Markets Finish Marginally Higher as RBI Keeps Repo Rate Unchanged

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Indian share markets continued to trade just above the dotted line during the afternoon session as RBI's policy stance of keeping the repo rate unchanged at 6.25 per cent was in line with market expectations.

At the closing bell, the BSE Sensex closed higher by 81 points, while the NSE Nifty closed higher by 27 points. Meanwhile, the S&P BSE Mid Cap and the S&P BSE Small Cap finished up by 0.5% and 0.8% respectively. Gains were largely seen in metal stocks, pharma stocks, and bank stocks. Software stocks witnessed selling pressure.

The Reserve Bank of India's Monetary Policy Committee kept key interest rates unchanged but softened its hawkish stance owing to the fall in retail inflation to a record low and lower-than-expected economic growth.

While the repo rate, at which the central bank infuses liquidity in the banking system, has been kept unchanged at 6.25%, the RBI lowered its inflation forecast for the current fiscal. The MPC has projected headline inflation at 2.0-3.5% in the first half of the year and 3.5-4.5% in the second half. This is an indication that the RBI may be accommodative on the future course of rates in a bid to revive economic growth.

Meanwhile, the month of May witnessed rollercoaster ride for the Indian stock markets. The benchmark indices after making a sluggish start gained momentum to surge to their life time highs and continue the momentum till the end of the month.

BSE Sensex Gainers During the month of May

In the early second half of the month markets showed some choppiness mainly on some weak earnings but hopes of timely arrival of monsoon rains once again led the markets continued to gain. The May F&O series continued to be of jubilation for the Indian markets, with both the Sensex and the Nifty ending the series with a gain of over 1.5% and Nifty managed to reclaim the psychological highs of 9,500.

Asian stock markets finished mixed as of the most recent closing prices. The Shanghai Composite gained 1.23% and the Nikkei 225 rose 0.02%. The Hang Seng lost 0.09%. European markets too are mixed today. The CAC 40 is up 0.37% while the FTSE 100 gains 0.16%. The DAX is off 0.09%.

The rupee was trading at Rs 64.45 against the US$ in the afternoon session. Oil prices were trading at US$ 48.05 at the time of writing.

In news from economic sector, terming Goods and Services Tax (GST) regime as the biggest tax reform since independence, NITI Aayog CEO Amitabh Kant has expressed confidence that the new tax regime would help the Indian economy to achieve 9% growth rate.

Kant's comments come against the backdrop of India losing the fastest growing economy tag to China for the March quarter with the gross domestic product (GDP) growth slipping to 6.1%.

Kant further said that Prime Minister Narendra Modi's vision of GST implementation which is scheduled to be rolled out from July 1 will bring a big revolution in India's taxation structure. He added that GST will simplify the county's taxation system and help deal with tax evasion cases.

The GST Council has finalised tax rates on almost all goods and services. All goods and services have been put in slabs of 5, 12, 18 and 28 per cent, apart from gold and precious metals, which will attract 3% GST, and rough diamond at 0.25% GST.

India's GDP stood at 7.1% for the fiscal year 2016-17, as compared to 8% in the FY16, while for the Jan-Mar quarter it stood at 6.1% against 7% in the previous quarter of FY17.

Moving on to news from telecom sector. Reliance Communications (RCom) Ltd share price fell 3.7% to Rs 19.35 after Global agencies Moody's Investors Service and Fitch Ratings downgraded the long-term debt rating of the company and its US$ 300 million worth of senior bonds.

For the second time in a span of a week, Fitch downgraded RCom to the lowest category with some hope for recovery of principal or interest amount while Moody's Investors Service downgraded the firm to the second lowest category.

Last week also, the company's debt was downgraded by these two rating agencies -- Fitch and Moody's Investors Service. Besides, ICRA and CARE had also downgraded their ratings on the company's loan facilities.

RCom's net debt stood at around Rs 450 billion as on March 31 this year. The lenders of the company have given it seven months' time to repay debt.

In another development, Bharti Airtel share price finished the day on a positive note (up 0.5%) after it was reported that the Competition Commission of India (CCI) has approved the proposed merger of Telenor (India) Communications with the company.

As part of the Scheme, Airtel will acquire Telenor India's running operations in seven circles - Andhra Pradesh, Bihar, Maharashtra, Gujarat, UP (East), UP (West) and Assam.

The proposed acquisition will include the transfer of all of Telenor India's assets and customers, further augmenting Airtel's overall customer base and network. It will also enable Airtel to further bolster its strong spectrum foot-print in these seven circles, with the addition of 43.4 MHz spectrum in the 1,800 MHz band.

Notably, after Telenor Acquisition, Bharti Airtel had also announced to acquire Tikona Wireless in March this year.

The announcement comes at a time when the telecom industry is witnessing an unprecedented churn following the entry of Reliance Jio forcing market leaders like Vodafone India and Idea Cellular to take the merger route.

And here's a note from Profit Hunter

The pharma sector is going through its worst phase. Most pharma stocks are trading close to their 52-week low. Yet one has outshined the sector - Cadila Healthcare. The stock hit a record high today.

In an earlier note, we said to watch the 450 level which will act as a support for the stock as per the change of polarity principle (this level acted as resistance on the way up). A few days back, the stock slipped below this level but recovered immediately to trade above it, reinforcing the importance of this level.

Today, the company announced that it has received final approval form the US Food and Drug Administration (USFDA) for Mesalamine delayed-release tablets. The stock is up 9% for the day, trading at a lifetime high.

Will the stock continue with its current upside momentum or will weakness in the pharma sector drag the stock down? If it does, 450 is still the level to watch...

Cadila Healthcare at Its Lifetime High

 

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