Sensex Ends Higher, RBI's Support to Mutual Funds, Stocks in Focus, and Top Cues to Track Today

Tue, 28 Apr Pre-Open

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Indian share markets ended on a strong note yesterday, tracking positive global cues.

Global stock markets were trading on a positive note yesterday, ahead of a busy week for earnings and central bank meetings. The Federal Reserve and the European Central Bank are scheduled to meet later in the week.

Buying interest was also seen as the RBI announced a Special Liquidity Facility (SLF) for mutual funds worth Rs 500 billion.

At the closing bell yesterday, the BSE Sensex stood higher by 416 points (up 1.3%) and the NSE Nifty closed higher by 128 points (up 1.4%).

The BSE Mid Cap index and the BSE Small Cap index ended up by 1.4%.

On the sectoral front, gains were largely seen in the banking sector, finance sector and FMCG sector.

Top Stocks in Focus Today

Market participants will be tracking IndusInd Bank share price, Ambuja Cement share price and HDFC Standard Life Insurance share price as these companies announced their March quarter results (Q4FY20) yesterday.

From the IT sector, Mindtree share price will be in focus today as 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.

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.

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

RBI Announces Rs 500 Billion Liquidity Support for Mutual Funds

The Reserve Bank of India (RBI) 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 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.

Auto Industry to Post Zero Sales in April

In news from the automobile sector, as per an article in The Economic Times, the Indian automobile industry is set to post zero sales in April for the first time in history, as factories and dealerships are shut due to the nationwide lockdown.

The fall will weigh on the economy as well.

Here's an excerpt from the article...

• Automakers' troubles will weigh on the overall economy as well.
  
  The sector employs more than 40 million people directly or indirectly, as well as contributes over 8% to the country's GDP and 15% to the government's tax collection.

Industry leaders including Maruti Suzuki's RC Bhargava, TVS Motors' Venu Srinivasan, M&M's Pawan Goenka and other leaders aren't expecting much improvement in sales next month as well, and have warned of a prolonged crisis in the sector because of the impact of Covid-19 on the economy and consumer sentiment.

Last week, the government had allowed factories outside Covid-19 hotspots to start operations, but automakers have yet to restart their plants as they are waiting for the ecosystem of suppliers, dealers and financiers also to open for business.

Several leading automakers said that they are not in a hurry to resume production for the domestic market as there would be supply chain management issues and there was sufficient stock in their channels to serve any pent-up demand once the lockdown ended.

Society of Indian Automobile Manufacturers (SIAM) president Rajan Wadhera has suggested opening of the market in phases. "We must begin by opening dealers in semi urban/rural areas, to start selling motorcycles, three-wheelers and small commercial vehicles to start the cash cycle," he said.

We will keep you updated on the latest developments from this space. Stay tuned.

FPIs Continue to Move Out of Indian Capital Markets

Remaining risk-averse amid the coronavirus pandemic, overseas investors have withdrawn net Rs 103.5 billion from Indian capital markets in April so far.

Between April 1-24, foreign portfolio investors (FPI) pulled out a net sum of Rs 68.2 billion from equities and Rs 35.3 billion from the debt segment. The total net outflow stood at Rs 103.5 billion.

However, the quantum of outflows has reduced from March, when FPIs had withdrawn a record Rs 1.1 trillion on net basis from Indian markets (both equity and debt).

Emerging markets are considered to be a riskier investment destination and more prone towards crises of this magnitude.

With low-risk appetite, foreign investors drift towards safer investment avenues and safe havens such as US$ and gold. Earlier this month, gold prices went on to hit a record high, rising above the Rs 47,000-mark, tracking global rates.

In one of his recent videos, Vijay Bhambwani explains why gold prices will go higher in the coming days.

You can check the same here: The Price of Gold Will Go Higher

Speaking of Indian share markets and the coronavirus sell-off, our special report, How to Trade the Coronavirus Crash, is the most comprehensive report on how to trade the coronavirus, both from a short-term and long-term perspective. You can claim your FREE copy 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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