The Nifty and the Sensex opened the week on a bullish note after the holiday weekend and last week’s bullish close.
Join us as we follow the top business news through the day.
Stocks most expensive in a long time
Indian shares hit record closing highs on vaccine hopes, signs of economic recovery
Another very good day for stocks.
PTI reports: «Indian shares hit record closing highs on Tuesday following their best monthly gain since April, after data showed a smaller-than-expected contraction in Asia’s third-largest economy and as hopes for a COVID-19 vaccine boosted bets for a quicker economic recovery.
Breakthroughs in developments for a vaccine had driven markets across the world sharply higher in November, with India’s main stock indexes too climbing over 11% each on the back of record inflows from foreign institutional investors.
The domestic market extended gains on Tuesday after data released late Friday showed India’s economy contracted by 7.5% in the September quarter, versus an 8.8% contraction expected in a Reuters poll, amid signs of a pick-up in manufacturing.
The NSE Nifty 50 index closed up 1.08% at 13,109.05, while the benchmark S&P BSE Sensex climbed 1.15% to 44,655.44. Indian markets were closed on Monday for a holiday.
Investors looked past a survey released earlier in the day showing India’s manufacturing recovery faltered in November as virus fears weighed on demand and output.
In Mumbai, heavyweight IT firm Infosys Ltd was the biggest boost to the indexes, rising 3.4%. Large private-sector lender ICICI Bank Ltd jumped 2.5%.
The Nifty Auto Index ended 1.1% higher after a handful of automakers reported monthly sales figures. Bajaj Auto Ltd advanced 2.2% after reporting a near 5% rise in sales for November.
The Nifty PSU Banking Index, which tracks state-run lenders, was among the best performers, closing 2.9% higher at its best level since late August.
India’s most valuable company Reliance Industries Ltd rose 1.3%.
European peers also made a positive start to the month following a record-breaking November and U.S. futures were higher after a drop on Monday, while MSCI’s broadest index of Asia-Pacific shares outside Japan climbed after robust China data.»
GST revenue at ₹1.04 lakh crore in November
Revenue from Goods and Services Tax (GST) stood at over Rs 1.04 lakh crore in November as against ₹1.05 lakh crore collected in the previous month, the Finance Ministry said in a statement. This is the second straight month in the current fiscal when GST revenue has topped ₹1 lakh crore.
The collection in November 2020 is 1.4 % higher than in November 2019 when the GST mop-up was ₹1,03,491 crore.
“In line with the recent trend of recovery in the GST revenues, the revenues for the month of November 2020 are 1.4 % higher than the GST revenues in the same month last year.
“During the month, revenues from import of goods were 4.9 % higher and the revenues from domestic transaction (including import of services) are 0.5 % higher than the revenues from these sources during the same month last year,” the ministry said in a statement.
Paytm waives off charges on merchant transaction
Paytm on Tuesday said it has waived off all charges on merchant transactions, enabling them to accept payments from Paytm wallet, UPI apps and RuPay cards at zero charge.
“Paytm will absorb ₹600 crore in MDR (merchant discount rate) charged annually by banks and other charges to support MSMEs during the ongoing pandemic. This move would help in ensuring that they have adequate liquidity to expand their businesses,” the company said in a statement.
It added that this will benefit over 17 million merchants who use Paytm All-in-One QR, Paytm Soundbox and Paytm All-in-One Android POS (point-of-sale) to accept payments from their customers.
“We are absorbing MDR to extend support to our merchant partners to increase their overall liquidity to expand their businesses…This move would also encourage merchants to embrace digital payments which would further strengthen the Digital India mission,” Kumar Aditya, Senior Vice President, Paytm said.
HC pulls up RBI for letting PMC Bank decide on depositors requests for money
The Delhi High Court on Tuesday pulled up the RBI for leaving it to scam-hit PMC Bank to decide which emergencies cited by its depositors were to be considered for the disbursal of ₹5 lakh to them, saying since the central bank imposed the restrictions it should have been the one taking the decision.
Punjab and Maharashtra Cooperative Bank has been put under restrictions, including limiting withdrawals, by the RBI, following the unearthing of a ₹4,355-crore scam.
