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RBI’s rate cut fails to lift Sensex, Nifty; check key factors behind today’s market fall

Halting the three-day rally, BSE Sensex and Nifty 50 ended in the red as the extension of the moratorium on loans by the Reserve Bank of India led to a sell-off in financial stocks. The 30-share Sensex fell 260 points or 0.84 per cent to end at 30,672, while the broader Nifty 50 index dropped 67 points or 0.74 per cent to close the session at 9,039. Axis Bank share price closed 5.65 per cent lower, while HDFC settled with 5 per cent loss. Similarly, Bajaj Finance was down 4.67 per cent and ICICI Bank dropped 4.32 per cent. “Before the extended weekend, Nifty successfully hold 9000 levels. On a weekly basis, it formed a bearish candle. Rising tensions between US and China will determine the trend for next week. There is a clear divergence between Nifty and Bank Nifty, it will be interesting to see how long remaining stocks in Nifty will continue to hold it above 9000,” said Vishal Wagh, Head of Research, Bonanza Portfolio Ltd.

RBI slashes repo rate by 4%: Reserve Bank of India decided to cut the repo rate by 40 bps from 4.4 per cent to 4 per cent to trim the impact of coronavirus on the economy. RBI MPC also said that it expects the GDP growth for this fiscal to remain in negative territory.

HDFC twins top drags: HDFC, HDFC Bank, ICICI Bank, Axis Bank and Reliance Industries were among top index contributors towards today’s fall. On the contrary, M&M gained 4.30 per cent and was the top Sensex gainer. Infosys, Asian paints, UltraTech Cement, Tech Mahindra and Maruti Suzuki were among other gainers on the index.

Nifty Financial Services decline 3%: Most of the sectoral indices ended lower with up to 3.06 per cent decline. Nifty Financial Services dropped 272 points dragged by M&M Financial Services, Shriram Transport Finance and PFC.

Expectations for next week: Domestic equity markets will remain closed on Monday, May 25 on account of Eid ul-Fitr. “Market is encircled with negative news and the only thing that can really bring back confidence in these dark days is discovery of an anti-drug to fight COVID-19 and a vaccine to keep it away. The commentary from US CEOs, even the Fed Governor are all pointing towards the worst which may still be ahead of us. Therefore, Indian bourses going ahead will mirror their economic trajectory,” Jimeet Modi, Founder & CEO, SAMCO Securities & StockNote, said.

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RIL-Rights Entitlement soars over RIL share price. Check live how much you may gain from rights issue

Reliance Industries-Rights Entitlement (RIL-RE) soared over 40% on day 1, taking the total with rights issue price over the actual RIL share price. Today, as of 10 AM, RIL-RE shares were trading 0.77 per cent lower to Rs 200.60 on NSE. At Wednesday’s closing, RIL-RE shares soared to Rs 214 on NSE, which was Rs 34 higher than the spread between Reliance Industries share price of Rs 1,437.40 and rights issue of Rs 1,257. Analysts are upbeat on this rights issue recommending it to ‘buy’. “We are recommending investors to subscribe to the rights issue of Reliance Industries Ltd as we are positive on the future prospects of the company on the back of strong traction in digital and retail business,” said Jyoti Roy, DVP Equity Strategist, Angel Broking Ltd.

What does Sebi’s ‘rights entitlement’ platform mean for traders and investors?

It is for the first time that Rights Entitlement (RE) shares were allowed to trade in India after market regulator Sebi introduced this platform earlier this year. “India’s largest rights issue will test the RE platform to see how resilient it is at technical and settlement factors as this also partially paid issue,” Ravi Singh, Head of Research, Karvy Stock Broking told to Financial Express Online. “The success/shortcomings of this platform would dictate future norms and response to the subscription percentage to the rights issues in the future,” Singh added.

How does Sebi’s ‘rights entitlement’ platform used by RIL-RE help shareholders?

So far in previous rights issues, some of the shareholders who had entitlement to the rights shares either subscribed, or transferred it to the other buyers at a little or no cost, or left it to renunciate, says Ravi Singh. Suggesting Sebi’s Rights Entitlement (RE) platform a good move for the investors or shareholders, Ravi Singh said: “The platform will help the rights entitled shareholders, who opt to renunciate to get a fair value for their rights entitlements by trading across this RE platform.” Describing it as a win-win situation for both the buyers and sellers, he added that the rights sellers may get anywhere between Rs 130 to Rs 190 for each entitlement, the buyers may get a yield of around 13.50% to 18% on an average. “Since intraday trading is not possible that may affect the liquidity to an extent, it is still a good platform for speculators for the remaining 9 trading days,” Singh said.

As of 5 PM yesterday, investors subscribed 0.27 per cent of the shares on sale, according to data from stock exchanges. India’s biggest-ever rights issue will remain open for the eligible investors for 14 days and the rights entitlements can be traded till May 29. The company is offering shares to existing investors in the ratio of 1:15 at a price of Rs 1,257 per share. The investors who wish to subscribe need not pay the entire amount in one go. The company has asked investors to pay only 25 per cent at the time of subscription. While out of the rest 75 per cent, investors will have to pay 25 per cent in May 2021 and the remaining 50 per cent in November next year.

