That sinking feeling!😰

Nifty50: 16,416 ▼ 153 (-0.9%)
Sensex: 55,107 ▼ 567 (-1.0%)

Hola, people!

Have you ever left anything valuable behind in an Uber? Perhaps a birthday cake made specially for a loved one? Well, Uber has brought out a list of curious items people have forgotten in their cabs. Some special mentions include a bike handle, mangoes and even a 5 kg dumbbell!

Anyway, hope you've not forgotten that only a day remains till the RBI announces its interest-rate decision. Markets looked nervous as a result, especially the banking and financial sectors. Here's more on today's events.

• Markets witnessed sharp losses after a gap-down opening amid weakness across sectors.
• Among the Nifty50 stocks, 36 closed in the red.
• Investors also await US inflation data and rate decisions in European countries later this week.

Among the Nifty sectoral indices, Oil and Gas (+0.99%) and Auto (+0.5%) were the only two gainers, while Media (-1.6%) and Realty (-1.6%) were the top losers.

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What’s trending

⭐Rate-sensitive sectors get cold feet

Ahead of RBI’s interest-rate decision on Wednesday, rate-sensitive sectors such as banking and real estate have turned negative on Tuesday. The Nifty Bank and Nifty Realty indices were down by 0.8% and 1.6% respectively. The market consensus is that RBI might go for a rate hike, in its ongoing effort to control inflation.

⭐ LIC touches new low

LIC (NSE): 752 ▼ 24.4 (-3.1%)

Shares of recently listed life insurance giant LIC have fallen significantly in the last few weeks. At the close of trade on Tuesday, LIC’s stock traded at ₹752, down nearly 20% from its IPO issue price of ₹949 a share. Its market capitalisation has fallen below ₹5 lakh crore. Despite this, LIC still remains the seventh most valuable Indian company.

⭐ NMDC cuts lump ore prices

NMDC (NSE): 122 ▼ 1.7 (-1.3%)

The country's largest iron ore miner NMDC has slashed prices of lump ore by ₹1,100 per tonne to ₹4,400 per tonne with immediate effect. This is a sharp 20% reduction from the price of ₹5,500 a tonne it had set in May. Iron ore is one of the key raw materials used in the production of steel. A cut in iron ore prices can have an impact on steel prices.

⭐ Input cost bite for FMCGs

HINDUNILVR (NSE): 2,210 ▼69 (-3%); BRITANNIA (NSE): 3,381 ▼ 110 (-3.1%)

According to reports, fast moving consumer goods (FMCG) makers plan to maintain the entry-level prices and not reduce sizes of small packs despite rising input costs. This is because they want to ensure that gross sales volumes are not impacted due to inflation. Entry-level and small packs account for up to 55% of gross sales for FMCG companies.

⭐Govt bond yield surges 

The 10-year government bond yield soared to 7.52% on Tuesday, hitting a three year high, amid a rise in Brent crude oil prices, which touched $120/barrel. The rise in bond yield comes ahead of the RBI monetary policy meeting, which is set to conclude on Wednesday. The yield on government securities has already risen by 70 bps in the current financial year.

In Focus

Defence stocks get fire power

Despite choppy markets, some defence stocks came out on top on Tuesday. Stocks like Bharat Dynamics, Dynamatic Technologies and Garden Reach Shipbuilders were up as much as 4%. This was after India's Defence Acquisition Council (DAC) approved a ₹76,390 crore proposal to buy India-made arms and ammunitions. How's this giving so much firepower to the defence sector? Let’s explore.

The Indian government has been gradually increasing the procurement of military equipment from domestic players, rather than importing from other countries. This has not only been boosting the country's "Aatmanirbhar Bharat" dream, but also aiding the growth of Indian defence sector companies. 

The DAC, which is led by Defence Minister Rajnath Singh, has approved the acquisition of next-generation corvettes (a small armed warship) at an estimated cost of ₹36,000 crore for the Navy. Meanwhile, the remaining outlay (about ₹40,000) will be set aside for the Army and Air Force.

During the Budget announcement in February, Finance Minister Nirmala Sitharaman had set aside around ₹84,600 crore to purchase defence goods from domestic companies in FY23. This is 68% of the total equipment purchase budget of the defence ministry in FY23, which was estimated at ₹1.24 lakh crore. For FY22, the country had set aside 64% of purchases from local players, up from 58% in FY21. 

And it’s not just state-owned companies that benefit. Private companies are also gaining traction. In April this year, the government had announced that of the amount set aside for domestic purchase in FY23, 25% will be bought from private-sector firms. 

So, let's just say that the defence sector stocks are on a new offensive.

IPO corner

One of India’s oldest banks Tamilnad Mercantile Bank has received a nod from the market regulator SEBI for its IPO. The IPO will be a combination of an offer for sale and a fresh issue. The net proceeds raised through the fresh issue will be used to strengthen its capital base.

Good to know

What is the repo rate?

Repo rate is the rate at which the Reserve Bank of India (RBI) lends money to commercial banks in the event of a shortfall in funds. It is a tool used by the RBI to control inflation. For example, in the event of high inflation, the RBI may raise this rate. This would make it costlier for banks to borrow money from the RBI, and inturn reduce supply of money in the economy. The current repo rate stands at 4.4%.

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