Market Recap for 3 June 2021

Nifty50: 15,690 ▲ +114 (+0.7%)
Sensex: 52,232 ▲ +382 (+0.7%)

After a strong opening, the markets remained range-bound for the first half of the day. However, the buying in the last hour allowed the Nifty50 to close at a new record high. 

Among the sectoral indices, only the Nifty Pharma (-0.2%) index closed in the red. Meanwhile, the Nifty Realty (+3.7%) and Nifty Media (+1.6%) indices were the strongest today. 

Here are the top stories of the day.

Ethanol blending target brings sugar rush 

• The government’s decision to advance its 20% ethanol-blending target from 2025 to 2023 brought about a surge in sugar stocks. Stocks such as Balrampur Chini, Triveni Engineering, Dwarikesh Sugar, jumped 6–8% intraday today. Further, Praj Industries, which makes biofuel technologies, soared 10% intraday. 
• Under the ethanol-blending programme, fuel distributors will be allowed to sell petrol blended with up to 20% ethanol. The move could offer multiple benefits. First, it could reduce the country’s oil imports (which accounted for nearly 25% of imports in May). Second, it could also boost revenue for the sugar sector, since ethanol, a derivative of sugar, offers better margins to sugar producers.  

Arvind Fashion reports double-digit sales growth

• Arvind Fashion, one of India’s leading casual and denim apparel players, reported a 14% YoY growth in revenue to ₹769 crore. This was led by an increase in footfalls and rebound across online and offline channels. The company’s power brands, which include USPA and Tommy Hilfiger, reported a healthy sales growth of 17% in the March quarter. 
• It was able to reduce its loss to ₹99 crore as compared to the ₹208 crore loss in the March quarter of the last fiscal with the help of higher sales, lower finance cost and a reduction in other expenses. However, the company has warned that the second wave will have an impact on the first quarter of FY22 and expects normalcy to return by the end of the second quarter. 

Snowman to deliver Sputnik V with Dr Reddy’s

• The cold-chain logistics company has tied up with Dr Reddy’s for the delivery of the Sputnik V vaccine across India. After the announcement, the stock soared 15% intraday and closed 10% higher.
• The company will offer storage, order processing, packing and secondary transportation for the vaccines. The logistics company claims to have the capacity to store 650 million doses at present. Its stock has risen about 14% since May.  

India’s services sector contracts in May

• In May, India’s services sector contracted for the first time in the last eight months. The services PMI, which measures business activity in the services sector, dropped to 46.4 in May as compared to a reading of 54 in April. A reading below 50 indicates contraction. 
• The street was expecting a reading of 49. But the surging pandemic and fresh restrictions on businesses led to a slump in services activity.

Closing bell

All-round buying propelled the Nifty50 higher today. The rise comes ahead of the RBI’s monetary policy outcome tomorrow. The RBI is expected to announce its interest rate decision during market hours. The street expects the rates to remain unchanged and the pro-growth stance to continue. Further, investors would also watch out for the central bank’s views on the GDP forecast for FY22 and its outlook on inflation. Meanwhile, major European indices are trading in the red, whereas Asian indices showed a mixed trend today.

Good to know

What is a monetary policy?
Monetary policy comprises all the measures taken by a central bank to manage the money supply in a country. Through its monetary policies, a central bank may increase liquidity (availability of money in the system) to spur economic growth. On the other hand, it may reduce liquidity—typically by restricting the volume of money that banks can lend—to control inflation. A monetary policy affects the production, prices, demand and employment in an economy. The RBI—India’s central bank—reviews its monetary policy once every two months.

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Investment in securities markets is 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.