Indian Equity Summary
· A sharp increase in the Covid-19 cases, weak macroeconomic results, India / China border tension casted its shadow on the domestic equityØ market with the Sensex / Nifty benchmark closing by ~3% in red on a wow basis, as the two-week positive trend in Indian equities came to halt.
· On the macro front , the manufacturing sector is also pointing towards a turnaround as the IHS Markit India Manufacturing PurchasingØ Managers Index (PMI) rises to 52.0 in August from 46.0 in July, while other leading indicators, such as automotive sales, have seen a year-onyear growth, driven by increased demand due to unlocking and to some degree, due to the low base effect.
· Going forward, global factors like development on the US -China relationship front , IndiaØ & China border issues and domestic factors like the monsoon trajectory and remaining earnings season ; will continue to dictate the trend of the domestic equity market. We expect the trading range for Nifty between 10900-11,400 in the near term.
Indian Debt Market-
· Post the OMO announcement by the RBI , the Government bond prices rose the yield of the new 10-year benchmark 5.77% 2030 paper settled atØ 5.93% on September 4, compared with 6.14% on August 28.
· RBI conducted special OMO (Operation Twist) of Rs 171 billion on 3rd September out of Rs 200 billion notified amount.Ø
· The average 10 years SDL cut-off yield stood at 6.46% as compared to 6.65% during last weekØ
· We expect the 10 year benchmark yield to trade between 5.80-6.05% in near term.Ø
Domestic News
· India surpassed Brazil to become the second worst-hit in the world by the pandemic with a new record daily rise of 90.8 thousand cases to 4.2Ø million, while Brazil recorded more 14.5 infections to 4.1 million.
· India's GDP contracted 23.9% in the April-June quarter of 2020, compared with an expansion of 3.1% in the previous quarter, and a 5.2% growthØ in the year-ago quarter
· India's service sector activity level was at the highest in four months in August. The IHS Markit services Purchasing Managers' Index rose to 41.8Ø in August from 34.2 in July. The reading was the highest since March, before the escalation of the global COVID-19 pandemic.
International News
· The Federal Reserve Chair Jerome Powell reiterated on Friday its pledge to maintain interest rates lower for years to supportØ recovery from the coronavirus crisis and recession.
· The yield on the US 10-year Treasury note climbed 9.9bps to 0.720% on Friday, the biggest daily gain since May 18th, after the jobsØ report for August showed the unemployment rate fell to 8.4 percent from 10.2 percent in July and below market consensus of 9.8 percent.
· The People's Bank of China (PBoC) continued its money injections and announced a net of CNY 100 billion seven-day reverse reposØ auction at the unchanged rate of 2.2 percent on September 4th 2020. The central bank said the move aims to maintain reasonable and sufficient liquidity. A total of CNY 100 billion of reverse repos matured on September 4th.
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Disclaimer
The information and views presented here are prepared by Karvy Private Wealth (a division of Karvy Stock Broking Limited) or other Karvy Group companies. The information contained herein is based upon sources that we consider reliable. We, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and we are not responsible for any loss incurred based upon it. Karvy Private Wealth is only a distributor of securities and financial market products
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