Tag - Stimulus

This Week in a nutshell (Nov 29th to Dec 03rd)

Technical talks

NIFTY opened the week on 29th Nov at 17,065 and closed on 03rd Dec at 17,196. During the week, NIFTY lost 1.2 per cent and has formed a Doji candle indicating strong buying and selling pressure from both sides. At the current juncture, on the weekly chart, the index has breached the 20-weekly moving average. Going ahead, the level of 17,077 is likely to act as strong support in the near term and the levels of 18,334 and 18,600 will act as immediate resistance levels.

Nifty IT gained 3.6 per cent this week while Nifty Healthcare (-3%) and Nifty Pharma (-2.6%) lost the most.

Weekly highlights

  • Auto sales numbers for Nov-21 were released this week andwere below the street expectations. The dip in sales was mainly due to the ongoing global chip shortage. Tractor demand was affected due to the delayed harvest of Kharif crops due to late monsoon rains this year. Two-wheeler buyers are postponing their purchases amid rising fuel prices, increasing prices, and ownership costs.
  • Indian carmakers are looking to increase prices from January next year to offset the rising input prices.
  • India’s trade deficit broadened in November as compared to October. The trade deficit stood at $23.3 bn as compared to $19.7 bn last month as per preliminary trade data released by the government. Imports were down 3.3% MoM AT $53.5 bn and exports were down by 16.2% MoM at $30 bn.
  • The GST revenue collection in November stood at ₹1,31,526 crores surpassing the October numbers. This is the second-highest collection since the implementation of GST. Improvements in compliance and filing of returns, tax evasions, and enhancement of system capacity are some of the reasons why GST revenue numbers are scaling new highs.
  • The US markets witnessed increased volatility as Federal Reserve Chair Jerome Powell signalled winding up its asset purchases earlier than the decided time frame due to heightened inflation risks that are expected to be around in the next year as well.
  • The US government averted a nationwide session one day ahead of the deadline, passing the resolution by a 69 to 28 vote.
  • On Friday, the US markets saw a sharp sell-off in technology stocks sinking NDX 100 down by 1.7%. This was an exhausting week for traders in the US due to the Fed’s decision to taper stimulus sooner than before, the outbreak of Omicron, and mixed US jobs data.
  • Oil posted its longest stretch of weekly losses since 2018 as investors are worried about the impact of Omicron on demand, while OPEC+ decided to continue its supply to the markets. West Texas Intermediate crude futures fell 2.8% this week.
  • The foreign institutional investors (FII) sold equities worth Rs 1,58,190 mn, while domestic institutional investors (DIIs) bought equities worth Rs 16,45,00 mn.

Things to watch out for next week

  • Markets this week will be driven mostly by updates related to the new coronavirus variant Omicron, rising crude prices and increasing US dollar.
  • The Monetary Policy Committee will disclose its interest rate decision on Wednesday. The street will closely watch how the RBI will react to the current Omicron crisis, economic growth, inflation numbers and hawkish US Fed. Experts largely feel the central bank could hike the reverse repo rate. In this policy, RBI may remain less accommodative citing inflation concern and hawkish US Fed.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

To some extend pain is addressed by RBI- Mr Dinesh Khara, SBI

Update on the Indian Equity Market:

On Wednesday Nifty closed -4.0% lower at 8,253. Among the sectoral indices NIFTY IT (-5.5%), NIFTY Bank (-4.9%), NIFTY PVT Bank (-4.9%) closed lower. None of the sectors closed on a positive note. Tech Mahindra (-9.4%), Kotak Bank (-8.7%), and AXIS Bank (-6.2%) led the losing stocks. Hero Motocorp (+2.5%), Bajaj Auto (+1.0%), Bajaj Finance (+0.5%) were among the top gainers.

Excerpts from an interview of Mr Dinesh Khara, MD- Global Banking and subsidiaries of State Bank Of India with CNBC-TV18 dated 31st March 2020:

  • Speaking on recent measures by RBI Mr Khara said the steps taken by RBI have mitigated the stress which the bank would have seen on account of the 21-days lockdown which has been announced.
  • However, the only thing could be the special mention accounts – SMA-I and SMA-II, which normally has a tendency of seeing the recovery towards the latter half of the month. So there, the bank might face some kind of a situation but that also is being resorted through follow up mechanism.
  • He added the pain has been addressed to an extent of about 90 %.
  • Speaking about the moratorium, he said everybody is entitled to the moratorium unless they opt-out.
  • For the next quarter, on the margin front, the bank has not looked at this point as the issue is evolving.
  • On asset quality, Mr Khara said the bank is in the process of evaluating the impact and it would be too early to say anything.
  • On SMEs, SBI announced an emergency package for SMEs, which is 10 per cent of the working capital for all the accounts which are performing. This package was announced even before the steps taken by RBI.
  • Speaking about loan growth he said after the lockdown is taken off, there would be pent-up demand and to meet that demand, the corporates might go for shoring up their working capital too. Apart from that, there is bound to be some kind of reconstruction effort post COVID-19 and the bank is confident that will also bring in opportunities for credit growth.

Consensus Estimate: (Source: market screener and Investing.com websites)

  • The closing price of SBI was ₹ 187/- as of 01-April-2020.  It traded at 0.7x/ 0.6x/ 0.5x the consensus Book value per share estimate of ₹ 249/277/312 for FY20E/ FY21E/ FY22E respectively.
  • The consensus average target price for SBI is ₹ 384/- which implies a PB multiple of 1.2x on FY22E BVPS of ₹312/-.