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Sensex Drops 298 Points, Moody's FY20 GDP Growth Forecast, and Top Cues in Focus Today
Fri, 11 Oct Pre-Open | Monish Vora, TM Team

Indian share markets ended their day deep in the red yesterday.

At the closing bell yesterday, the BSE Sensex stood lower by 298 points (down 0.8%) and the NSE Nifty closed down by 79 points (down 0.7%).

The BSE Mid Cap index ended the day down by 0.9%, while the BSE Small Cap index ended the day down by 0.6%.

Sectoral indices ended on a mixed note with stocks in the banking sector, finance sector and realty sector leading the losses, while telecom stocks and energy stocks witnessed buying interest.

Speaking of the volatility witnessed in Indian share markets lately, if you look at the stock market returns over the years, you will see that the markets have never moved in a linear fashion.

What do I mean by that?

It has never been a one-way street - only up or down.

Stock markets have always moved in cycles.

The Time to Buy Stocks is Now

Here's what Radhika Pandit wrote about this in a recent edition of The 5 Minute WrapUp...

  • If you would have bought stocks when either the Sensex or the Smallcap index was in a downturn, you would have made big returns once the cycle turned and the bulls took over.

    Sarvajeet and I believe we are seeing a similar situation currently.

    The economic slowdown does not herald the end of the world or for that matter the end of India. It's a phase and like all phases - This too shall pass.

So, the real question is - Are you taking advantage of these price declines to buy quality stocks?

Also, amid such volatile times in stock markets, Richa Agarwal reveals her investing strategy in the video below.

She also talks about the type of small cap stocks she is looking at during such times. Tune in...

Top Stocks in Focus Today

from the telecom sector, Bharti Airtel share price was in focus today as the telecom operator raised US$ 750 million (about Rs 53.3 billion) from investors based in Asia, Europe and the US through a hybrid financial instrument.

The company will use the proceeds for refinancing, investments in subsidiaries and general corporate purpose.

From the pharma sector, Torrent Pharma share price will be in focus today as the US Food and Drug Administration (FDA) issued a warning letter to Torrent Pharmaceuticals' Indrad plant in Gujarat on Tuesday following an inspection of the facility in April.

This action follows the earlier intimation received from USFDA in August 2019, wherein the agency had classified its inspection as Official Action Indicated (OAI).

Moody's Cut India's FY20 Growth Forecast

Moody's Investors Service cut India's gross domestic product (GDP) growth forecast for 2019-20 to 5.8% from the earlier estimate of 6.2%.

It attributed the deceleration to an investment-led slowdown that has broadened into consumption, driven by financial stress among rural households and weak job creation.

The ratings agency said that the drivers of the deceleration are multiple, mainly domestic and in part long-lasting.

Highlighting the diminished probability of sustained real GDP growth at or above 8%, it said that what was an investment-led slowdown has broadened into consumption, driven by financial stress among rural households and weak job creation.

A credit crunch among non-bank financial institutions (NBFIs), major providers of retail loans in recent years, has compounded the problem.

The ratings agency expects growth to pick up to 6.6% in FY21 and around 7% over the medium term.

Note that India's economic growth slumped to a six-year low of 5% in the April-June quarter. Further, according to the Reserve Bank of India (RBI), it is likely to be nearing this trough at 5.3% in the July-September quarter.

Last week, the RBI cut its benchmark interest rates last week for the fifth time this year to boost economic growth. The RBI cut repo rate by 25 basis points to 5.15%, which takes its cumulative cuts so far this year to 135 bps.

The six-member MPC decided to continue with an accommodative stance as long as it is necessary to revive growth, while ensuring that inflation remains within the target.

The MPC also sharply reduced its growth forecast for the fiscal year 2019-2020 to 6.1% from 6.9% earlier. The committee noted that risks to growth have emerged due to weak domestic demand and sagging export prospects on account of continuing trade tensions.

On the other hand, it retained its consumer price inflation forecast for the second half of the fiscal year 2019-202 as expected at 3.5%-3.7%.

Moody's noted that prolonged softer growth would dampen prospects for the government's fiscal consolidation plans and hamper its ability to prevent a rise in the debt burden.

With the recently announced corporate tax cuts and lower nominal GDP growth, it expects a central government deficit of 3.7% of GDP in 2019-20, marking a 0.4 percentage point slippage from its target.

How these estimates pan out remains to be seen in the coming months. We will keep you updated on developments from this space.

RBI Rejects LVB-Indiabulls Housing Finance Merger

From the banking sector, Lakshmi Vilas Bank (LVB) share price will be in focus today as the Reserve Bank of India (RBI) yesterday rejected the proposed amalgamation of Indiabulls Housing Finance with the bank.

