Indian Indices Continue Momentum; Sensex Ends 163 Points Higher

Thu, 6 Feb Closing

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Indian share markets traded on a positive note throughout the day and ended higher. Benchmark indices continued their momentum for the fourth consecutive day after the RBI kept repo rate unchanged at 5.15%.

Gains were largely seen in the telecom sector and finance sector, while IT stocks witnessed selling pressure.

At the closing bell, the BSE Sensex stood higher by 163 points (up 0.4%) and the NSE Nifty closed higher by 49 points (up 0.4%).

The BSE Mid Cap index ended the day up by 0.8%, while the BSE Small Cap index ended up by 0.6%.

Asian stock markets finished on a positive note as of the most recent closing prices. The Hang Seng was up 2.5% and the Nikkei was up 2.4%. The Shanghai Composite stood higher by 1.7%.

The rupee was trading at 71.23 to the US$ at the time of writing.

Market participants were tracking Eicher Motors share price, ICRA share price, and Mphasis share price as these companies announced their December quarter results today.

In news from the pharma sector, shares of pharma companies were in focus today with Granules India, Divi's Laboratories, J.B. Chemicals, and Alembic Pharma hitting their 52-week highs after reporting good set of numbers for the quarter ended December 2019 (Q3FY20) and positive corporate announcements.

Granules India gained over 6% after the company announced that its foreign arm had received approval from the US health regulator for Valganciclovir hydrochloride oral solution, an antiviral medication.

Divi's Laboratories surged 5% after the company said it has commenced commercial operations effective from Wednesday from a part of the DC-SEZ Unit in Telangana.

Meanwhile, shares of Ajanta Pharma surged over 10% today after the company reported strong set of numbers for Q3FY20.

The company reported 61% year-on-year (YoY) jump in its net profit at Rs 1,076 million for Q3FY20. It had posted profit of Rs 670 million in the year-ago period.

Revenue from operation stood at Rs 6,512 million, up 34% YoY, while earnings before interest, tax, depreciation, and amortisation (EBITDA) grew 73% to Rs 1,856 million.

In a press release, the company said that during the quarter under review, India sales grew 12% YoY to Rs 1,950 million. Research and development (R&D) expenses were Rs 350 million.

Ajanta Pharma share price ended the day up by 10%.

To know more about the company, you can read Ajanta Pharma's latest result analysis on our website.

Speaking of pharma sector, in the video below, Tanushree tells us where the sector stands now and also about the potential for a rebound.

Watch Now...

Moving on, the monetary policy committee (MPC) of the Reserve Bank of India (RBI) kept the repo rate unchanged at 5.15% - a 10-year low in its last policy review of the financial year 2019-20.

Consequently, the reverse repo rate stands unchanged at 4.90%.

All six members of the MPC were unanimous in their decision to stand pat on rates.

The bank said it will maintain 'accommodative' policy stance as long as it is necessary to revive growth, while ensuring that inflation remains within the target.

The MPC projected GDP growth for fiscal 2021 at 6% - in the range of 5.5-6.0% in H1 and 6.2% in third quarter. The committee had earlier projected GDP growth for the first half of fiscal 2021 at 5.9-6.3%.

The MPC sharply raised consumer price inflation projection to 6.5% for the fourth quarter of fiscal year 2020 from 5.1-4.7% earlier. The committee pegged CPI inflation for the first half of FY21 at 5.4-5.0% compared with 4-3.8% earlier.

RBI Governor Shaktikanta Das said that the repeat of status quo should not be seen as an indicator of future action. He further said that economy remains weak and the output gap is negative.

The MPC also noted that while there was need for adjustment in interest rates on small saving schemes, the external benchmark system introduced from 1 October 2019 has strengthened monetary transmission.

With the RBI keeping interest rates unchanged, the focus of market participants has now shifted to whether the RBI's decision will translate into better economic activity in the near term.

Like this chart shows, RBI rate cuts have always had a big gap with bank lending rates.

Yet Another RBI Rate Cut May Not Result in Lower Lending Rates

Here's what Tanushree Banerjee wrote about it in one of the editions of The 5 Minute WrapUp...

• It will be a while before lower lending rates stoke the economy.
  
  Therefore, hoping for an immediate revival in the economy is futile. The RBI has no magic wand to do this.
  
  Rather look for stocks that can outperform irrespective of the RBI policy.
  
  I believe the cement sector may be a good place to start.
  
  One of my recent recommendations from the sector is a typical Rebirth of India stock.
  
  And I won't be surprised if it repeats its 2002-2006 performance.

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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