Of RBI Monetary Policy, Key Q3FY19 Results, and Top Cues in Focus Today

Thu, 7 Feb Pre-Open

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Indian share markets ended the day on a strong note yesterday. Gains were largely seen in the metal sector and IT sector.

At the closing bell yesterday, the BSE Sensex stood higher by 358 points (up 1%) and the NSE Nifty closed higher by 128 points (up 1.2%). The BSE Mid Cap index closed down by 0.1%, while the BSE Small Cap index ended the day up by 0.1%.

RBI Monetary Policy

Indian stock markets will be taking cues from the Reserve Bank of India (RBI) policy statement that will be released today.

Market participants are expecting that the central bank could consider cutting rates by 25 basis points (bps).

However, any change in the stance could trigger further volatility for the Indian rupee.

This will be RBI governor's first policy meeting and a dovish stance could put the currency under pressure.

In its December monetary policy review, the RBI had kept interest rates unchanged but held out a promise to cut them if the upside risks to the inflation do not materialise.

Developments in the Pharma Space

From the pharma sector, Lupin share price will be in focus today as the company announced that it has launched in the US generic Clomipramine Hydrochloride capsules which are used in treatment of symptoms of obsessive-compulsive disorder.

The drug is indicated for patients with obsessive-compulsive disorder (OCD) symptoms.

As per IQVIA MAT December 2018 data, Clomipramine Hydrochloride capsules in the three strengths had annual sales of US$ 96.2 million in the US.

To know more about the company, you can access to Lupin's Q2FY19 result analysis and Lupin's 2017-18 Annual Report Analysis on our website.

Dr Reddy's Laboratories share price will also be in focus today as the company announced its wholly-owned subsidiary in USA is continuing its voluntary nation-wide recall of lot ABD807 of Levetiracetram in 0.54% Sodium Chloride injection to the hospital level in the North American country.

According to a letter written to the US Food and Drug Administration on Februray 4, the drug maker said the recall, which began in October 2018, was originally initiated due to a product complaint received for mislabelling.

Levetiracetam injection is an anti-epileptic drug indicated for adjunct therapy in adults on certain types of seizures.

Dr Reddy's Laboratories Inc has notified the distributors to arrange for return of any recalled product.

To know more about the company, you can access to Dr. Reddy's Q2FY19 result analysis and Dr. Reddy's Stock Analysis on our website.

From the Results Corner...

Hindustan Petroleum Corporation Ltd (HPCL) reported a Rs 2.5-billion net profit for the third quarter of FY19.

This is 87% lower than the Rs 19.5-billion profit reported by the company in the corresponding quarter of FY18.

Reportedly, the decrease in profit was mainly due to inventory losses caused by falling crude prices and higher fuel and loss component.

The combined gross refinery margin (a measure of the gain per barrel of crude oil refined) during the October-December 2018 period was US$3.72 per barrel as compared with US$9.04 a barrel in the corresponding previous period.

Reportedly, inventory loss (a measure of the loss per barrel of crude oil under processing due to price changes in the international market) stood at US$6.29 per barrel. This brought down the bottom line by Rs 34.7 billion. In the same period last fiscal, HPCL reported an inventory gain of Rs 2.94 per barrel.

ICRA Warns Stressed Corporate Loans May Turn into NPAs

From the macroeconomic space, India Ratings and Research (Ind-Ra) in its latest report warned that around Rs 3.5 trillion or 3.9% of the stressed corporate loans continue to remain unrecognised on the books of banks, while around Rs 1.5-2 trillion or 40% of them may slip into NPAs by September 2020.

It indicated that as of September 2018, these accounts constitute the total stressed corporate exposure (interest coverage ratio of 1.5x) of 19.3% or Rs 13.5-14 trillion.

According to the report, banks have recognised only Rs 10 trillion out of the Rs 13.5-14 trillion stressed corporate loans as of September 2018.

It also stated that banks may require an additional of Rs 400 billion in provisions for these Rs 1.5-2 trillion loans, which may become dud assets. It expects state-run banks would require incremental capital of about Rs 660 billion from the fourth quarter of FY19 through FY20, which is needed for a credit expansion of 10-11% in FY19 and FY20 each.

However, it pointed out that this capital infusion is not adequate to cover the impact of Ind-AS which could be substantial.

Apart from the above, the agency has maintained a stable outlook on large private sector banks and just two of the 19--State Bank of India and Bank of Baroda-and has retained a negative outlook for the remaining state-run banks till FY20.

It said in FY20, all banks on which we have a stable outlook might see moderate write-backs of provisions on corporate assets, depending on the pace of resolutions.

It would be interesting to see how this pans out. Meanwhile, we will keep you updated on all the developments from this space.

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