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Indices trade with steep losses; Europe opens in red

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The main stock indices traded with steep losses in afternoon trade amid negative global cues. The Nifty slipped below the crucial 9,000 mark and traded lower. At 13:23 IST, the barometer index, the S&P BSE Sensex, was down 386.55 points or 1.25% at 30,546.35. The Nifty 50 index was down 107.10 points or 1.18% at 8,999.15

Banks and financial stocks tumbled after the Reserve Bank of India (RBI) governor Shaktikanta Das 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.

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.

In the broader market, the S&P BSE Mid-Cap index was down 1.06% while the S&P BSE Small-Cap index shed 0.43%.

The market breadth was negative. On the BSE, 798 shares rose and 1270 shares fell. A total of 143 shares were unchanged. In the Nifty 50 index, 19 shares advanced while 31 stocks declined.

Foreign portfolio investors (FPIs) sold shares worth Rs 258.73 crore, while domestic institutional investors (DIIs), were net buyers to the tune of Rs 401.78 crore in the Indian equity market on 21 May, provisional data showed.

RBI Decision:

The Reserve Bank of India (RBI)'s Governor Shaktikanta Das briefed the media at 10 am today. Besides extending the loan repayment moratorium for another three months up, 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.

RBI Monetary Policy Committee (MPC) Friday unanimously decided to slash the Repo Rate by another 40 basis points to 4%. The interest rate decision was taken to revive growth and mitigate the impact of the coronavirus pandemic. The announcement came following a three-day off-cycle meeting of the MPC, held between 20 and 22 May 2020.

On the basis of an assessment of the current and evolving macroeconomic situation, MPC decided to reduce the policy repo rate under the liquidity adjustment facility (LAF) by 40 bps to 4% with immediate effect. Accordingly, the marginal standing facility (MSF) rate and the Bank Rate stand reduced to 4.25% from 4.65%. The reverse repo rate under the LAF stands reduced to 3.35% from 3.75%. The MPC also decided to continue with the accommodative stance as long as it is necessary to revive growth and mitigate the impact of COVID-19 on the economy, while ensuring that inflation remains within the target.

These decisions are 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.

The 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 the Reserve Bank of India 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.

The Central Bank also 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.

Gainers &Losers:

Zee Entertainment (up 2.96%), Asian Paints (up 2.46%), Infosys (up 2.42%), Bharat Petroleum Corporation (up 1.63%) and Bharti Infratel (up 1.53%) were top gainers in Nifty 50 index.

Bajaj Finserv (down 6.67%), Bajaj Finance (down 5.42%), HDFC (down 5.37%), ICICI Bank (down 4.94%) and Axis Bank (down 4.34%) were top losers in Nifty 50 index.

Q4 Results Today:

JSW Steel (down 2.92%), UPL (up 0.67%), Trent (down 2.9%), Wabco India (up 1.86%), IDFC First Bank (down 1.06%), Honeywell Automation India (up 0.57%), Godrej Industries (up 0.35%), Essel Propack (up 1.67%), Bosch (up 0.1%), Birla Corporation (up 1.59%), Bayer Cropscience (up 1.25%), Basf India (up 1.91%), Neuland Laboratories (up 0.07%) and Supreme Industries (up 2.66%) are some of the companies that will announce their quarterly earnings today.

Earnings Impact:

Quick Heal Technologies slumped 9.68%. The IT security services provider's consolidated net profit declined 71.2% to Rs 7.99 crore on a 25.3% fall in net sales to Rs 64.25 crore in Q4 March 2020 over Q4 March 2019.

Hawkins Cookers tumbled 6.87% 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 1.54%. 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

Global Markets:

European markets opened lower while Asian shares were trading with steep losses 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. 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.

That measure was passed after President Donald Trump said in a tweet that the "incompetence of China" caused "this mass Worldwide killing," referring to the coronavirus.

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(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Fri, May 22 2020. 13:23 IST
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