Key benchmarks ended lower on Monday amid mixed global cues. The barometer index, the S&P BSE Sensex dropped 194.17 points or 0.51% at 37,934.73. The Nifty 50 index fell 62.35 points or 0.56% at 11,131.80.
Weakness in banks shares eclipsed gains in IT shares. Banks corrected after RBI in its Financial Stability report warned that bad-loan ratio is set to worsen to 12.5%.
Selling was broad based. The BSE Mid-Cap index slipped 1% and the BSE Small-Cap index declined 0.98%. Both these indices underperformed the Sensex.
Sellers outnumbered buyers. On the BSE, 868 shares rose and 1809 shares fell. A total of 171 shares were unchanged.
Total COVID-19 confirmed cases worldwide stood at 16,261,995 with 648,937 deaths. India reported 4,85,114 active cases of COVID-19 infection and 32,771 deaths, according to the data from the Ministry of Health and Family Welfare, Government of India.
Ministry of Health and Family Welfare noted in latest update that on 25th July, India recorded the highest ever COVID-19 recoveries in a single day. 36,145 COVID-19 patients were cured and discharged in the last 24 hours. This has taken the total number of recovered cases to 8,85,576. The recovery rate has achieved another high of fast approaching 64%. It stands at 63.92% today. This means more patients are recovering thus maintaining the steadily widening difference between recovered and active COVID-19 patients. This gap has crossed 4 lakh and currently stands at 4,17,694. Recovered cases are 1.89 times the active cases (4,67,882).
RBI's Financial Stability Report:
The Reserve Bank of India (RBI) released its 21st Financial Stability Report on Friday, which reflects the collective assessment of the Sub-Committee of the Financial Stability and Development Council (FSDC) on risks to financial stability.
RBI said that the capital to risk-weighted assets ratio (CRAR) of Scheduled Commercial Banks (SCBs) edged down to 14.8% in March 2020 from 15% in September 2019 while their gross non-performing asset (GNPA) ratio declined to 8.5% from 9.3% and the provision coverage ratio (PCR) improved to 65.4% from 61.6% over this period.
Macro stress tests for credit risk indicate that the GNPA ratio of all SCBs may increase from 8.5% in March 2020 to 12.5% by March 2021 under the baseline scenario; the ratio may escalate to 14.7% under a very severely stressed scenario.
Numbers to Watch:
The yield on 10-year benchmark federal paper rose to 5.860% as compared with 5.817% at close in the previous trading session.
In the foreign exchange market, the rupee edged lower against the dollar. The partially convertible rupee was hovering at 74.8350, compared with its close of 74.83 during the previous trading session.
In the commodities market, Brent crude for September 2020 settlement fell 17 cents at $43.17 a barrel. The contract rose 3 cents, or 0.07% to settle at $43.34 a barrel in the previous trading session.
European markets were mixed while most Asian markets closed mildly higher on Monday as investors continued to monitor the development on the US-China front.
On the economic data front, China's industrial profits for June soared 11.5% year-on-year, according to the country's National Bureau of Statistics.
The Bank of Japan's Summary of Opinions for its mid-July meeting, released Monday, said the country's economy is expected to "pick up moderately" from the second half of 2020. The central bank warned, however, that the economy is "unlikely to return to the level reached before the outbreak of COVID-19" even in fiscal 2022.
Investor practices caution as diplomatic relations between the U.S. and China continued to deteriorate, following the shutdown of the U.S. consulate in Chengdu on Monday in compliance with a retaliatory measure from Beijing, after Washington ordered the closure of the Chinese consulate in Houston.
In US, Wall Street retreated on Friday as shares of major tech companies struggled and US-China tensions rose. Investor attention was likely be on lawmakers stateside as they attempt to push forward on another coronavirus stimulus package.
US Treasury Secretary Steven Mnuchin reportedly said Sunday that Republicans have finalized a bill worth about $1 trillion in coronavirus relief funds.
