Indian Indices Extend Gains; Kotak Mahindra Bank, Axis Bank and HDFC Surge Over 4%

Mon, 27 Apr 12:30 pm

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Share markets in India have extended early gains and are presently trading on a strong note.

Benchmark indices staged a gap-up opening today after the RBI announced a Special Liquidity Facility (SLF) for mutual funds worth Rs 500 billion.

Buying interest is also seen as investors are hoping more stimulus from the PM Modi's meet with CMs.

The BSE Sensex is trading up by 671 points while the NSE Nifty is trading up by 192 points.

The BSE Mid Cap index and the BSE Small Cap index are trading up by 1.4% and 1.2%, respectively.

All sectoral indices are trading in green with stocks in the finance sector and banking sector witnessing most of the buying interest.

Gold Prices are currently trading down by 0.2% at Rs 46,446.

The rupee is trading at 76.11 against the US$.

As the Coronavirus pandemic continues to haunt the global financial markets, the rupee has been hit badly.

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.

Market participants are tracking IndusInd Bank share price, Ambuja Cement share price and HDFC Standard Life Insurance share price as these companies are scheduled to announce their March quarter results (Q4FY20) later today.

You can read our recently released Q4FY20 results of other companies here: Wipro, TCS, Infosys, HDFC Bank, Tata Elxsi, ACC, CRISIL.

In news from the IT sector, Mindtree share price is in focus today. Stock of the company rallied 9% today after the company posted 4.3% quarter-on-quarter (QoQ) revenue growth at Rs 20.5 billion Q4FY20.

It posted a net profit of Rs 2,062 million, a rise of 4.7% sequentially.

The IT firm reported revenues at US$ 278.4 million, a 1.9% rise in constant currency term over the previous quarter.

Meanwhile, the company's operating margin improved 150 basis points sequentially to 17.1% in Q4FY20.

The company reported earnings before interest, taxes, depreciation, and amortization (EBITDA) margin expansion of 250 basis points QoQ, and record deal wins of US$ 393 million during the quarter despite the Covid-19 disruption.

The company's board also recommended a final dividend of Rs 10 per equity share of face value Rs 10 for the financial year ended March 31, 2020.

To know more about the company, you can read Mindtree's Q4FY20 result analysis on our website.

Moving on to news from the financial markets space, the Reserve Bank of India (RBI) today announced Rs 500 billion liquidity support for mutual funds (MFs).

Under this special liquidity facility scheme, the RBI will conduct repo operations of 90 days tenor at the fixed repo rate. The facility will be on-tap and open-ended, and banks can submit their bids to avail funding on any day from Monday to Friday.

The scheme will be available from 27 April till 11 May.

In a release, the RBI said, "Heightened volatility in capital markets in reaction to Covid 19 has imposed liquidity strains on mutual funds which have intensified in the wake of redemption pressures related to closure of some debt MFs and potential contagious effects there from".

Here are some key takeaways from RBI's special liquidity facility:

This special repo window will be available to all liquidity adjustment facility (LAF) eligible banks against eligible collateral and can be availed only for on-lending to mutual funds. The eligible banks may place their bids electronically on the CBS platform between 9 AM and 12.00 noon every day.

In case of over-subscription of the notified amount on any given day, the allotment will be done on pro-rata basis. RBI will, however, reserve the right to inject marginally higher amount than the notified amount due to rounding effects.

The minimum bid amount would be Rs 10 million and multiples thereof. RBI will reject bids of the participant if the total bid amount submitted by the participant exceeds the notified amount of the issue.

The above move comes after Franklin Templeton mutual fund decided to shut down debt schemes like Low Duration Fund, Dynamic Accrual Fund, Credit Risk Fund, Short Term Income Plan, Ultra Short Bond Fund and Income Opportunities Fund.

Last week, it was reported that RBI could be looking at a special window to help MFs meet the redemption pressure.

A similar window was opened by RBI for banks to meet the liquidity requirement of mutual funds in 2008 and 2013.

In 2008, the central bank opened a special 14-day repo window of Rs 200 billion to enable banks to raise money and lend to the funds, but received only four bids for Rs 35 billion.

In 2013, RBI opened a special three-day repo window that allowed banks to borrow a total of Rs 250 billion at a rate of interest of 10.25% to help mutual funds tide over their liquidity problems.

What effects the central bank's move have on Indian stock markets and the Indian economy in the coming days remains to be seen. Stay tuned for more updates from this space.

Speaking of mutual funds, here's what Tanushree Banerjee wrote about it in one of the editions of The 5 Minute WrapUp...

• After a few hiccups in the first half of this fiscal, strong inflows into mutual funds have taken the industry's AUM to a new high.
  
  Can we call it a saturation point?
  
  Far from it!
  
  The total AUM of India's mutual fund industry is just about 13% of India's GDP.
  
  This megatrend of financialisation of savings has a long runway ahead of it.

New High for Mutual Fund AUM

As per Tanushree, this is one of the megatrends that will help what she calls the Rebirth of India.

She has identified the 7 best stocks that will profit from the Rebirth of India. You can read about these top 7 stocks here.

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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