benchmark, rose 0.33 per cent to USD 45.11 per barrel."
Retail inflation rises to 6.93% in July
Retail inflation rose to 6.93% in July, mainly on account of higher prices of food items, government data showed on Thursday.
The food inflation, according to the Consumer Price Index (CPI) data, increased to 9.62% in July.
The retail inflation in June was 6.23%, while the food inflation stood at 8.72%.
It is for the second consecutive month that the retail inflation has been above the RBI’s comfort level. The government has mandated the central bank to restrict the inflation at 4% (+, - 2%).
Sensex surges over 200 points in early trade; RIL leads gains
A good start to the day for stocks.
PTI reports: "Domestic equity benchmark Sensex jumped over 200 points in early trade on Friday led by gains in index-heavyweights Reliance Industries, Infosys and L&T amid sustained foreign fund inflow.
The BSE Sensex was trading 206.45 points or 0.54 per cent higher at 38,516.94; while NSE Nifty was up 56.10 points or 0.50 per cent at 11,356.55.
L&T was the top gainer in the Sensex pack, rising around 2 per cent, followed by Sun Pharma, Reliance Industries, UltraTech Cement, NTPC, Asian Paints, TCS and Infosys.
On the other hand, HCL Tech, PowerGrid, ONGC, ITC, Axis Bank and Maruti were among the laggards.
In the previous session, the Sensex had settled 59.14 points or 0.15 per cent lower at 38,310.49, and the Nifty slipped 7.95 points or 0.07 per cent to finish at 11,300.45.
Exchange data showed that foreign institutional investors bought equities worth Rs 416.28 crore on a net basis on Thursday.
According to traders, buying in index majors led benchmarks higher despite weak cues from global markets.
Sustained foreign fund inflow also supported key indices in morning session, they said.
Bourses in Shanghai, Hong Kong and Seoul were trading with losses in mid-day deals, while Tokyo was in the positive territory.
Stock exchanges on Wall Street ended on a mixed note in overnight trade.
Global oil benchmark Brent crude was trading 0.20 per cent higher at USD 45.05 per barrel."
Special market operations can be useful in facilitating monetary policy transmission, says article in RBI Bulletin
RBI may have to use unconventional tools as monetary policy transmission through banks remains weak.
PTI reports: "RBI’s special market operations such as Operation Twist (OT) and Long Term Repo Operations (LTRO) can be useful in facilitating monetary policy transmission when the regular transmission mechanism does not perform as expected, according to an article published in the central bank’s bulletin.
The Reserve Bank of India (RBI) initiated two special market operations -- OT and LTRO since December 2019 and February 2020, respectively. They were designed to ensure comfortable liquidity in the financial system and to facilitate monetary policy transmission.
“Our analysis indicates that special operations such as OT and LTRO, which directly intervene in the bond market can be useful tools in facilitating transmission of monetary policy when the regular mechanism of transmission does not perform as expected,” the article published in the RBI Bulletin for August said.
The article, prepared by Satadru Das, Saurabh Ghosh, and Vidya Kamate of the Strategic Research Unit, analysed the impact of these two sets of special operations on money and Government Securities (GSECs) markets.
OT involves buying of GSECs with longer term maturities -- ten years and five years -- and selling of shorter term GSECs of original/ residual maturities of one and three years.
LTROs are repurchase agreements collateralised by government securities, by which the central bank lends money to the banks for one to three years at the policy repo rate.
“As such, they would facilitate monetary transmission by reducing the cost of funds (in case of LTRO) and reducing the term premia (with OT),” the article said.
While the cost of funds channel may facilitate credit offtake, the reduction in the term premia may manifest through lower rates across the term structure of the financial market spectrum.
In totality, the objectives of both these operations is to ensure that comfortable liquidity is available to the system to facilitate the transmission of monetary policy, it said.
Another article titled ‘Onshoring the Offshore’, published in the bulletin, said that several currencies in recent years, particularly those of Emerging Market Economies (EMEs), have emerged as candidates for internationalisation.
The article has been prepared by Abhishek Kumar and Rituraj of Financial Markets Regulation Department, RBI.
As per the article, over the last three years, EME currencies’ turnover, driven to an extent by the rise of Non-Deliverable Forwards (NDF) markets, outpaced global turnover in foreign exchange markets, boosting their global share.
“Among the EMEs, as per the BIS Triennial Central Bank Survey, 2019, trading in Indian Rupee (INR) has almost doubled in the last three years,” it noted.
Recognising the linkages between onshore and offshore markets, and the possible impact of offshore markets on price discovery onshore, RBI is engaged in developing a deep and liquid onshore foreign exchange market, the article said.
The article also said RBI, in January 2020, also permitted exchanges in the GIFT City International Financial Services Centre (IFSC) to offer INR derivative contracts with settlement in foreign currency.
Banks in India were permitted by RBI to participate in NDF markets from June 1, 2020. Several banks have started participating in the market with steady increase in average daily turnover by banks in India.
The volumes have been almost entirely concentrated in the interbank segment, although there are indications that interest from global funds and corporates is slowly growing, it said.
“The participation of Indian banks in the NDF market has increased avenues for interbank risk management and, going forward, could help bring down hedging cost for customers,” it added."