“The Reserve Bank of India (RBI) was to apply its mind and not act as a post office. If you (RBI) have imposed the restrictions, then you have to apply your mind. You cannot accept what PMC bank says as gospel truth. You cannot leave it to PMC bank to decide to whom it will disburse funds.” said a Bench of Chief Justice D N Patel and Justice Prateek Jalan.
“This is not satisfactory. You cannot leave it to the PMC bank to decide. There has to be some way to monitor it. something independent of the administrator (appointed by RBI),” the Bench added.
India’s Nov diesel sales down 7% y/y, petrol up 5%- preliminary data
More mixed data on the economic recovery.
Reuters reports: «India’s diesel sales in November declined 7% from a year earlier although they rose by 8% on previous months, preliminary data on fuel sales by state refiners showed.
Diesel consumption, a key parameter linked to economic growth and which accounts for about 40% of overall refined fuel sales in India, totalled about 6.21 million tonnes in November.
Sales of gasoline rose 4.9% from a year earlier to 2.4 million tonne, a growth of about 8% from October.»
Canada plans digital tax in 2022 on global tech giants such as Facebook, Google
Canada plans to impose a tax on corporations providing digital services from 2022 that will stay in place until major nations come up with a coordinated approach on taxation, the Finance Department said on Monday.
The Organisation for Economic Cooperation and Development is working on a common approach to ensure digital behemoths, such as Alphabet Inc’s Google and Facebook Inc, pay their share of taxes as the coronavirus hammers budgets.
Canada said it was concerned about a delay in reaching agreement. The threat of digital services taxes has prompted threats of trade retaliation from outgoing U.S. President Donald Trump’s administration.
Indian rupee hits 1-1/2-month high; RBI liquidity stance eyed
Here’s what is behind the rally in the rupee.
Reuters reports: «The Indian rupee strengthened on Tuesday to its highest level in 1-1/2 months, boosted by foreign fund inflows to equities, though traders remain wary of central bank intervention to prevent a sharp rally in the currency.
The partially convertible rupee was trading at 73.50/51 per dollar at 0755 GMT, after touching 73.45 earlier in the session – it highest since Oct. 21.
“The absence of the central bank from the market has helped the rupee break the 73.75 barrier,” said a senior trader at a foreign bank. “The 73.40 is the next level to watch out for now.”
The BSE and the broader NSE share indexes were trading 0.9% higher on Tuesday. The benchmark indexes ended November with gains of 11% each, driven by record inflows and on promising news surrounding vaccine efficacy rates.
The Reserve Bank of India (RBI) has been aggressively buying dollars from the spot market to prevent a sharp appreciation in the unit and ensure export competitiveness.
That led to a massive infusion of rupees in the banking system, causing money market rates to crash with the overnight interbank call rate falling on some occasions below the reverse repo rate, the lower band of the policy rate corridor.
The RBI’s monetary policy committee is expected to leave interest rates unchanged on Friday, after data showed that the economy contracted less than expected in the September quarter alongside persistently high inflation.
Traders, however, are closely watching the commentary from the RBI around liquidity.
“Official preference is to soak dollar inflows to keep rupee on an even keel, which has in turn pushed up INR liquidity. This has seen the INR surface as the regional underperformer vs US dollar year-to-2020,” said Radhika Rao, an economist with DBS Bank.
“The RBI is likely to ease its grip on the INR while focusing on mainstream policy and bond market stability,” she added, referring to the 2021 outlook.»
Zoom’s margins dented by booming free user base, cloud costs
Zoom Video Communications Inc warned on Monday its gross margins would remain under pressure going into 2021 as the surging number of free users of its video conferencing service makes it hard to offset a spike in costs to maintain its growth.
Shares of the company, which have risen about sevenfold this year fueled by the meteoric rise in demand in video conferencing for work, school or socializing due to the COVID-19 pandemic, fell 5% after the bell, despite upbeat fourth-quarter forecasts.
Zoom operates some of its own data centers, but it also relies on cloud computing services from outside vendors such as Amazon.com and Oracle Corp, meaning it must bear costs for free users.
Those bills, driven in part by a jump in free users in the third quarter as millions of students and teachers started new school semesters, pushed down Zoom’s gross profit margins to 66.7%, below analysts’ estimates of 72.1%, and its pre-pandemic average of around 80%.
