Indian Indices Erase Gains; RBI Cuts Reverse Repo Rate by 25 bps

Fri, 17 Apr 12:30 pm

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After logging gap-up opening, share markets in India turned volatile and erased most of the early morning gains, even after the RBI slashed the reverse repo rate by 25 bps to 3.75%.

The central bank also announced special refinance facility of Rs 150 billion to SIDBI, Rs 250 billion to NABARD, and Rs 100 billion to HFCs to support liquidity.

The BSE Sensex is trading up by 385 points, while the NSE Nifty is trading up by 121 points.

The BSE MidCap index is trading up by 1.2%, while the BSE SmallCap index is trading up by 1.8%.

Sectoral indices are trading mixed with stocks in the realty sector and finance sector witnessing buying interest, while FMCG stocks are witnessing selling pressure.

The rupee is currently trading at 76.54 against the US$.

In a recent article titled The Sharp Fall in Indian Rupee: 6 Points to Know, we dive deeper and look at the factors behind rupee's depreciation.

Gold prices are currently trading down by 3% at Rs 45,848.

The coronavirus impact has shaken markets worldwide. Indian stock markets have felt the full impact too.

For the BSE Sensex, FY20 was the second worst year post FY08, the year of the global financial crisis.

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Naturally, there is an atmosphere of fear all round.

Is it time to sell stocks now? Will the correction get worse?

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In fact, these corrections are the rare times when you find businesses with solid fundamentals at reasonable valuations.

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Moving on, in news from the travel support services sector, institutional investors, led by foreign portfolio investors (FPIs) and mutual funds (MFs), have booked profit in Indian Railway Catering and Tourism Corporation (IRCTC) by trimming their stake by over three percentage points in the March quarter.

According to the latest shareholding pattern data, total institutional holdings in IRCTC declined to 3.86% as on March 31, 2020. In the December quarter, they held 6.91% stake in the company.

MFs' stake has more than halved from 4.78% to 2.05%, while that of FPIs has dipped to 1.7% from 1.99%.

Meanwhile, individual/public investors increased their stake to 7.05% in March quarter from 3.98% in December quarter.

Note that, stock price of IRCTC saw a strong run-up at the bourses and moved up over 100% in first two months of the current calendar year.

IRCTC had also entered the list of top 100 companies with the highest market capitalisation during this bull run.

Reports state that the decision by Indian Railways to stop passenger services further till May 3 is set to wipe out IRCTC's ticket earnings and a huge share of its revenue through service charge. Around 80% of the tickets booked by the railways is through the IRCTC online platform.

IRCTC share price is presently trading up by 4%.

Moving on to news from the macroeconomic space, Reserve Bank of India Governor Shaktikanta Das announced additional measures today, including reducing reverse repo rate, to support the economy hit by COVID-19.

The Reserve Bank of India (RBI) slashed the reverse repo rate by 25 basis points to 3.75% even as it kept the repo rate unchanged at 4.4%.

RBI Governor Shaktikanta Das announced several steps to improve liquidity for non-banking finance companies as they were finding hard to raise funds.

RBI Governor Shaktikanta Das announced the launch of second instalment of TLTRO - TLTRO 2.0 for easing credit to NBFCs.

The governor said the central bank will conduct targeted repo operations for an amount of Rs 500 billion to begin with in tranches of appropriate sizes.

Das said the funds will have to be made in bonds, CP, NCD of NBFCs with 50% of it going to small and mid-sized NBFCs within one month of availing the credit from RBI.

Here are some highlights from the RBI's press conference:

NPA classifications will exclude the three-month moratorium period till May-end. NBFCs will be allowed to grant relaxed NPA classification to their borrowers.

LCR requirement is brought down from 100% to 80% with immediate effect.

Banks are asked to maintain additional provisioning of 10% on standstill accounts. Moreover, banks are asked not to announce dividends until further notice.

NBFCs' loans to delayed commercial real estate projects can be extended by a year without restructuring. Loans given by NBFCs to real estate companies will get similar benefit as given by scheduled commercial banks.

What effects the above measures have on Indian stock markets and the Indian economy remains to be seen. Stay tuned for more updates from this space.

And 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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