▼ Nifty: 11,317 (-0.33%) ▼ Sensex: 38,365 (-0.14%)
Today, the Nifty50 witnessed strong selling pressure in the latter part of the day. The drop may have been triggered by multiple factors including the ongoing Indo-China border tensions, a jump in the USD/INR rate, and a cut in India’s FY21 GDP forecasts by rating agencies. Major sectoral indices closed in the red, with the Nifty IT index (+1.2%) acting as a saving grace.
Here are the top stories for the day.
India’s FY21 GDP to contract more sharply than expected
Rating agencies Fitch and Ind-Ra have cut India's FY21 GDP forecast and expect it to contract by -10.5% and -11.8%, respectively. Their earlier forecasts were around -5.3% and -5.0%, respectively. As per Ind-Ra, the pandemic could run longer than expected, further slowing down the recovery. However, it expects the GDP to rebound and grow at 9.9% in FY22, mainly due to the low base of FY21. As per Fitch, the GDP should rebound strongly in the July-September quarter as the economy reopens, but there are signs that the recovery has been sluggish and uneven.
Government divestment plans pick up pace
The government is divesting up to 15% stake in Bharat Dynamics, a manufacturer of ammunition and missile systems, through an offer for sale (OFS). The institutional portion has already been fully subscribed and the retail portion will open tomorrow (9 September). The government aims to raise up to ₹900 crore through this OFS. Last month, the government had sold a 15% stake in Hindustan Aeronautics to raise about ₹5,000 crore. As per reports, companies in which the government plans to divest its stake include IRCTC and Life Insurance Corporation (LIC). The government has set an ambitious divestment target of ₹2.1 lakh crore for FY21. These offers for sale could suck out some liquidity from the secondary market.
Info Edge shares rise with higher Q1 margins
The Q1 revenue growth of Info Edge dipped 10.4% on a year-on-year basis, but its operating margin improved to 37.3% versus 32.3% in the same quarter last year. The improvement in margin is attributable to better control on discretionary marketing spends. The company’s Q1 net profit stood at ₹93.6 versus a loss of ₹187.5 crore in the same period last year. Info Edge owns internet businesses including Naukri.com, Jeevansaathi.com, and 99acres.com. Apart from these, Info Edge has made significant strategic investments in major internet-based companies, like Zomato.com and Policybazaar.com, which add to the overall value. The Info Edge stock was up 0.4% today and has gained nearly 110% since its March 2020 lows.
Closing bell
The European Central Bank will announce its monetary policy and interest rate decision on Thursday, which will be closely watched by market players across the globe. Meanwhile, falling crude prices (down 3.6% today) could bring some cheer to the government’s exchequer. India is the world’s third-largest oil importer and every dollar drop in the price of oil decreases the annualised import bill by ₹10,700 crore.