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BSE gains 1,075 points on Monday; foreign investors turn significant buyers

The strong surge in equities, that started on Friday on the back of a cut in corporate tax rates and other incentives for India Inc., continued on Monday with the benchmark indices registering their best-ever two-day rally.

The 30-share Sensex gained 1,075.41 points, or 2.83%, to close above the psychological 39,000-mark at 39,090.03. The index has gained almost 3,000 points — 2,996.56 to be precise — in just two trading sessions.

Index constituents like L&T, ITC, Axis Bank, Kotak Mahindra Bank, ICICI Bank, Asian Paints and Indusind Bank all gained more than 6% each. Index heavyweights like HDFC and HDFC Bank also gained 5.22% and 4.86%, respectively.

Meanwhile, the broader Nifty closed at 11,600.20, up 326 points or 2.89%.

Friday’s announcements have made market experts turn bullish on the outlook for the equity market on the back of expected improvement in corporate earnings.

“The combination of monetary and fiscal stimulus should help revive India's growth rate... We raise our June 2020 BSE Sensex target from 40,000 to 45,000... reflecting higher earnings prospects rather than higher multiples,” stated the latest India strategy report by Morgan Stanley.

The global financial major expects the next set of triggers could be a rate cut by the Reserve Bank of India, disinvestment and sovereign bond issue, among others.

Interestingly, foreign portfolio investors were significant buyers on Monday as provisional data pegged their net buying at ₹2,684 crore. Foreign investors have ended most days in the recent past as net sellers even as the government took steps to waive tax surcharge that was announced in the Union Budget.

On the other hand, domestic institutional investors (DIIs), who had been supporting the markets with huge buying on a daily basis, were net buyers at ₹291 crore on Monday.

Meanwhile, the renewed investor confidence was clearly visible with more than 1,600 stocks gaining ground on Monday, as against 981 declines. Some of the sectoral indices, representing fast moving consumer goods, financials, banking, capital goods, consumer durables and energy, gained over 3% each.

Changes will become effective from October 1 this year

RBI had mandated external benchmark-linked interest rate for faster transmission of policy rates. SOMASHEKAR G R N

State Bank of India (SBI), the country’s largest lender, decided to link all the floating rate retail loans and loans to micro, small and medium enterprises (MSME) to the Reserve Bank of India’s (RBI) repo rate, with effect from October 1.

In July, SBI had linked home loans to the repo rate but decided to discontinue the product earlier this month after the RBI came out with guidelines, mandating external benchmark-based floating rate products.

Changes to product

“SBI had introduced floating rate home loans effective July 1, 2019. A few modifications have been made in the scheme effective October 1, 2019 to comply with the latest regulatory guidelines,” the bank said in a statement.

In the earlier repo-linked home loan product, only the principal component was equated to the monthly instalment while from October 1, both interest and principal will be equated to monthly instalments.

The interest rate of the repo rate-linked loan will be below the present structure of MCLR-linked loans.

The RBI had mandated external benchmark-linked interest rate to all banks for faster transmission of monetary policy rate.

Linking floating rate loans to repo rate would mean every time there is a change in repo rate, interest rates will change automatically.

Some lenders sell shares days before standstill pact ends

Some lenders of Zee Entertainment Enterprises Ltd. (ZEEL), who had entered into a standstill agreement over repayment of debt till September 30, sold shares days before the deadline ended.

Last week, the media and entertainment company had secured from some of the lenders another six-month extension to repay debt. Lenders who did not agree to give more time sold the shares.

Bulk deal

According to NSE data, Catalyst Trusteeship sold 72.5 lakh shares of ZEEL at ₹281.75 per share, thereby pegging the bulk deal value at ₹204.23 crore.

While it could not be independently confirmed, the buzz in the market was that the lender sold shares on behalf of Kotak Mutual Fund. A spokesperson for Kotak Mutual Fund declined to comment.

While Kotak Mutual Fund had an exposure of around ₹400 crore towards Essel Group, the company had repaid about ₹200 crore early this month.

"Essel Group confirms that the lenders who had not agreed to grant the extension, have exited by selling the pledged shares of ZEEL. The other lenders, who value the assets, have, in-principle, agreed to grant more time to the group,” a company spokesperson said.

The share sale triggered a 9.63% fall in ZEEL stocks to ₹272.10 on the BSE on a day when the broader indices rose close to 3%. Earlier this month, Essel Group completed the first tranche of stake sale of ZEEL, its flagship entity, to Invesco Oppenheimer Developing Markets  Fund and partially repaid the borrowers.

Essel Group had entered into an agreement to sell up to 11% promoter stake in Zee Entertainmentto the Fund. In the first tranche, the group sold 8.7% stake in ZEEL.

Following the stake sale, lenders received 45-60% of the total outstanding from Zee Entertainment.

Growth opportunities for Indian banks deliberated

Mutual understanding: Both sides also discussed the implementation of bilateral agreements. ap

India and the United Arab Emirates discussed areas for future cooperation, including growth opportunities for Indian banks, and the potential for private banks operating at the Abu Dhabi Global Market (ADGM) to offer private wealth services in India, according to a joint statement issued by the Ministry of Commerce and the Abu Dhabi Investment Authority.

The joint statement comes following the seventh meeting of the UAE-India High Level Joint Task Force on Investments, which was co-chaired by Sheikh Hamed bin Zayed Al Nahyan, Managing Director of Abu Dhabi Investment Authority (ADIA), and Indian Minister of Commerce Piyush Goyal.

The statement added that the Indian government had agreed to “give an early consideration and mutually beneficial solution” to the issue of tax treatment of the Abu Dhabi Investment Authority’s subsidiaries at the ADGM so as to facilitate the authority’s investments in India. “In the context of the Air Services Agreement between India and UAE and the memorandum of understanding with the Emirates of Abu Dhabi, Dubai, Ras-Al-Khaimah and Sharjah, both sides discussed the implementation of these bilateral agreements,” the joint statement said.

A mix of global and local factors responsible, says report

India’s containerised trade growth in Q2 2019 slowed to 1% from 9% over the same period last year, according to Maersk India Trade Report.

This was due to a host of international factors such as slowing trade growth, and growing trade tensions, coupled with domestic factors like rural consumer distress, tightening liquidity and a slowdown in key manufacturing sectors, it said.

Combined, these triggers impacted India’s economic activity, slowing overall import-export growth, it added. As per the report, west India delivered the highest growth with imports growing at 4% and exports at 11%. north India delivered 1% growth in imports and a decline of 9% in exports. South India registered 1% import growth and 2% export growth while east India recorded 2% growth in imports and a decline of 1% in exports.

Exports to China fall

“India’s exports to China declined by 20%, led by a reduction in demand for India-made textiles and apparel. Imports from China contracted more, by 22%,” the report said adding exports to Saudi Arabia have grown by 74% with vegetables and tiles, stone and glass exports from India.

Steve Felder, MD, Maersk South Asia, “Amid increasing global volatility, a slower local economy and the USA’s withdrawal of preferential access for certain Indian products, India’s import-export trade is expected to continue to face headwinds in the coming months.”

However, the Commerce Ministry’s recently proposed export promotion scheme, supported with a production-based support scheme, coupled with a weaker rupee, is expected to boost Make in India and benefit multiple industries, he said.

India’s overall trade with North America grew 14%, and with Europe a growth of 10% was witnessed in Q2 2019.

Containerised trade with the Mediterranean countries was flat, primarily due to a 2% reduction in exports.

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