Budget and Affordable Housing, IndusInd Bank Q1FY20 Results, and Top Cues in Focus Today

Mon, 15 Jul Pre-Open

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India share markets ended their volatile day on a negative note on Friday.

At the closing bell on Friday, the BSE Sensex stood lower by 86 points (down 0.2%) and the NSE Nifty closed down by 30 points (down 0.3%).

The BSE Mid Cap index ended the day up 0.4%, while the BSE Small Cap index ended the day up 0.2%.

Sectoral indices ended on a negative note with stocks in the capital goods sector and telecom sector witnessing most of the selling pressure.

Top Stocks in Focus Today

From the textiles sector, KPR Mill share price will be in focus today. The stock of the company witnessed selling pressure last week after the company withdrew its buyback proposal due to the tax proposed on buyback obligations in Budget 2019.

From the IT sector, Tech Mahindra share price will also be in focus today as the company has entered into a strategic partnership with Rackspace, which will enable cross-selling to company's customer base, joint product and services offerings, and improvements to Rackspace's internal business applications and processes.

With the above partnership, Rackspace will execute a new go-to-market commercial model and benefit from improvements and efficiencies to the management of business applications and processes.

Affordable Housing Gets a Further Fillip from Union Budget

In the news from the macroeconomic space... In the Union Budget 2019, affordable housing got a further fillip with an increase in Income Tax deduction of Rs 1.5 lakh on home loans.

Finance Minister Nirmala Sitharaman said the interest paid on housing loans is currently allowed as a deduction to the extent of Rs 2 lakh under Section 24.

To provide further impetus to affordable housing, an additional deduction of Rs 1.5 lakh will be given on interest paid on loans borrowed up to 31 March 2020 for purchase of house up to Rs 45 lakh.

Therefore, a person purchasing an affordable house will now get an enhanced interest deduction up to Rs 3.5 lakh. This will translate into a benefit of around Rs 7 lakh to the middle-class home-buyers over their loan period of 15 years, Sitharaman had said.

The government has proposed to insert a new section 80EEA in the Act so as to provide a deduction Rs 1.50 lakh additional income tax deductions on loan taken for residential house/property up to Rs 45 lakh from any financial institution.

To align the definition of affordable housing under the Income Tax Act with GST Acts, Sitharaman had proposed to increase the limit of carpet area from 30 square metre to 60 square metre in metropolitan regions and from 60 square metre to 90 square metre in non-metropolitan areas.

The cost of the affordable house has been fixed at Rs 45 lakh and below.

Note that, the real estate sector in India has been facing a lot of obstacles lately.

Due to all the headwinds, the number of developers has reduced, and this has created consolidation in the market.

Typically, such a reduction in investment in an industry, i.e. contraction of supply, paves the way for a recovery of profits.

From a supply perspective, the competitive intensity has reduced due to leveraged balance sheets of many developers.

This, in turn, has resulted in subdued launches and stalling of existing projects, thus overall reducing inventory and consolidation in the sector.

With this, the share of organised market players is expected to go up in the medium to long term.

This is a huge opportunity for long term serious players in the sector.

In the video below, Research analyst, Sarvajeet Bodas talks about how Modi's push towards affordable housing can revive the real estate sector and accelerate the economic activity.

IndusInd Bank Reports Healthy Growth in June Quarter

IndusInd Bank share price will be in focus today as the private sector lender reported a healthy growth in June quarter earnings after the merger of Bharat Financial Inclusion with itself. The numbers are not comparable on a year-on-year (YoY) basis due to this development.

During the quarter, net profit of combined entity stood at Rs 14.3 billion for the quarter ended June 2019.

Net interest income (NII), the difference between interest earned and interest expended, grew by 34% YoY at Rs 28.4 billion.

Gross NPA stood at 2.15% in the June quarter against 2.10% sequentially. Net non-performing assets (NPA) came in at 1.25% compared with 1.2% on a quarter-on-quarter (QoQ) basis.

The lender's absolute gross NPA stood at Rs 42 billion against Rs 39.4 billion in March quarter.

Provisions of the bank inched up to Rs 4.3 billion on a yearly basis from Rs 3.5 billion, while they saw a big slump from Rs 15.6 billion on a quarterly basis.

Crude Oil Continues Momentum

In news from the commodity space, crude oil witnessed buying interest last week. Prices rose on Friday as market participants tracked the rebound in global share markets.

Gains were also seen after US oil producers in the Gulf of Mexico cut more than half their output in the face of a tropical storm and as tensions continued in the Middle East.

Last week, prices traded higher after an industry group reported that US stockpiles fell for a fourth week in a row and on tensions around Iran and OPEC's extended cuts.

The market has been concerned that Russia wouldn't fully comply with the extended cuts.

Also, in other news for crude oil, it was reported that India's crude oil production in May year fell 7% to 2,800 thousand metric tonne (TMT) due to fall in production from fields operated by Oil and Natural Gas Corporation (ONGC), Oil India, and private operators.

The fall in domestic crude oil production pushed the country's crude oil import dependence to 85% in the month as compared to 83.8% recorded in the corresponding month a year ago.

As per the data, cumulatively, domestic crude oil production decreased 7% to 5,519 TMT during the first two months (April-May) of the current financial year (2019-2020), as compared to the corresponding period a year ago.

Note that rising crude oil prices coupled with decreasing production has a big impact on the Indian economy as it imports most of its energy needs.

Rise in crude oil increases input costs for dependent firms. It also means rising inflation. Rising inflation means rising interest rates.

It also puts pressure on the government to cut excise duty, thereby impacting its revenues. We have already seen that happening.

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

To know more on crude oil, you can read one of Vijay Bhambwani's recent articles: Is OPEC Dying?

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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