India central bank seen holding rates; liquidity stance watched
What’s expected from the RBI’s upcoming policy meet?
Reuters reports: «The Reserve Bank of India monetary policy committee is expected to leave interest rates unchanged when it meets on Friday, after data showing the economy contracting less than expected and persistently high inflation.
Economists and market participants are closely watching the commentary from the RBI around liquidity. The overnight call money rate has fallen below the reverse repo rate on days on account of the excess liquidity in the banking system.
“The MPC’s views on liquidity will assume more importance, as the transient surplus has pushed down short-term/overnight rates sharply,” said Radhika Rao, an economist with DBS Bank.
Economists expect the RBI to announce measures to help tweak market rates through liquidity absorbtion operations or giving increased access to the reverse repo window to more market participants.
All 53 analysts and economists in Reuters poll conducted ahead of the GDP data released last week said they don’t expect any change in rates on Friday.
Economists also pushed back the expected timing for the next rate cut by a quarter after the RBI having cut its key interest rate by a total 115 bps this year to a record low of 4%.
The poll showed economists now expect the next rate cut to be in the Apr-June quarter, as against the Jan-March period they had predicted in the previous two surveys.
Inflation has remained consistently above the upper end of RBI’s mandated 2%-6% target range every month barring March this year while core inflation has also remained sticky.
On the other hand in the September quarter gross domestic product contracted 7.5% on year compared to a decline of 23.9% in the previous three months, when the impact of the coronavirus pandemic was more pronounced.
RBI governor Shaktikanta Das last week said the economy was showing stronger than expected pick-up in recovery but one needs to be watchful of the sustainability of demand after a series of religious festivals.»
US bond yields fall to record low
India’s factory recovery stumbled in Nov as COVID-19 fears remain
Is pent-up demand that drove the rebound getting exhausted?
Reuters reports: «India’s manufacturing recovery faltered in November as coronavirus fears weighed on demand and output, prompting firms to cut jobs for the eighth month in a row, a survey showed.
Asia’s third-largest economy and the second most affected country by the pandemic contracted 7.5% in the July-September quarter, compared to a record 23.9% slump in the previous quarter amid some signs of a recovery in manufacturing, official data showed on Friday.
But the Nikkei Manufacturing Purchasing Managers’ Index , compiled by IHS Markit, declined to 56.3 in November from October’s more than a decade high of 58.9, although it well above the 50-level separating growth from contraction for a fourth month.
Sub indexes tracking overall demand and output indicated robust growth but rates of expansion were the weakest in three months.
“Although the softening of rates of expansion seen in the latest month does not represent a major setback, since these are down from over decade highs in October, a spike in COVID-19 cases and the possibility of associated restrictions could undermine the recovery,” noted Pollyanna De Lima, economics associate director at IHS Markit.
“Companies noted that the pandemic was the key factor weighing on growth during November, with COVID-related uncertainty also restricting business confidence.”
Recent resurgence in infections in some parts of the country pushed local governments to reimpose some restrictions on mobility, threatening the recovery.
Millions have already lost their jobs or suffered pay cuts since the pandemic started and manufacturing firms reduced headcount for the eighth month in a row, a streak not witnessed since the survey began in March 2005.
Meanwhile, the strongest rise in input costs since August forced firms to increase selling prices at the quickest pace in nine months, indicating overall inflation would remain above the Reserve Bank of India’s medium-term target of 2-6%.
That would limit the RBI’s room to ease monetary policy further.
Optimism about the coming 12 months waned for the first time in six months despite rising hopes on the progress of coronavirus vaccines, which has boosted global stock markets to record highs.»
Rupee surges 25 paise to 73.80 against US dollar in early trade
The rupee mirrored the bullish start in stocks.
PTI reports: «The rupee appreciated 25 paise to 73.80 against the US dollar in the opening session on Tuesday, tracking strong domestic equities and sustained foreign fund inflows.
Traders said investor risk sentiment improved on positive macro-economic data on the domestic front, while weakness of the American currency in the overseas market also supported the rupee.
