Market recap for 4 December 2020

Nifty50 13,258 ▲ 124 (0.95%)

Sensex 45,079 ▲ 446 (1.00%)

The markets were upbeat on the RBI’s stance to keep rates unchanged. All sectoral indices ended the day in green with maximum gains seen in the Nifty Bank (+2.05%), which was supported by ICICI Bank (+4.4%), SBI (+3.0%) and Axis Bank (+2.2%). Even the market breadth was positive with 39 of the Nifty50 stocks closing with gains today. The Nifty50 ended the week 2.2% higher, extending its upward move into the fifth consecutive week. 

Top gainers (Nifty50)

Top losers (Nifty50)

Here are the top stories for the day.

RBI keeps rates unchanged, revises GDP forecast upwards

In an environment of high inflation rate and better-than-expected pick-up in the economic recovery, the RBI’s Monetary Policy Committee today decided to keep interest rates unchanged. Further, the central bank has revised the GDP forecast for FY21 upwards to -7.5% from -9.5% earlier. This means that economic growth in the second half of this fiscal is likely to be better than the first half. 

The CPI inflation which had risen to 7.6% in October, is expected to drop to 6.8% in Q3 and to 5.8% in Q4 as food prices may soften, as per RBI. The central bank’s accommodative stance (lowering/maintaining interest rates to inject money into the financial system) favours a rise in the markets, especially in rate-sensitive sectors. Reacting to this news, indices such as the Nifty Bank (+2.0%), Nifty Auto (+0.6%) and Nifty Realty (+1.1%) ended positively. 

Airlines take off as capacity hiked to 80%

As people feel more confident to travel during  Covid times, domestic airlines are now permitted to operate at 80% capacity of pre-Covid levels from the earlier cap of 70%. Currently, about 2.5 lakhs people travel by air per day, compared to 30,000 in May. Shares of airline companies such as Interglobe Aviation (+5.7%) and Spicejet (+9.9%) rose today.

Ultratech at lifetime high on capex news

Cement major Ultratech has lined up capacity expansion to the tune of 12.8 million tonne per annum (mtpa) with an investment of ₹5,477 crore. These new capacities will be created in the eastern, central and northern regions of India. Post expansion, the company’s total capacity will rise to 136.25 mtpa by FY23. Interestingly, the capex will be funded through internal sources and the company envisages that it will not impact its ongoing plan to become debt-free. 

The company, which has a 22.3% market share, announced its capex plan at a time when the industry is witnessing healthy volumes due to demand from the rural economy and the government’s focus on building infrastructure in the country. Major cement companies based on market capitalization include Ultratech (+4.0%), Shree Cements (+0.1%), Ambuja Cement (-3.2%), ACC (-3.0%) and Ramco Cements (+0.2%).

Closing bell

As expectations regarding a fresh round of stimulus in the US rise, global equity markets are seeing high buying interest. On the other hand, the US dollar index has slumped to its lowest point this year. Markets move based on fundamentals in the long term, but in the short term, liquidity (or even expectations around liquidity) can drive the markets.

Good to know

What is CAGR?

Compound annual growth rate (CAGR) is a measure of the average yearly growth of your investments over a certain period. It tells you the average rate of return you have earned on your investments every year.

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Investment in securities markets are subject to market risks; please read all the related documents carefully before investing. The securities quoted are exemplary and are not recommendatory. Past performance is not indicative of future results. Details provided in the above newsletter are for educational purposes and should not be construed as investment advice by RKSV group. Investors should consult their investment advisor before making any investment decision.