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Indian Indices Erase Gains; Telecom Stocks Under Pressure
Fri, 27 Mar 12:30 pm | Monish Vora, TM Team

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After logging gap-up opening, share markets in India turned volatile and erased most of the early morning gains, even after the RBI in its MPC meet cut the repo rate by 75 bps to 4.40%.

Investors turned cautious after RBI Governor Shaktikanta Das said that there's a rising probability that large parts of the global economy will slip into recession.

The BSE Sensex is trading up by 110 points, while the NSE Nifty is trading up by 76 points.

The BSE Mid Cap index is trading up by 0.2%, while the BSE Small Cap index is trading up by 0.5%.

Sectoral indices are trading mixed with stocks in the banking sector and finance sector witnessing buying interest, while telecom stocks are witnessing selling pressure.

Note that, since the coronavirus outbreak, all BSE indices and NSE indices are down in the range of 25-35%.

Speaking of sectoral impact, in the article titled: Worst Hit Indian Sectors Amid Coronavirus Pandemic: 10 Points to Know, we dive deeper and look at how the impact has been on individual sectors...

The rupee is currently trading at 74.80 against the US$.

Gold prices are currently trading down by 0.4% at Rs 43,387.

A few days ago, we asked you to participate in Equitymaster's "State of the Markets" poll.

The poll asked you to vote on what holds next for the Indian stock markets amid the gloomy economy and coronavirus fears.

Many of you voted for the same and we thank you for participating. The numbers are in and here are the results.

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In news from the banking sector, Yes Bank on Thursday said it has increased its fundraising size to Rs 150 billion from Rs 100 billion.

In a late evening release, the bank said it will raise the additional amount through shares, ADRs, GDRs or convertible bonds.

Yes Bank has already raised over Rs 100 billion from State Bank of India (SBI) and other key banks and financial institutions through sale of equity under its reconstruction plan approved by the government and the Reserve Bank of India (RBI).

The RBI has also extended a Rs 600-billion credit line to the private lender for meeting obligations.

Yes Bank share price is presently trading up by 3.7%.

In one of the articles, we have written about the entire timeline of how YES Bank went from a stock market darling to a pariah. Read the article here: How the YES Bank Collapse Unfolded - 10 Points.

Moving on to news from the macroeconomic space, the Reserve Bank of India today, lowered the key repo rate by 75 basis points (bps) to 4.4%, to help arrest the economic slowdown in the wake of the coronavirus outbreak.

The reverse repo rate now stands at 4%, down 90 bps, falling to the lowest ever. Before this, it had hit the lowest point of 4.74% in April 2009 in the wake of the global financial crisis.

The six member Monetary Policy Committee (MPC) voted 4-2 in favour of the reduction of the repo rate by 75 bps, RBI Governor Shaktikanta Das said in an address to media.

Meanwhile, liquidity adjustment facility (LAF) has been reduced by 90 bps to 4% while cash reserve ratio (CRR) has been slashed by 100 bps to 3%.

The central bank advanced the policy review and the MPC met over March 24, 25 and 26 to analyze the situation caused by the unprecedented lockdown of the nation and all business activities.

The RBI also allowed banks and other lending institutions to extend the repayment schedule and moratorium by three months to avoid large NPAs and reduce risk weights.

Earlier, the US Federal Reserve had lowered the interest rates, bringing it near zero, in another emergency move to help shore up the US economy amid the rapidly escalating global coronavirus pandemic.

The Fed had cut interest rates by half a percentage point on March 3, too, in its first emergency cut since the financial crisis of 2008.

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Many other central banks have been taking the same measures to control coronavirus.

For instance, the Reserve Bank of New Zealand (RBA) slashed interest rates by 75 bps to a record low. The Reserve Bank of Australia poured US$ 3.6 billion in liquidity into Australia's financial system and said it was prepared to buy government bonds.

We will keep you updated on all the news from this space. Stay tuned.

Note that the coronavirus threat has meant sharp losses for global stock markets.

