RBI's Move for Banks Investing in Debt MFs, M&M Q1 Results, and Top Buzzing Stocks Today

Mon, 10 Aug Pre-Open

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Indian share markets ended on a flat note on Friday as benchmark indices reversed losses during closing hours, supported by financials especially Bajaj twins and HDFC Bank.

At the closing bell on Friday, the BSE Sensex stood higher by 15 points.

Meanwhile, the NSE Nifty closed up by 14 points.

The BSE Mid Cap index ended up by 1.4%.

The BSE Small Cap index ended up by 0.8%.

On the sectoral front, gains were largely seen in the power sector and telecom sector.

Gold prices witnessed huge buying interest and hit new record-high last week.

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Top Stocks in Focus Today

Cipla will be among the top buzzing stocks today as Cofsils, a brand under Cipla Health, has launched the Cofsils Face Mask, 3-ply single-use disposable face mask for protection against harmful viruses and bacteria. Reportedly, the 3-ply face mask provides 98% virus protection at 0.1 micron and 98% bacterial protection at three microns.

Cipla is also working with government agencies to develop a treatment for COVID-19 while ramping up the production of various life-saving essential drugs. Meanwhile, the company is offering drugs, which have shown potency in treating COVID-19, in partnership with its global partners.

Shares of Delta Corp, Eveready Industries, KPIT Technologies and Centrum Capital will be among the top gainers today as the BSE relaxed circuit limits for these stocks last week.

Bayer CropScience will also be in focus today as the company reported encouraging numbers for the quarter ended June 2020 (Q1FY21). For the quarter under review, Bayer CropScience reported an 86% increase in its consolidated net profit at Rs 2,517 million on better monsoon that helped boost its sales of seeds and crop protection products. Revenue from operations stood at Rs 12.3 billion, up 29% against Rs 9.5 billion in the corresponding quarter of the previous fiscal.

RBI Relaxes Risk Capital for Banks to Invest in Debt Mutual Funds

The Reserve Bank of India (RBI), in its statement on Developmental and Regulatory Policies issued last week, reduced the risk capital that banks need to set aside against investment in debt mutual funds and exchange-traded funds (ETFs).

The move may improve liquidity in debt mutual funds and ETFs.

Currently, banks have to set aside more capital when they invest in debt mutual funds compared to when they buy debt instruments directly. This is because investment in debt mutual funds is treated on par with equity funds when it comes to capital requirements of banks.

On the other hand, when banks directly invest in debt papers, capital requirements are generally lower and based on the credit rating and nature of the debt instruments.

However, noting the risk of sudden redemption in debt funds, the central bank did not go for a complete harmonization. "A general market risk charge of 9% will continue to be applied," said the RBI statement.

Reports state that this may cause lower churn of inflows and outflows into debt funds.

This is also a positive development from the point of view of debt fund investors. Banks normally park their surplus liquidity in certain debt fund categories like liquid funds. This move will marginally improve flows in liquid funds and possibly corporate bond funds.

How this pans out remains to be seen. Meanwhile, we will keep you updated on all the latest developments from this space.

M&M Reports 97% YoY Decline in Q1 Net Profit

Mahindra & Mahindra (M&M) reported a 97% year-on-year (YoY) decline in consolidated net profit at Rs 677.9 million for the June quarter of FY21 (Q1FY21). This included one-time gain of Rs 290 million.

The company had reported a profit of Rs 22,597.4 million in Q1FY20.

The company's revenue also fell 56% YoY to Rs 55.9 billion from Rs 128.1 billion reported in the year-ago quarter.

M&M sold 27,565 vehicles in Q1FY21, a 78% YoY drop from 1.23 lakh units sold in Q1FY20. Tractor sales also declined 22% YoY to 64,140 units while exports (vehicles and tractors) dropped 72% to 3,109 units from 10,923 in the year-ago quarter.

The company said, Indian auto industry (excluding two wheelers) reported a de-growth of 81.5% over the previous year. After the first ever zero sales in the month of April, the industry is finding its way back.

M&M's operating margin for the quarter stood at 10.3% as compared to 14% in Q1FY20.

The company approved the appointment of Nisaba Godrej and Muthiah Murugappan as additional directors on the board of directors. The company has also sought shareholders' approval to cut stake in Ssangyong Motor to less than 50%.

To know more, you can read M&M's Q1FY21 result analysis on our website.

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

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