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REC share price, PFC stock fall even as power stocks rally on liquidity push from Modi’s package

Power stocks rallied up to 13 per cent on BSE in otherwise weak trade on Thursday after Finance Minister Nirmala Sitharaman announced a much-awaited relief package for ailing power distributing companies. A part of Rs 20 lakh crore Atma Nirbhar Bharat Abhiyan package will provide a fresh loan of Rs 90,000 crore through PFC-REC to state-run power distribution companies (discoms) which will reduce receivables of electricity generation companies. In today’s trade REC share price fell 2.33 per cent to Rs 98.15, while Power Finance Corporation (PFC) shares dropped 2.17 per cent to Rs 87,65 apiece. However, other power stocks Adani Power share price rallied up to 13 per cent to Rs 36 apiece on BSE, Tata Power shares jumped 9.5 per cent to Rs 33.20 apiece, Reliance Infrastructure shares gained 5 per cent to Rs 18.15.

Similarly, shares of Jaiprakash Power Ventures, Reliance Power, K.P. Energy were up in the range of 3-5 per cent. While JSW Energy, Torrent Power, CESC, Green Power gained up to 3 per cent in the morning trade. However, Power Finance Corporation and PEC shares slipped over 2 per cent each to Rs 87.65 and Rs 98.15, respectively. In comparison, BSE Sensex was down 509 points or 1.59 per cent at 31,499.22. “Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) will infuse liquidity in the discoms to the extent of Rs 90,000 crore in two equal instalments. This amount will be used by discoms to pay their dues to transmission and generation firms,” FM Sitharaman said.

The government has also announced to give loans against state guarantees for the exclusive purpose of discharging liabilities of discoms to gencos. Also, discoms will provide the facility of digital payments to consumers. “For the DISCOMS, the amount may be small but useful for them as they can use the funds to pay the generators and transmission companies. The Rs 90,000 cr will be paid from reserves or alternatively borrowed from the market,” CARE Ratings said.

The loans will be secured against receivables and guaranteed by respective state governments. “However, since it comes with additional riders and conditions on digitization, reducing AT&C losses, etc., it is to be seen how much of this will be actually disbursed,” Emkay Global Financial Services said in its recent report. “Given the adequate capitalization levels of PFC/REC, the fiscal impact should be negligible,” it added.

“We welcome the reforms announced by the government around discoms as it ensures a steady flow of income. However, it just puts the burden on REC and PFC,” Amar Ambani, Senior President and Head of Research, YES Securities, said.

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Jubilant Life Sciences share price up 83% since March, inks pact with Gilead for potential coronavirus cure

The rally that pharmaceutical companies have witnessed on Dalal Street in the past few months has seen a lot of the stocks jump manifold, among these, Jubilant Life Sciences has recorded the second-best performance, up 83% from its recent low. The scrip traded at a 52-week-low value of Rs 234 per share on the last day of March and since then has been galloping northward, to now trade at Rs 482 apiece. What could further help Jubilant Life Sciences stock is the firm’s new deal with Gilead Sciences, which will see the pharma major register, manufacture and sell Gilead’s investigational drug, remdesivir, a potential therapy for coronavirus in 127 countries including India.

Jubilant Generics Limited, a subsidiary of Jubilant Life Sciences has entered into a non-exclusive license agreement with Gilead, the company said in a regulatory filing on Tuesday. Jubilant Life Sciences will now be able to register, manufacture and sell the drug, that is being touted as the potential therapy for coronavirus, in 127 countries. “Under the licensing agreement, Jubilant will have the right to receive a technology transfer of the Gilead manufacturing process to scale up production to enable expedited access of the medicine to Covid-19 patients upon approvals by regulatory authorities in respective countries,” it said.

The move, according to analysts, would help the stock. “It will work in favor of Jubilant Life Sciences, as technicals suggest a higher high higher low chart formation is in progress. It is strongly bullish. The next target will be 480-508,” Vishal Wagh, Research Head of Bonanza Portfolio told Financial Express online. Remdesivir, an investigation antiviral by Gilead has received an Emergency Use Authorization by the USFDA, which will help in a broader use of the drug on people suffering from coronavirus. “ The EUA is based on available data from two global clinical trials – US National Institute for Allergy and Infectious Diseases’ placebo-controlled Phase 3 study in patients with moderate to severe symptoms of COVID-19, and Gilead’s global Phase 3 study evaluating remdesivir in patients with severe disease,” Jubilant Life Sciences said.

Jubilant Life Sciences has a board approval to separate the Life Sciences Ingredients business. “The separate listing of Jubilant’s two business segments is expected to unlock value even as an NCLT approval and the demerger could now be delayed. With the pharma business expected to deliver steady growth and the LSI business expected to recover aided by an improved demand & pricing scenario for key products, the medium-term outlook remains positive,” said analysts at JM Financial with a buy rating on the stock and a target price of Rs 705 per share.

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