Buzzing Indian Segments:
Shares of seven brokerage firms tumbled after the media reported that direct market access (DMA) system is being developed by the Securities and Exchange Board of India (SEBI).
Geojit Financial Services (down 9.69%), ICICI Securities (down 9.34%), IIFL Securities (down 6.43%), 5paisa Capital (down 5%), Emkay Global Financial Services (down 5%), Indiabulls Ventures (down 4.45%) and Motilal Oswal Financial Services (down 4.16%) tumbled.
Shares of Bombay Stock Exchange (BSE) jumped 2.93% to Rs 507.75.
SEBI is reportedly considering allowing DMA to retail investors. Under the DMA, investors will be able to trade directly from the exchange instead of going through stockbrokers.
DMA could impact revenue of stock brokerage firms. However, stock exchanges may earn higher revenues in the form of brokerage and fee from demat holdings.
The Nifty Bank fell 3.59% to 21,848.75. The index has fallen 5.35% in two sessions.
HDFC Bank fell 3.55% after the bank's managing director Aditya Puri has sold 95% of his shareholding in the bank valued at Rs 843 crore. According to insider trading data published by the stock exchanges on Saturday, Aditya Puri has sold 74,20,033 shares of the bank between 21 and 24 July. Before this transaction, Puri held 77.96 lakh shares or 0.14% of banks equity capital. Aditya Puri has been the managing director and chief executive since 1994. His term ends on 20 October 2020.
ICICI Bank fell 6.11%. The private sector lender reported a 36.2% rise in net profit to Rs 2599.15 crore on a 21.8% jump in total income to Rs 26069.95 crore in Q1 June 2020 over Q1 June 2019. Net profit was aided after the bank sold equity shares representing 3.96% in ICICI Lombard General Insurance Company and 1.50% in ICICI Prudential Life Insurance Company for a total consideration of Rs 3,092.93 crore. Gross non-performing assets (NPAs) stood at Rs 40,386.24 crore as on 30 June 2020 as against Rs 41,409.16 crore as on 31 March 2020 and Rs 45,763.08 crore as on 30 June 2019. The ratio of gross NPAs to gross advances stood at 5.46% as on 30 June 2020 as against 5.53% as on 31 March 2020 and 6.49% as on 30 June 2019. The bank's provisions and contingencies soared 117% to Rs 7593.95 crore in Q1 June 2020 over Rs 3495.73 crore in Q1 June 2019. The bank made additional COVID-19 related provisions of Rs 5,550 crore made on a prudent basis in Q1 June 2020 with the objective of completely cushioning the balance sheet from the impact of COVID-19.
Kotak Mahindra Bank declined 2.03%. The private lender declined 2.26% to Rs 1,319.40 after standalone net profit slipped 8.50% to Rs 1,244.45 crore on 3.26% decrease in total income to Rs 7,685.40 crore in Q1 June 2020 over Q1 June 2019. Net Interest Income (NII) for Q1 FY21 rose to Rs 3,724 crore from Rs 3,161 crore in Q1 FY20, recording a growth of 17.8% Y-o-Y (year-on-year). Net Interest Margin (NIM) for the quarter was at 4.4%. Gross non-performing assets (NPAs) stood at Rs 5,619.33 crore as on 30 June 2020 as against Rs 5,026.89 crore as on 31 March 2020 and Rs 4,613.52 crore as on 30 June 2019. The ratio of gross NPAs to gross advances stood at 2.70% as on 30 June 2020 as against 2.25% as on 31 March 2020 and 2.19% as on 30 June 2019. The ratio of net NPAs to net advances stood at 0.87% as on 30 June 2020 as against 0.71% as on 31 March 2020 and 0.73% as on 30 June 2019.
The Nifty IT index rose 1.97% to 17,626.75. The index rose 3.41% in two sessions.
HCL Technologies (up 3.02%), Infosys (up 2.75%), TCS (up 2.26%) and Tech Mahindra (up 1.73%) advanced.
