RBI Monetary Policy Takeaways, Gold Hits Record High, and Top Buzzing Stocks Today

Fri, 7 Aug Pre-Open

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Indian share markets ended on a positive note yesterday after the RBI kept the repo rate unchanged at 4%.

At the closing bell yesterday, the BSE Sensex stood higher by 362 points (up 1%).

The NSE Nifty closed higher by 98 points (up 0.9%).

The BSE Mid Cap index ended up by 0.8%.

The BSE Small Cap index ended up by 1%.

On the sectoral front, gains were largely seen in the IT sector and FMCG sector.

Speaking of the current stock market scenario, note that after over 2 years of lag, the smallcap index is beating Sensex in the post Covid rebound.

As per Richa Agarwal, lead smallcap analyst at Equitymaster, the next few days would be crucial for making big gains in smallcap stocks. But while it is time to act, you must tread with caution. Post Covid, Richa expects a lot of clean up in the smallcap space, with only a few quality stocks emerging as winners.

She will be revealing more about these quality stocks online at her Rebound Riches Summit on Friday, 7 August 2020.

To book your free seat for this summit, please click here.

Also, speaking of stock markets, in his latest video, co-head of research, Rahul Shah talks about how you can make winning penny stock investments with the help of few simple ratios. He talks about the most critical data points that are needed to make successful penny stock investments.

Tune in to find out more:

Top Stocks in Focus Today

Bharti Airtel will be among the top buzzing stocks today as the company announced a multi-year strategic pact with Amazon Web Services (AWS), the cloud services arm of the retail giant to deliver Cloud solutions to large as well as small and medium enterprise (SME) customers in India. Reportedly, it is a 50:50 strategic partnership. According to the reports, the public Cloud services market in India is likely to touch US$7.1 billion in 2024, rising at a compound annual growth rate (CAGR) of 20.3% from US$3.4 billion in 2020.

Federal Bank share price will also be in focus today as the lender is going to buy an additional stake of up to 4% per cent in IDBI Federal Life at Rs 27.56 per share. IDBI Federal Life Insurance is a three-way joint-venture of IDBI Bank, Federal Bank and Ageas, a multinational insurance giant based out of Europe.

Market participants will also track Blue Star share price as the air conditioning and commercial refrigeration major reported a net loss Rs 196 million in the first quarter of the current financial year as compared to a net profit of Rs 768 million in Q1 FY20. The company said swift actions taken to reduce operating costs helped mitigate the adverse profitability impact to a large extent.

RBI Monetary Policy Takeaways

In news from the macroeconomic space, the Reserve Bank of India kept repo rate unchanged at 4% in its second bi-monthly monetary policy meeting for FY21. It maintained the stance as 'accommodative'.

RBI has already cut interest rates by 115 basis points this year, taking the repo rate down to 4%, the lowest since it was introduced in 2000.

In its outlook for the rest of the year, the RBI MPC noted that inflation was expected to remain elevated in the second quarter of 2020-21 and ease thereafter in the second half of the year.

On the economic growth front, Governor Das said, without putting any number to it, that India's real gross domestic product would contract in the first half of FY21 as well as full financial year.

The governor also announced a one-time restructuring for all loans across sectors affected by the pandemic.

Borrowers whose accounts were classified as standard will be eligible for the restructuring, provided they didn't default for more than 30 days with any lending institution as on March 1, 2020.

Also, banks can invoke the resolution plan till December 31, 2020, which will have to be implemented within 180 days from the date of invocation.

Thirdly, lenders shall have to keep additional provisions of 10% on the post-resolution debt. Banks not signing the inter-creditor agreement (ICA) within 30 days from the date of invocation shall attract higher provisions of 20%.

The central bank has said stressed that micro, small and medium enterprises (MSME) will be eligible under the existing framework, provided their accounts were classified as standard as on March 1, 2020. This restructuring will have to be implemented by March 31, 2021. However, there is already a debt restructuring scheme going on for MSMEs.

Apart from the above, the RBI Governor also eased the loan-to-value ratio for gold loans to 90% from 75%. So far, as per RBI guidelines, loans given by the banks against gold ornament for non-agricultural purposes could not exceed 75% of the value of gold ornament or jewellery pledged.

With the above development, banks and NBFCs can heave a sigh of relief with the RBI finally acknowledging their concern and admitting the demand for a one-time restructuring package.

By allowing restructuring, the regulator allows banks to relax terms of a loan that can be done either by extending the payment period, cutting the rate of interest or by offering a payment holiday.

Note that amid fast-changing macroeconomic environment and a deteriorating outlook for growth, the MPC has had to hold off-cycle meetings in March and May this year.

The MPC has cumulatively cut the repo rate by 115 basis points in these two meetings, taking the total policy rate reduction since February 2019 to 250 basis points.

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

Gold Prices Surge to Fresh Record High

Domestic gold prices rose yesterday, tracking the trend in the international market.

On MCX, October gold futures rose 0.8% to hit a new high of Rs 55,597 per 10 gram at Indian stock market closing hours yesterday, tracking a global rally.

Domestic gold prices are off to a strong start this week after posting strong gains in the previous week.

In global markets, gold prices hit a new high by rising above the important US$2,000 mark. A weaker dollar, expectations of more stimulus and rising coronavirus cases boosted the safe-haven demand of gold.

Spot gold was up 0.2% at US$2,022.4 per ounce after rising above US$2,030 in early session. US gold futures rose 0.9% to US$2,039.

Investors in India are also seen flocking to sovereign gold bonds, which in the fourth tranche saw over 4 tonnes of gold equivalent being subscribed. Gold exchange traded funds (ETFs) are also witnessing increased buying interest with the net inflow in June being at Rs 4.9 billion while net assets under management (AUM) as on June end were at Rs 108.5 billion.

So, is this the right time to buy gold or silver? And how can one go about investing in this precious metal?

We answer these questions in our Youtube Playlist on gold investing where you can find trading ideas on gold by India's #1 trader Vijay Bhambwani. And find out the right way to profitably trade gold now.

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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