The stock of the private sector lender hit an all-time low of Rs 25.65 yesterday on the back of above development.

On Wednesday, the RBI said the application for the voluntary amalgamation of Indiabulls Housing and its subsidiary Indiabulls Commercial Credit with LVB could not be approved.

Indiabulls in its statement to the stock exchanges said, "now that the merger will not happen with Lakshmi Vilas Bank, the uncertainty of the last five months on the business is lifted and the company will focus on its growth of the core business of housing finance."

The company also said it was considering a buyback of equity shares of the company, for which it has called a board meeting on October 14.

In June this year, the Competition Commission of India (CCI) had given its nod to the proposed amalgamation.

Indiabulls Housing Finance and LVB had proposed a merger between the two in April in a share-swap deal under which LVB shareholders would get 14 shares of Indiabulls Housing for every 100 equity shares held in the bank.

Note that shares of LVB have been hitting the lower circuit limit of 5% since the past eight consecutive sessions, after the RBI initiated prompt corrective action (PCA) against the Chennai-based bank.

The RBI's decision to bring the bank within the PCA framework sets ceilings and limits on big-ticket and high-risk lending.

Under the PCA, which was introduced in December 2002, the RBI imposes several restrictions on a bank, from lending to the distribution of dividends, etc. The measure is usually aimed at improving the performance of the bank.

Developments in the Telecom Sector

Shares of Bharti Airtel and Vodafone Idea were trading higher yesterday after Reliance Jio on Wednesday announced that it will be charging an Interconnect Usage Charge (IUC) from customers for calls made to the other networks.

Reliance Jio announced that all calls made to other mobile operators will be charged at the prevailing IUC rate until the regulator abolishes the IUC charge.

Reports state that this move will be positive for telecom companies.

The charge is fixed by the Telecom Regulatory Authority of India (TRAI) and is currently at 6 paise per minute.

What effect this development has on telecom companies remains to be seen. We will keep you updated on all the developments from this space.

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!

Read the latest Market Commentary

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Stock Market Updates

ENGINEERS INDIA Plunges by 5%; BSE CAPITAL GOODS Index Down 0.2% (Today's Market)

Oct 14, 2019 03:32 PM

ENGINEERS INDIA share price has plunged by 5% and its current market price is Rs 112. The BSE CAPITAL GOODS is down by 0.2%. The top gainers in the BSE CAPITAL GOODS Index are BHARAT ELECTRONICS (up 3.6%) and SUZLON ENERGY (up 3.0%). The top losers is ENGINEERS INDIA (down 5.0%).

INDIA TOURISM DEV. Surges by 11%; BSE 500 Index Up 0.2% (Today's Market)

Oct 14, 2019 03:26 PM

INDIA TOURISM DEV. share price has surged by 11% and its current market price is Rs 269. The BSE 500 is up by 0.2%. The top gainers in the BSE 500 Index is INDIA TOURISM DEV. (up 11.2%). The top losers are GODREJ CONSUMER and TTK PRESTIGE .

REPCO HOME Plunges by 6%; BSE 500 Index Up 0.6% (Today's Market)

Oct 14, 2019 03:10 PM

REPCO HOME share price has plunged by 6% and its current market price is Rs 300. The BSE 500 is up by 0.6%. The top gainers in the BSE 500 Index are PC JEWELLER (up 9.5%) and MOTILAL OSWAL (up 8.9%). The top losers are REPCO HOME (down 6.2%) and PNB HOUSING FINANCE LTD (down 5.7%).

RELIANCE CAPITAL Plunges by 10%; BSE 500 Index Up 0.7% (Today's Market)

Oct 14, 2019 02:58 PM

RELIANCE CAPITAL share price has plunged by 10% and its current market price is Rs 17. The BSE 500 is up by 0.7%. The top gainers in the BSE 500 Index are PC JEWELLER (up 11.2%) and INDIA TOURISM DEV. (up 8.9%). The top losers is RELIANCE CAPITAL (down 10.0%).

BAJAJ CONSUMER CARE Plunges by 5%; BSE FMCG Index Up 0.4% (Today's Market)

Oct 14, 2019 01:54 PM

BAJAJ CONSUMER CARE share price has plunged by 5% and its current market price is Rs 243. The BSE FMCG is up by 0.4%. The top gainers in the BSE FMCG Index are P&G HYGIENE (up 3.1%) and GODFREY PHILLIPS (up 2.3%). The top losers is BAJAJ CONSUMER CARE (down 5.1%).

Indian Indices Extend Gains; Tata Motors & ONGC Climb 5% (Today's Market)

Oct 14, 2019 12:30 pm

The BSE Sensex is trading up by 218 points, while the NSE Nifty is trading up by 57 points.

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