At the interbank forex market, the domestic unit opened at 73.93 against the US dollar and gained further ground to touch 73.80, registering a rise of 25 paise over its previous close.
On Friday, the rupee had settled 17 paise lower at 74.05 against the US dollar.
Forex market was closed on Monday on account of Guru Nanak Jayanti.
Meanwhile, India’s economy recovered faster than expected in the September quarter as a pick-up in manufacturing helped GDP clock a lower contraction of 7.5 per cent and held out hopes for further improvement on consumer demand bouncing back.
The dollar index, which gauges the greenback’s strength against a basket of six currencies, was down 0.05 per cent to 91.82.
Foreign institutional investors were net buyers in the capital market as they purchased shares worth Rs 7,712.98 crore on a net basis on Friday, according to exchange data.
On the domestic equity market front, the 30-share BSE benchmark Sensex was trading 258.59 points higher at 44,408.31, and the broader NSE Nifty rose 71.50 points to 13,040.45.
Brent crude futures, the global oil benchmark, fell 1.22 per cent to USD 47.59 per barrel.»
S&P still sees GDP shrinking by 9% in FY21
S&P Global Ratings on Monday retained its forecast of 9% contraction in the Indian economy for the current fiscal, saying even though there were now upside risks to growth, it would wait for more signs that COVID-19 infections had stabilised or fallen.
S&P, in its report on Asia Pacific, said the Indian economy would grow at 10% in the next fiscal.
“We project headline consumer price inflation just above the mid-point of the Reserve Bank of India’s [target] range of 2-6% through 2021. One-off factors should ease, including food-supply disruptions… But the pass-through to core inflation, currently near 6%, suggests inflation persistence remains a challenge,” S&P said.
Sensex rises over 120 points in early trade; Nifty tops 13,000
Yet another week starts on a bullish note.
PTI reports: «Equity benchmark Sensex climbed over 120 points in opening trade on Tuesday, as better than expected GDP data strengthened market sentiment amid unabated foreign capital inflows.
The 30-share BSE index was trading 126.62 points or 0.29 per cent higher at 44,276.34.
Similarly, the broader NSE Nifty rose 32.45 points or 0.25 per cent to 13,001.40.
UltraTech Cement was the top gainer in the Sensex pack, rising about 2.5 per cent, followed by Infosys, Sun Pharma, Bajaj Auto PowerGrid, ICICI Bank and IndusInd Bank.
On the other hand, ONGC, M&M, Nestle India, Axis Bank and HDFC were among the laggards.
In the previous session, Sensex ended 110.02 points or 0.25 per cent lower at 44,149.72, and NSE Nifty slipped 18.05 points or 0.14 per cent to 12,968.95.
Equity markets were closed on Monday for Guru Nanak Jayanti.
India’s economy recovered faster than expected in the September quarter as a pick-up in manufacturing helped GDP clock a lower contraction of 7.5 per cent, official data showed on Friday.
Meanwhile, the output of eight core infrastructure sectors dropped by 2.5 per cent in October, mainly due to decline in production of crude oil, natural gas, refinery products and steel.
Foreign institutional investors remained net buyers in the capital market as they purchased shares worth Rs 7,712.98 crore on a net basis on Friday, according to provisional exchange data.
Elsewhere in Asia, bourses in Tokyo, Shanghai, Hong Kong and Seoul were trading with gains in mid-session deals.
Stock exchanges on Wall Street ended lower in overnight sessions.
Brent crude futures, the global oil benchmark fell 1.22 per cent to USD 47.59 per barrel.»
‘Passenger vehicle, bike wholesales to decline’
Domestic passenger vehicle and two-wheeler wholesales will come down in the next few months as inventory levels remain high at the dealer level, according to rating firm India Ratings and Research (Ind-Ra).
The overall auto industry would, however continue, to grow in the next few months, it noted.
“With the festive season now over in India, the rating agency expects wholesale billings to moderate in the next couple of months, given that the inventory at dealer level for passenger vehicles (PVs) and two-wheelers is already at higher than the 21 days recommended by Federation of Automobile Dealers Association (FADA),” Ind-Ra said in a statement.
However, it expected the overall automotive industry to continue to revive in the next two to three months, in line with improving economic indicators, it noted.
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