Markets likely to be wobbly; RIL, HDFC Bank, DHFL shares in focus

Global equity markets had risen briefly towards the end of last week. (Photo: Bloomberg)

Mumbai: The Indian equity markets are expected to be wobbly amidst weak global peers. Asia stocks eased on Monday as investors reduced expectations of an aggressive interest rate cut by the Federal Reserve, while heightened Middle East tensions following an Iranian seizure of a British tanker lifted crude oil prices.

MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.1%. South Korea’s KOSPI shed 0.3%, Australian stocks lost 0.2% and Japan’s Nikkei fell 0.5%.

Global equity markets had risen briefly towards the end of last week after dovish comments by New York Fed President John Williams boosted the prospect of the central bank lowering rates by 50 basis points at its 30-31 July meeting.

But the stock markets gave back those gains on Friday, with Wall Street shares ending in negative territory, after the New York Fed walked back Williams’ comments by saying his speech was not about potential policy action at the upcoming Fed meeting.

Expectations for a 50 basis points cut were scaled back further after the Wall Street Journal reported the Fed was likely to cut rates by 25 bps when it meets later this month, and may make further cuts in the future given global growth and trade uncertainties.

Back home, key companies which will announce their June quarter results on Monday are Kotak Mahindra Bank, United Spirits, Dewan Housing Finance Corporation (DHFL), Oriental Bank of Commerce, TVS Motor Company, ICICI Securities, Just Dial, GlaxoSmithKline Pharmaceuticals and Mastek.

Shares of Reliance Industries (RIL)and HDFC Bank are likely to be in focus on Monday after they announced their June quarter earnings after markets closed for trading last week. Reliance Industries Ltd on Friday reported a 6.8% year-on-year (y-o-y) increase in net profit for the June quarter, beating Street estimates on the back of strong performances by Reliance Jio Infocomm Ltd and Reliance Retail. RIL’s gross refining margin (GRM), or the amount a refiner earns by refining one barrel of crude oil, narrowed to $8.1 a barrel—an 18-quarter-low for the company.

HDFC Bank Ltd on Saturday said its first quarter net profit rose 21% on account of higher provisions and other income. Asset quality deteriorated marginally as gross non-performing assets (NPAs), as a percentage of total advances, rose to 1.4% in the June quarter compared to 1.33% in the year-ago period.

Meanwhile, the dollar and US Treasury yields rose on the greater likelihood of a shallower 25 bps rate cut.

The dollar index against a basket of six major currencies was steady at 97.152 after rising 0.4% on Friday. The benchmark 10-year Treasury yield stretched Friday’s rise and climbed to 2.058%.

The greenback was nearly flat at 107.830 yen after adding 0.4% on Friday thanks to the rise in US yields. The euro was little changed at $1.1218 after shedding 0.5% on Friday.

In commodities, Brent crude futures were up 1.26% at $63.26 per barrel following a gain of about 0.9% on Friday. Crude was buoyant after Iran’s Revolutionary Guards on Friday captured a British-flagged oil tanker in the Gulf after Britain seized an Iranian vessel earlier this month, further raising tensions along a vital international oil shipping route.

Gold slipped from a six-year high as the dollar firmed and as expectations for a deep rate cut by the Fed were dialed back.

Spot gold traded at $1,425.82 an ounce after going as high as $1,452.60 on Friday, its strongest since May 2013.