Persistent Systems soared 10.88% after consolidated net profit rose 7.37% to Rs 90 crore on 7.01% increase in revenue from operations to Rs 991.38 crore in Q1 June 2020 over Q4 March 2020. EBITDA grew 14.7% M-o-M (month-on-month) and surged 21.8% Y-o-Y (year-on-year) to Rs 146.43 crore in Q1 June 2020. In terms of US$, revenue rose 3.1% Q-o-Q and 9.5% Y-o-Y to $131.02 million during the quarter. Commenting on the Q1 earnings, Christopher O'Connor, the chief executive officer (CEO) and executive director of Persistent Systems, has said that: "In this quarter of the pandemic Persistent achieved 3.1% growth, cumulatively achieved by both business units.
ITC fell 1.73% after the FMCG major reported a 26.19% decline in net profit to Rs 2342.76 crore on a 17.4% fall in net sales to Rs 9501.75 crore in Q1 June 2020 over Q1 June 2019. Revenue from sale of cigarettes stood at Rs 3,853.79 crore (down 29.07% YoY) while total FMCG revenue, including cigarettes, was at Rs 7,228.36 crore (down 14.89% YoY). ITC said its hotels segment was severely impacted with operations coming to a standstill due to restrictions on travel and hotel operations. Negative operating leverage weighed on segment profits but aggressive reduction in controllable fixed costs partly mitigated the impact.
Zee Entertainment Enterprises (ZEEL) slipped 4.12% on recording a consolidated net loss of Rs 765.82 crore in Q4 March 2020 compared with net profit of Rs 292.53 crore in Q4 March 2019. Consolidated net sales fell 3.4% to Rs 1,951.08 crore in Q4 March 2020 compared with Rs 2,019.27 crore in Q4 March 2019. Consolidated EBITDA for the quarter stood at Rs -283.90 crore as against Rs 568.30 crore in Q4 March 2019.
Coromandel International slipped 1.26%. The company's consolidated net profit surged 301.40% to Rs 250.57 crore on 50.8% jump in net sales to Rs 3,213.23 crore in Q1 June 2020 over Q1 June 2019. During the quarter ended 30 June 2020, profit before depreciation, interest, taxes and exceptional item (EBITDA) for the quarter ended 30 June 2020 grew 113% to Rs 415 crore from Rs 195 crore in 30 June 2019.
India Cements fell 1.69%. The cement maker's consolidated net profit slumped 71.4% to Rs 19.74 crore on 49% drop in net sales to Rs 763.46 crore in Q1 June 2020 over Q1 June 2019. Profit before tax (PBT) tanked 71.8% to Rs 28.84 crore in Q1 June 2020 as against Rs 102.12 crore in Q1 June 2019. Current tax expenses for the quarter tanked 55.4% at Rs 17.84 crore as against Rs 40.03 crore in Q1 June 2019.
Central Depository Services (India) surged 8.22% after the depository's consolidated net profit jumped 67.40% to Rs 46.72 crore on a 17% rise in total income to Rs 86.01 crore in Q1 FY20 over Q1 FY19. Consolidated EBITDA for the quarter ended 30 June 2020 increased by 56% to Rs 58.80 crore from Rs 37.63 crore in the corresponding period last year.
Marico fell 1.89%. The FMCG major's consolidated net profit rose 23.17% to Rs 388 crore on 11.13% decline in revenue to Rs 1,925 crore in Q1 June 2020 over Q1 June 2019. EBITDA was up 1% to Rs 467 crore YoY, led by 300 bps expansion in operating margins which was attributable to softer input costs, rationalization of A&P spends in discretionary portfolios and very aggressive cost control.
The domestic business delivered a turnover of Rs 1,480 crore, down 15% on a year-on-year basis, impacted by the disruption in supply chain due to the continuing lockdown during the quarter to contain the outbreak of COVID-19.
Marico's International business declined by 4% in Q1FY21 in constant currency terms, due to COVID-19 led restrictions affecting growth and persistently weak macros in some of the markets.