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Mid Session

Indices slip further; private banks tumble
(12:32, 04 Jun 2020)

The market declined further in early afternoon trade, led by selling in banks shares. Profit selling emerged after the Sensex and the Nifty rallied over 11% in previous six trading sessions. Banks shares corrected after the Supreme Court (SC) raised concerns over levying of interests on loans during the six-month moratorium period.

At 12:30 IST, the barometer index, the S&P BSE Sensex, was down 336.95 points or 0.99% at 33,772.59. The Nifty 50 index lost 104.20 points or 1.04% at 9,957.35.

In the broader market, the S&P BSE Mid-Cap index fell 0.73% while the S&P BSE Small-Cap index slipped 0.71%.

The market breadth was strong. On the BSE, 1009 shares rose and 1220 shares fell. A total of 111 shares were unchanged. In the Nifty 50 index, 15 shares advanced while 35 stocks declined.


The NSE's India VIX, a gauge of market's expectation of volatility over the near term, shed 0.49% to 29.8925. The Nifty June 2020 futures were trading at 9,941.75, a discount of 15.6 points compared with the spot at 9,957.35.

On the options front, the Nifty option chain for 25 June 2020 expiry showed maximum call open interest (OI) of 17.12 lakh contracts at the 10,000 strike price. Maximum put OI of 31.37 lakh contracts was seen at 9,000 strike price.

Coronavirus Update:

Total COVID-19 confirmed cases worldwide stood at 65,11,713 far with 3,86,073 deaths. India reported 1,06,737 active cases of COVID-19 infection and 6,075 deaths, according to the data from the Ministry of Health and Family Welfare, Government of India.

Buzzing Index:

The Nifty Private Bank index fell 2.74% to 11,170.20, declining the most among the sectoral indices on the NSE. The Supreme Court on Thursday made oral observations raising concerns over the Reserve Bank of India (RBI) allowing levy of interest during the moratorium period allowed for loan repayments.

Bandhan Bank (down 7.01%), RBL Bank (down 5.28%), IndusInd Bank (down 4.83%), Axis Bank (down 3.81%), Kotak Mahindra Bank (down 3.08%), Federal Bank (down 2.65%), ICICI Bank (down 2.2%), City Union Bank (down 2.04%), HDFC Bank (down 1.31%) and Yes Bank (down 0.18%) declined.

The economic aspect is not higher than health of the people, SC told RBI in the interest waiver case. The central bank had in an affidavit said lenders will lose around Rs 2 lakh crore if interest is waived during the loan moratorium, which has been extended till August 31.

A bench comprising Justices Ashok Bhushan, S K Kaul and M R Shah was hearing petitions filed Gajendra Sharma and few others challenging the RBI Circulars of March 27 and May 22 to the extent they allowed financial institutions to levy interest on loans during the 6-month moratorium.

As per reports, Justice Bhushan said There are two issues in this: No interest during moratorium period, and no interest on interest. Accrual of interest while allowing moratorium is “detrimental”, remarked Justice M R Shah. On this, the Solicitor General Tushar Mehta said that he will seek instructions from the Ministry of Finance and RBI. Referring to the RBIs stand in the counter-affidavit that the waiver of interest would affect the financial health of lending institutions, Senior Advocate Rajiv Dutta, appearing for petitioners, submitted.

Earnings Impact:

Cholamandalam Investment and Finance Company slumped 7.64% to Rs 143.85 after net profit slumped 85.38% to Rs 42.66 crore on 14.11% rise in total income to Rs 2,151.45 crore in Q4 March 2020 over Q4 March 2019. The NBFC major said net profit before this provision stood at Rs 418 crore which is up by 43% for the quarter over previous year. Total Assets under Management (AUM) grew by 16% to Rs 66,943 crore from Rs 57,560 crore in Q4 March 2019.

With respect to the moratorium announced by RBI on EMI repayments, Cholamandalam Investment said that nearly 76% of customers have availed moratorium considering the uncertainty over the period of lockdown.

The company has created a one-time contingency provision of Rs 284 crore towards probable losses against loans for which moratorium was extended. Over and above this, the company has also created a Macro provision of Rs 250 crore to meet contingencies that may arise post moratorium due to the global recession and economic slow-down.

In total, the company has set aside an additional provision of Rs 534 crore (including Rs 30 crore of Macro provision created in FY 19) to meet any contingencies that may arise in future due to the Covid-19 shut down. The company further said it has not availed moratorium so far on its borrowings, and it does not intend to avail any moratorium benefit.

DCM Shriram fell 3.89% to Rs 287.50 after consolidated net profit dropped 29% to Rs 207.38 crore on 0.9% decline in net sales to Rs 1,862.99 crore in Q4 March 2020 over Q4 March 2019. Consolidated profit before tax tanked 33.3% to Rs 247.91 crore in Q4 March 2020 as against Rs 371.59 crore in Q4 March 2019.

Revenues from operations were dragged by lower chemicals ECU (Electro Chemical Unit) prices. ECU prices fell 35% YoY (year-on-year) leading to lower revenues by Rs 158 crore. Volumes lost 4% YoY on account of nationwide lockdown due to COVID-19. Poly Vinyl Chloride (PVC) volumes also tumbled 22% YoY as a result of nationwide lockdown due to COVID-19.

However, revenues were boosted by higher domestic sugar volumes up by 38% YoY and distillery volumes up 83% YoY consequent to commissioning of second distillery 200 kilo-litres per day (KLD) and higher sugar prices 4% YoY during Q4 FY20. Sugar Free Solutions (SFS) value added inputs revenues up 22% YoY with enhanced focus on this segment.

Meanwhile, the company has decided to enter the business of country liquor as a forward integration of sugar distillery operations. The board has approved an investment of about Rs 42.40 crore to set up country liquor bottling plant of capacity of 11,000 cases per day at Hariawan (UP) sugar unit. This will also enable swing capability between ethanol & country liquor.

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