We have written a piece around how deep this impact has been felt in the global financial markets. You can check out the same here: Worst Week for Global Stock Markets: Coronavirus Impact in 10 Points

Speaking of the Indian economy, with the RBI cutting rates by a whopping 75 points, the focus of market participants has now shifted to whether the RBI's rate cut will translate into better economic activity in the near term.

Like this chart shows, RBI rate cuts have always had a big gap with bank lending rates.

Yet Another RBI Rate Cut May Not Result in Lower Lending Rates

Here's what Tanushree Banerjee wrote about it in one of the editions of The 5 Minute WrapUp...

  • It will be a while before lower lending rates stoke the economy.

    Therefore, hoping for an immediate revival in the economy is futile. The RBI has no magic wand to do this.

    Rather look for stocks that can outperform irrespective of the RBI policy.

    I believe the cement sector may be a good place to start.

    One of my recent recommendations from the sector is a typical Rebirth of India stock.

    And I won't be surprised if it repeats its 2002-2006 performance.

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


What else is happening in the markets today? Dig in...

Equitymaster requests your view! Post a comment on "Indian Indices Erase Gains; Telecom Stocks Under Pressure". Click here!

  

Stock Market Updates

Sensex Ends 173 Points Lower; IT and Realty Stocks Witness Selling (Today's Market)

Apr 8, 2020 Closing

While the BSE Sensex closed lower by 173 points, NSE Nifty closed lower by 43 points.

M&M FINANCIAL SERVICES Surges by 11%; BSE 500 Index Up 0.1% (Today's Market)

Apr 8, 2020 03:33 PM

M&M FINANCIAL SERVICES share price has surged by 11% and its current market price is Rs 162. The BSE 500 is up by 0.1%. The top gainers in the BSE 500 Index are M&M FINANCIAL SERVICES (up 11.2%) and ALKEM LABORATORIES (up 14.1%). The top losers are HDFC and OIL INDIA (down 0.1%).

CASTROL INDIA Surges by 6%; BSE OIL & GAS Index Up 0.2% (Today's Market)

Apr 8, 2020 03:33 PM

CASTROL INDIA share price has surged by 6% and its current market price is Rs 115. The BSE OIL & GAS is up by 0.2%. The top gainers in the BSE OIL & GAS Index is CASTROL INDIA (up 6.2%). The top losers are OIL INDIA (down 0.1%) and HPCL (down 0.1%).

ASTRAZENECA PHARMA Plunges by 5%; BSE HEALTHCARE Index Up 3.7% (Today's Market)

Apr 8, 2020 03:23 PM

ASTRAZENECA PHARMA share price has plunged by 5% and its current market price is Rs 2,828. The BSE HEALTHCARE is up by 3.7%. The top gainers in the BSE HEALTHCARE Index are ALKEM LABORATORIES (up 14.5%) and CADILA HEALTHCARE (up 11.2%). The top losers is ASTRAZENECA PHARMA (down 5.2%).

NILKAMAL Surges by 16%; BSE 500 Index Up 0.1% (Today's Market)

Apr 8, 2020 03:19 PM

NILKAMAL share price has surged by 16% and its current market price is Rs 1,140. The BSE 500 is up by 0.1%. The top gainers in the BSE 500 Index are NILKAMAL (up 15.9%) and ALKEM LABORATORIES (up 13.9%). The top losers are INDRAPRASTHA GAS and INDIAN BANK (down 0.1%).

P&G HYGIENE Surges by 5%; BSE FMCG Index Up 0.5% (Today's Market)

Apr 8, 2020 02:39 PM

P&G HYGIENE share price has surged by 5% and its current market price is Rs 11,009. The BSE FMCG is up by 0.5%. The top gainers in the BSE FMCG Index are P&G HYGIENE (up 5.3%) and ZYDUS WELLNESS (up 8.6%). The top losers are NESTLE (down 0.2%) and GODFREY PHILLIPS (down 0.4%).

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