Today’s Action
Nifty, -0.9%; Sensex, -0.8%; Model Portfolio, 0%; Nifty Midcap, -0.8%; Smallcap, -0.6%
Daily Market Review
Market Status: Downtrend
Nifty, after a muted start, declined 100 points post the announcement of rate cut from RBI and closed near day’s low. The repo rate was cut by 35bps to 5.4%, reverse rate adjusted to 5.15%, and bank rate to 5.65%. This is the fourth consecutive rate cut, totaling a cut of 110bps in 2019. Policy stance maintained at Accommodative. In the broader market, Midcap (-0.8%) and Smallcap (-0.6%) were also under selling pressure after opening in the green.
Out of 75bps cut by RBI till June, on average, only 29bps has been transmitted by banks. But, today, soon after the RBI’s rate cut decision, SBI announced a 15bps reduction in its lending rates. With a leader like SBI reducing rates, other banks may also follow the suit. Also, the transmission of rate cuts by banks to the borrower is expected to improve, as liquidity was surplus in June-July.
On the sectoral front, only Nifty Media (+1.2%), IT (+0.4%), and Pharma (+0.8) closed in positive territory. Nifty PSU Banks (-3.3%), Metal (-2.6%), and Auto (-2.4%) were the top losers. Nifty Bank, Financial Services, and Realty were each down 1–1.2%. The advance-decline ratio was leaned toward decliners. Out of 2,087 stocks traded on the NSE, 818 advanced, 945 declined, and the rest remained unchanged.
Yesterday, Nifty closed in the green and was considered as day 1 of an attempted rally. Today will be counted as day 2 of an attempted rally, as Nifty traded above its day 1 low. Looking forward, we will shift the market to a Rally Attempt if Nifty stays above Tuesday’s (day 1) low for one more session. From there on, we would prefer to see a follow-through day before shifting the market back to a Confirmed Uptrend.
Key News
State Bank Of India: The bank announced a 15bps reduction in its lending rates. The new one-year MCLR will come down to 8.25% per year. The new rates will be effective from August 10. The stock was down 3.8%.
Mahindra & Mahindra: The Company reported Q1 FY20 results during market hours. PAT was below consensus, while EBITDA was in line. Adjusted PAT at Rs 892.7 crore dropped 29% y/y. EBITDA was down 15% y/y to Rs 1,794 crore and margin contracted by 180bps y/y to 14% for Q1 FY20. The stock was down 5.7% and trading at a five-year low, below its 50-and 200-DMA.
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