The Week That Was - Outperformance of the broader market is expect to continue - ICICI Securities

Output of eight core industries fell 15% in June 2020 (22% decline in May 2020) on account of Covid-19 related lockdown. Except for fertiliser production that grew 4.2% YoY in June 2020, all other sectors - coal (15.5%), crude oil (6%), natural gas (12%), refinery products (8.9%), steel (33.8%), cement (6.9%), and electricity (11%) recorded a decline in production. During April-June 2020, the sector's output declined 24.6% YoY.

The Ministry of Defence has released the draft defence production and export promotion policy (DPEPP 2020) with the stated objective of achieving a turnover of Rs. 175000 crore ($25 billion) including exports of Rs. 35000 crore ($5 bn) in aerospace and defence goods and services by 2025.

RBI has announced a one-time restructuring plan for corporates as well as MSME, which was demanded by lenders. In addition, for the first time in recent history, restructuring has been announced for retail loans.

According to media sources, the government's production linked incentives (PLI) schemes would help boost domestic mobile manufacturing by ~30% over the next five years to US$153 billion. The government is also aiming at ~40-50% growth in mobile phones exports for the next five years.

As per media sources, RBI's draft code on governance could extend the tenure of CEOs of private banks (for both promoters or professionals) to be capped at 15 years. RBI has also clarified that from the date of issuance of guidelines, promoters or CEOs who have completed 15 years would still have two years or up to the expiry of the current tenure to appoint a new successor.

Brent Crude prices closed higher at US$ 44.8/barrel as compared to previous week's closing price of US$ 43.1/barrel. Gold prices ended higher at $ 2057/ounce as compared to previous week's closing price of $1965/ounce. Bond yields ended higher at 5.89% as compared to previous week's closing price of 5.84%.

International Markets:

US Markets: The US markets ended higher as the investors hope for another round of stimulus from the US Fed. The number of US citizens filing new claims for unemployment benefits continued to remain near the record highs. Initial claims for state unemployment benefits came at a seasonally adjusted 1.2 million for the week ended Aug 1, 2020 vs 1.4 million cases in the prior week. As per US Fed policymakers, pick up in the infection is again stalling the US economy, after the economy began to grow in May and June.

European Markets: The European markets ended higher due to rising investor confidence of a coronavirus vaccine amid rising US-China tensions. The Eurozone retail sales reached pre-pandemic levels, rising 5.7% in June from May due to greater spends in car fuel and clothes.

Source : Equity Bulls

Keywords