IMF on India's Growth, Developments for YES Bank, and Top Cues in Focus Today

Thu, 26 Dec Pre-Open

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India share markets witnessed selling pressure on Tuesday and ended on a negative note.

At the closing bell on Tuesday, the BSE Sensex stood lower by 181 points (down 0.4%) and the NSE Nifty stood down by 50 points (down 0.4%).

Both, the BSE Mid Cap index and the BSE Small Cap index, ended the day flat.

Stocks in the IT sector and energy sector witnessed huge selling pressure, while metal stocks were trading in the green.

Top Stocks in Focus Today

From the pharma sector, Glenmark Pharmaceuticals share price will be in focus today as the company has inked a sub-licensing agreement with Mankind Pharmaceuticals to co-market sodium glucose co-transporter-2 (SGLT2) inhibitor, Remogliflozin Etabonate (Remogliflozin) in India.

Under the agreement, Mankind will market the drug under its own trademark while Glenmark will manufacture and supply Remogliflozin to Mankind.

Alembic Pharmaceuticals share price will also be in focus today as the company has received final approval from the US Food & Drug Administration (USFDA) for its Abbreviated New Drug Application (ANDA) Travoprost Ophthalmic Solution.

The approved ANDA is therapeutically equivalent to the reference listed drug product, Travatan Ophthalmic Solution of Alcon Pharma.

The drug is indicated for the reduction of elevated intraocular pressure in patients with open angle glaucoma or ocular hypertension.

From the airline sector, market participants will be tracking Jet Airways share price as the creditors of the air carrier have decided to seek fresh initial bids for the airline.

The Committee of Creditors (CoC) would seek fresh Expression of Interest (EoI), according to a regulatory filing on Monday.

Earlier this month, the National Company Law Tribunal (NCLT) had directed the CoC to expedite their decision on seeking fresh EoIs in view of new interest being shown for the grounded airline.

India is in the Midst of a Significant Economic Slowdown: IMF

The International Monetary Fund (IMF) in its latest report has said that India is now in the midst of a significant economic slowdown and urged the government to take urgent policy actions to address the current prolonged downturn.

It also said that India's rapid economic expansion in recent years has lifted millions of people out of poverty. However, in the first half of 2019, a combination of factors led to subdued economic growth in India.

On the growth front, it said India's gross domestic product (GDP) growth is projected at 6.1% for fiscal year FY20, reflecting the primarily cyclical slowdown, which would be the lowest in 7 years, and is expected to rebound to 7% in FY21.

With risks to the outlook tilted to the downside, the IMF called for continued sound macroeconomic management. They saw an opportunity with the strong mandate of the new government to reinvigorate the reform agenda to boost inclusive and sustainable growth.

The report pinned the slowing growth of the Indian economy on the deceleration of consumption and investment that was made worse by regulatory uncertainty. It said the relatively low food prices contributed to 'rural distress'.

On a positive note, the IMF report said over the medium term, growth is projected to gradually rise to its medium-term potential of 7.3% helped by a firming in investment and private consumption in the second half of the fiscal year.

This is expected to be supported by the lagged effects of monetary policy easing, recent measures to facilitate monetary policy transmission and address corporate and environmental regulatory uncertainty, and government programs to support rural consumption being rolled out.

The report said that the other contributing factors to an improvement would include continued commitment to inflation targeting, gradual macro-financial and structural reforms, including implementation of reforms initiated earlier, such as the Goods and Services Tax (GST) and the Insolvency and Bankruptcy Code (IBC), as well as ongoing steps to liberalise FDI (foreign direct investment) flows and further improve the ease of doing business.

YES Bank Steps Out of F&O Ban; Shares Rise on Hopes of Fresh Funding

In the news from the banking sector, YES Bank share price will be in focus today as it came out of Futures & Options ban on Tuesday after open interest across exchanges fell below the market-wide position limit. The stock was banned from trading in the futures segment recently after the combined open interest in its derivatives contract crossed 95% of the market-wide position limit.

The open interest refers to all outstanding buy and sells positions in the security or futures, and options contracts.

The stock of the lender also witnessed buying interest yesterday after reports emerged that some European entities evinced interest to invest up to US$ 1 billion in YES Bank.

The investment banking sources said that discussions in this regard was at the advanced stage. Besides that, London-based Citax Holdings has already set aside US$ 500 million in an escrow account.

Meanwhile, YES Bank said that Canadian industrialist Erwin Singh Braich's US$ 1.2 billion binding offer continued to be under discussion even as reports suggest that the Reserve Bank of India (RBI) might not find merit it the bid.

Earlier last week, India Ratings and Research (Ind-Ra) had downgraded Yes Bank's Long-Term Issuer Rating from "A+" to "A", owing to inadequate and slow equity infusion. The fresh capital is critical for providing sufficient cushion for the credit cost impact of its stressed asset pool.

Ind-Ra considered equity infusion of US$ 1-1.2 billion in the next few weeks.

In a similar move, ICRA had also downgraded rating on Yes Bank's tier-II bonds from "A+" to "A". The downgrade was on the basis of continued uncertainty regarding the timing and extent of capital raise.

Note that the private bank on December 13 said the third quarter would remain subdued and there would be an improvement in the revenue in the March quarter on the back of government measures.

In a note, Yes Bank said that muted demand environment amid economic slowdown weighed on corporate earnings during the second quarter of 2019-20, with an aggregate revenue recording a contraction of 3.5% year-on-year (YoY) compared to an expansion of 3% in the preceding quarter of the financial year.

How the above developments pan out remains to be seen. Stay tuned for more updates from this space.

And to know what's moving the Indian stock markets today, check out the most recent share market updates here.

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