India's Economic Growth Forecast, Deepak Nitrite Q4 Results, and Top Cues in Focus Today

Thu, 28 May Pre-Open

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Indian share markets ended on a strong note yesterday with Nifty ending above 9,300 level and Sensex reclaiming its 31,000-mark.

At the closing bell yesterday, the BSE Sensex stood higher by 995 points (up 3.2%) and the NSE Nifty closed up by 285 points (up 3.2%).

The BSE Mid Cap index ended up by 0.5%, while the BSE Small Cap index ended up by 0.3%.

Sectoral indices ended on a positive note with stocks in the banking sector, finance sector and IT sector witnessing maximum buying interest.

Asian stock markets finished on a mixed note yesterday.

China's central bank made a fresh cash injection into the interbank money market through reverse repos for a second straight day today, while it continued to keep the borrowing cost unchanged.

The People's Bank of China (PBOC) injected 120 billion yuan (US$ 16.8 billion) via seven-day reverse repos at 2.20%, same as the previous operation. According to the central bank's statement, the move was to counteract the impact from government bond issuance in order to keep banking system liquidity reasonably ample.

European stock markets were trading on a positive note yesterday as investors focused on a fresh stimulus plan for the European Union, while renewed US-China tensions over Hong Kong tempered optimism about a global economic recovery.

Note that stock markets around the world have witnessed one of the most volatile phases in 2020 so far.

One month we see a sharp decline followed by a sharp up move the next month.

One day we hear positive news of a vaccine for the virus. Another day, a WHO scientist says we might have to live with this virus for years.

Naturally, investors are confused as to what they should do? Buy, hold or sell their stocks.

In the video below, Girish Shetty, Research Analyst at Equitymaster, explains the current scenario and what are the type of stocks investors should buy, hold or sell in the current crisis.

Tune in to find out more...

Q4FY20 Results: Deepak Nitrite Reports 88% YoY Jump in Profits

From the chemical sector, Deepak Nitrite reported an 88% year-on-year (YoY) jump in its consolidated net profit at Rs 1,723 million for the quarter ended March 2020.

The company had reported a profit of Rs 914.6 million in the year-ago period.

The company's revenue from operations rose 4.7% to Rs 10.6 billion for Q4FY20 as against Rs 10.1 billion in the corresponding quarter of the previous fiscal.

On standalone basis, revenues stood at Rs 5.3 billion in Q4FY20 as compared to Rs 4.9 billion in Q4FY19.

The company's profit before tax (PBT) came in at Rs 1.6 billion, up 84%. Profit after tax (PAT) stood at Rs 1.2 billion, up 106% YoY.

For the full year ended March 2020, the company's net profit rose to Rs 6,110.3 million, while sales rose 56.7% to Rs 42,297.1 million.

The stock of the company witnessed huge buying interest yesterday on back of the above good set of numbers.

Apart from the above market participants will be tracking Dabur share price, Quess Corp share price and Sun Pharma share price as these companies announced their March quarter results (Q4FY20) yesterday.

You can read our recently released Q4FY20 results of other companies here: Birla Corporation, Bata India, Colgate, Hawkins Cookers, Bayer Cropscience, JSW Steel, DCB Bank.

Fitch and CRISIL Drastically Cut India's Economic Growth Forecast

Fitch ratings and CRISIL have drastically cut India's economic growth forecast in the current fiscal year due to a prolonged lockdown.

Both, Fitch and CRISIL projected the economy to contract 5%, from their earlier estimates of the economic growth at 0.8% and 1.8%, respectively.

In its latest report, CRISIL said that it expects the current quarter's GDP to shrink 25% year-on-year (YoY).

The rating agency said it would really be a long road to recovery and going back to the pre-Covid-19 trend level of gross domestic product (GDP) in India will not be possible for the next three fiscal years.

Reportedly, lockdown extension, higher economic costs, and an economic package that lacked muscle are the three key reasons why CRISIL downgraded the GDP forecast.

Meanwhile, Fitch ratings said India had had a very stringent lockdown policy that had lasted a lot longer than expected and incoming economic activity data had been spectacularly weak.

Note that the Indian economy was grappling with its own issues and COVID-19 has made matters worse.

The industry was facing demand problems, due to which business houses were reluctant to undertake capex plans. Unemployment was at its peak and exports were consistently down for several months.

India's GDP growth has been on a consistent decline after peaking out at 7.9% in Q4 of FY18 to 4.7% in Q3 of FY20. This is evident in the chart below:

Declining GDP Growth for India

The numbers are expected to have fallen further in Q4FY20 due to Covid 19.

Interestingly, there's a silver lining in all this. India can become an outsourcing hub. The global slowdown will mean that countries like the US, will be looking out for low-cost outsourcing destinations like India.

Further, a lot of global buyers have already shifted to India to source ceramics, home appliances, fashion, and lifestyle goods.

Meanwhile, as per the reports, around a thousand foreign manufacturers want to relocate their production to India, a country they see as an alternative to China.

Here's an excerpt from one of the articles Tanushree Banerjee wrote on the Indian economic recovery:

• It's also a fact that India's importance in the global supply chain has never looked better. PM Modi himself referred to that.
  
  Therefore, utilising the stimulus package to tighten India's presence in the global supply chain will be the fastest way to move up the Swoosh index. Any delay or disregard would cost India dearly.
  
  True that Apple, Samsung and several smartphone manufacturers are already considering an expansion of their Indian capacities.
  
  But the land, labour, liquidity, and legal reforms cannot remain on paper if the Make in India dreams are to be realised.
  
  I expect to gather more cues about India's prospects on the Swoosh index over coming months.

Watch this space as Tanushree tracks these Rebirth of India megatrends closely.

Government Extends BPCL Bid Deadline to July 31

In news from the energy space, the government has for the second time extended the deadline for bidding for privatisation of India's second-biggest oil refiner Bharat Petroleum Corp Ltd (BPCL) by over a month to July 31.

While the Cabinet had in November last year approved the sale of government's entire 52.98% stake in BPCL, offers seeking expression of interest (EoI), or bids showing interest in buying its stake, were invited only on March 7.

The EoI submission deadline was May 2, but on March 31 it was extended up to June 13.

The government today said this deadline is further being extended up to July 31.

Note that the government of India is proposing strategic disinvestment of its entire shareholding in BPCL comprising of 1,149.1 million equity shares, which constitutes 52.98% of BPCL's equity share capital along with transfer of management control to a strategic buyer (except BPCL's equity shareholding of 61.65% in Numaligarh Refinery Ltd). Numaligarh Refinery Ltd stake will be sold to a state-owned oil and gas firm.

The bidding will be a two-stage affair, with qualified bidders in the first EoI phase being asked to make a financial bid in the second round. Public sector undertakings (PSUs) "are not eligible to participate" in the privatisation, the offer document said. Any private company having a net worth of USD 10 billion is eligible for bidding and consortium of not more than four firms will be allowed to bid.

BPCL will give buyers ready access to 14% of India's oil refining capacity and about one-fourth of the fuel market share in the world's fastest-growing energy market.

We will keep you updated on how this bidding goes. Stay tuned.

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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