RBI had announced 3-month moratorium for term loans and working capital payments borrowers, which would cushion both lenders and borrowers as the lenders can skip tagging a default payment as an NPA during the 3-month time frame. All the financial institutions and NBFC are permitted to grant moratorium of three months on payment of all installments falling due between 01st March 2020 and 31st May 2020. Lenders with weak balance sheets and low liquidity will take the hit of 3-month moratorium as the delay in interest from borrowers could hamper the short-term business operations. Private lenders with already on-going issues like recognition of NPAs, low loan book growth, the higher amount of withdrawals by depositors and weak corporate governance practices will see steep fall in valuations. However, NPA levels are likely to remain stable. According to RBI data at the end of January 2020, banks have an outstanding exposure of Rs 11 trillion to the micro, small and medium enterprises (MSME) sector and Rs 7.37 trillion to the NBFC sector. Banks have also lent Rs 3.73 trillion to the manufacturing sector, Rs 2.27 trillion to the commercial real estate sector, Rs 1.41 trillion to the transport sector and over Rs 450 billion to the tourism and hotels segment.
FIIs/FPIs have bought Indian equity shares worth Rs. 18 billion in February 2020 and sold shares worth Rs. 593 billion in March 2020 (till 20th March).
The Nifty Index futures witnessed rise in open interest by 87% for the March series and 65% for the April series. Implied volatility (IV) fell for call option and for put option in the last week. Fall in IV for call option and for put option shows steady support for Nifty at present levels but current levels of IV could lead to abnormal movement in Nifty in the week ahead.
Market volatility is set to continue in the coming week, as investors monitor the rapid spread of Covid-19 and watch out for fresh policy responses to stem the negative impact on economic growth. PMI surveys across the globe are expected to signal record pace of contractions in private sector activity.
Global Economy
The Federal Reserve announced on 23rd March 2020 extensive new measures to support the economy as the number of coronavirus cases continues to increase and more states issue stay-at-home orders. Such measures include the provision of up to USD 300 billion in new financing for employers, consumers, and businesses; continuing purchase Treasury securities and agency mortgage-backed securities in the amounts needed to support smooth market functioning.
The IHS Markit US Manufacturing PMI edged down to 49.2 levels in March of 2020 from 50.7 levels in February 2020, preliminary estimates showed.
The IHS Markit US Services PMI plummeted to 39.1 levels in March 2020, missing market consensus of 42 levels and signalling the fastest contraction in business activity since comparable series began over a decade ago.
The number of Americans filling for unemployment benefits jumped to 3.28 million in the week ended 21st March 2020, the highest since the series began in 1967 and well above expectations of 1 million.
Stocks of crude oil in the United States increased by 1.623 million barrels in the week ended 20th March 2020, following a 1.954 million rise in the previous week and compared with market expectations of a 2.774 million advance, according to EIA Petroleum Status Report.
Global Market
Wall Street closed in red on Friday, as coronavirus fears outweighed the long-awaited fiscal stimulus package cleared the Senate house. It includes direct money transfers, corporate aid and subnational resources to combat the rapidly spreading Covid-19.During the week, Dow Jones surged by 13%, Nasdaq rose by 9% and S&P gained fell by 10%.
European stock markets fell more than 5% on Friday after three consecutive sessions of gains, amid worries about a global economic recession as the coronavirus crisis hurts demand and activity. Several British officials, including Prime Minister Johnson, tested positive for COVID-19, raising concerns about the rapid spread of the pandemic. During the week, FTSE surged by 6% and DAX gained by 8%.
The price of Brent Crude Oil settled down 5.4% at USD 24.9 a barrel on Friday, after touching a near 17-year low of USD 24.5 a barrel earlier in the session, as investors fear that the current efforts to contain the rapid spread of Covid-19 could hurt demand even further. During the week, Brent Crude Oil declined by 21%.
Indian Market
S&P BSE Sensex & Nifty declined by 0.33% & 1% respectively during last week.
The S&P BSE Sensex declined 0.4% to finish a volatile session at 29,816 on Friday, down from a 4.9% jump in the previous session, after the Reserve Bank of India joined other central banks around the world and cut interest rates by 75bps to a record low of 4.4% during an emergency policy-meeting. Worries regarding GDP growth mount, after the country entered lockdown this week for 21 days to curb the spread of the coronavirus. India has a total of 1032 COVID 19 infections as of Sunday. Click here to read our RBI policy meeting analysis.
Sectoral Indices Trends:
The sectoral indices closed mostly on a negative note during last week. The S&P BSE Bankex, Oil & Gas, Auto, and PSU had declined by -1.29%, -8.49%, -7.77%, and -6.32% respectively.
SBI witnessed a rise in turnover in Stock Derivatives
SBI also witnessed rise in open interest; the share price of SBI gained marginally by 0.30% during last week. RBI had announced 3-month moratorium for term loans and working capital payments borrowers, which would cushion both lenders and borrowers as the lenders can skip tagging a default payment as an NPA during the 3-month time frame.
Last week, SBI announced to pick up to 49% at not less than Rs 10 per share in YES Bank. To hold at least 26% stake in YES Bank for at least three years. RBI has authorized 24 billion shares of YES Bank for face value of Rs 2 each, which brings the authorized capital to 48 billion. SBI would be infusing Rs. 24.5 billion at Rs 10 per share for 49% stake.
Prior to last week, SBI gained momentum after the government had created a telecom fund in order to save Vodafone Idea from bankruptcy. SBI management reported 41% (Y-o-Y) rise in net profit as the asset quality showed good improvement. Gross bad loan declined to 6.9% from 7.53% a year ago. Net Interest income increased by 22% (Y-o-Y). Net NPAs stood at 2.65% compared with 3.95% during last year.
Foreign Institutional Investors (FIIs) Derivative Statistics have shown a rise in the open interest across Stock Options, Index Futures, Index Options, and Index Option on a week on week basis. Stock Futures witnessed fall in open interest during last week.
Currency
Indian rupee appreciated by 0.679% against USD, USD/INR pair closed at Rs. 74.88 in the last week.
