Economic Update:
Monetary Policy committee of RBI met in 1st week of August and decided to keep the policy repo rate unchanged at 4% and continue with the accommodative stance of the monetary policy while ensuring that the inflation remains within target of 4% in medium term with variation of +/- 2%. RBI will find it challenging to manoeuvre in coming times as any further rate cuts to revive sentiments will lead to rising inflation numbers. The Retail inflation in July 2020 is already at 6.93%, higher than RBI’s upper target of 6%.
Global economic activities have remained weak overall. Amongst advanced economies, US and Eurozone went through a deeper contraction in Q2 2020 compared to Q1 2020. Gold prices have hit all-time high of Rs. 55000 per 10 gram on July end on account of safe heaven demand. Gold is generally used as a hedge against volatility in equity. Whereas crude oil prices have remained supported on account of supply cuts by Oil producing countries and prospects of improved demand of oil due to gradual easing of lockdown restrictions.
Capital Markets Update:
Trends in Secondary Markets:
BSE Sensex continued strong gains of June and closed at 37,607 in July 2020, up 7.71% from closing of 34,916 in June. Nifty 50 closed at 11,073 in July, up 7.49% from 10,302 in June closing. Positive developments in Covid-19 vaccine, improvement in economic activity following the relaxations in lockdowns, better than expected Q1 results were some of the key drivers for the positive performance of the market. Strong performance of Indian indices was in line with the gains in global indices.
Foreign portfolio investors (FPI) and Foreign Institutional Investors (FII) infused Rs 7,563 Crore in Indian Equities in July 2020. This is third consecutive month of FPIs and FIIs being Net buyers as against heavy sell out in March & April. Stock markets are continuing to benefit from the surplus global liquidity which is finding its way into emerging economies like India.
Amongst the BSE sectoral indices, Information Technology (22.6%), BSE Healthcare (12.4%), BSE Teck (16.8%) and BSE energy (16.6%) registered strong gains. The IT stocks rallied with better than expected Q1 results. IT Stocks such as Infosys, Wipro, HCL Tech, and Tech Mahindra were up between 24 percent and 31 percent. IT sector is likely to stay in focus as Covid-19 pandemic has created new opportunities for digital growth.
Primary market Update:
The investor sentiments have improved in Q2 2020, compared to Q1 2020 when there were no main board public issues due to Covid-19 pandemic. The IPO of, speciality chemical manufacturer, Rossari Biotech came in July 2020 and made a bumper debut by closing at Rs. 752 at first day of opening, a 77% premium on opening price of Rs. 425. The IPO was open for sale in mid-July with a price band of Rs. 423-425 per share to raise nearly Rs. 496 Crore at valuation of 20 times EV/EBITDA of FY20. The IPO was oversubscribed by staggering 80 times.
Acknowledgements: RBI Bulletin (www.bulletin.rbi.org.in), SEBI Bulletin (www.sebi.gov.in), NSE (www.nseindia.com), BSE (www.bseindia.com)
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