Sensex closes 139 pts higher, Nifty at 15,856; all eyes on RIL Q1 results

Sensex closes 139 pts higher, Nifty at 15,856; all eyes on RIL Q1 results

Rupee Hits Record Low Of 74.87 Against Dollar, May Cross 75-Mark Soon

Rupee Vs Dollar Today: The rupee settled at 74.74 against the dollar

Continuing its losing streak for the fourth straight session, the rupee fell 19 paise against the US dollar on Friday, July 2, to settle at 74.74 (provisional) amid a firm American currency and anticipation of a spike in crude oil prices - both of which weighed on investor sentiment. At the interbank foreign exchange market, the local unit opened on a negative note at 74.71 against the dollar and hovered in the range of 74.65 to 74.87 during the session. In the last four sessions to Friday, the domestic unit has lost 55 paise. In an early trade session, the local unit depreciated 20 paise to 74.75 against the greenback.

The domestic currency registered a volatile trading session throughout the week. On Thursday, July 1, the rupee fell 23 paise to close at 74.55 against the dollar - recording its lowest level in two months. On Wednesday, June 30, the local unit plunged to 74.32 against the dollar, registering its biggest monthly fall in 15 months. Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, rose 0.05 per cent to 92.63.

What analysts say:

Mr. Rahul Gupta, Head Of Research- Currency, Emkay Global Financial Services:

“The USDINR spot has continued the uptrend this week, and we likely need a catalyst to fuel another extension higher. After the big beat on US ADP employment the focus is on nonfarm payrolls data, as a strong candidate with enough impetus to accelerate US Dollar buying pressure. In USDINR spot the next week’s trading range will continue to be 74-75.25 with sideways bias.”

Mr Amit Pabari, MD, CR Forex:

‘‘The US dollar Index has crossed 92.50, the strongest level since April 5th as bets rose that the Fed could move a step closer to tightening monetary policy on the continued upbeat in US data.

Soaring crude oil prices being a threat to a net oil importing nation have further dented sentiments. The dollar is expected to rise as U.S. economic outperformance can continue to underpin the USDINR pair and we might see it moving close to 75.00-75.20 levels in the coming sessions if it sustains well above 74.40-50 zone convincingly.’’

Anindya Banerjee, DVP, Currency Derivatives & Interest Rate Derivatives at Kotak Securities:

‘‘All eyes on US jobs report tonight. If the growth in US jobs is close to a million it will underscore the point that the US central bank will remain hawkish, at a time when RBI remains dovish. This contrast is enough to drive USDINR higher. The rising oil prices, in spite of OPEC + committing to increased supply and stronger USD. With Indian equity markets underperforming the developed peers due to lackluster FPI flows makes rupee unattractive. All in all, the combination of these factors can drive USDINR towards 75.30/40 levels on spot.’’

Domestic Equity Markets Today:

On the domestic equity market front, the BSE Sensex ended 166.07 points or 0.32 per cent higher at 52,484.67, while the broader NSE Nifty climbed 42.20 points or 0.27 per cent to close at 15,722.20. The equity benchmarks snapped their two-day losing streak driven by gains in heavyweights - ICICI Bank, Reliance Industries, Infosys, State Bank of India, HDFC. The Sensex climbed 350 points from the day’s lowest level and the Nifty 50 index also reclaimed its 15,700 level.

Shrikant Chouhan, Executive Vice President, Equity Technical Research at Kotak Securities:

Indian markets were slightly lower this week noting the gradual strengthening of the USD over the past week. Meanwhile, India’s unemployment rate (measured by CMIE) fell to 9.2 per cent in June 2021 from 11.9 per cent in May 2021, aided by steady relaxation of restrictions in major states. The Nifty 50 was at 15,678 on 2nd July falling by 1.2 per cent during the week, while the Sensex was at 52,405 falling 0.98 per cent during the week.

Dr. Joseph Thomas, Head of Research, Emkay Wealth Management:

“After a fairly volatile session, the markets closed in the positive territory reflecting the inherent uneasiness in taking a definitive direction ahead of the weekend. While the frontline indexes closed marginally positive, the midcap index closed flat and the small cap index closed one per cent higher. Metals lost heavily followed by marginal losses in auto and capital goods.

While recovery from the pandemic is being taken as positive, the potential threats from the delta variant and the damage that it may cause which is still in the realm of speculation, is causing some consternation, as in certain parts of Europe it is reported that it is on the rise. This may dampen the sentiments a bit in the coming weeks depending upon the extent of its spread as the holiday season is on in most part of the Northern Hemisphere.''

Meanwhile, according to exchange data, the foreign institutional investors were net sellers in the capital market on July 1 as they offloaded shares worth Rs 1,245.29 crore. Brent crude futures, the global oil benchmark, fell 0.14 per cent to $ 75.73 per barrel.

Airline losses to widen in Q1 over falling traffic, fuel price hike

will report a muted performance in Q1FY22 on the back of rising fuel costs and fall in traffic due to the second wave of the (Covid-19) pandemic, industry analysts said.

While losses are expected to widen on a sequential basis, these would be lower on a year-on-year basis as air travel was suspended for two months till May 24, 2020.

InterGlobe Aviation, which operates IndiGo, will declare its result on July 27. SpiceJet is yet to announce its result date.

Broking firm Prabhudas Liladher expects IndiGo’s Q1 loss to widen sequentially to Rs 2,430 crore from Rs 1,160 crore on rising costs and lower yields. Adjusting for compensation from Boeing, SpiceJet’s loss will widen quarter-on-quarter to Rs 650 crore from Rs 380 crore, it said. Including compensation, SpiceJet had posted a loss of Rs 235 crore in Q4FY21.

“We expect IndiGo and SpiceJet each to report sequential dip in passenger load factor to 61% per cent and 69.5 per cent respectively,” Prabhudas Liladher said.

Air travel recovery stalled in May with the onset of second wave of the Covid-19 pandemic. States began introducing lockdown like measures and made RT-PCR tests mandatory for passengers. This curbed demand with airlines reducing number of flights. Average daily flights operated in May were down at 30-35 per cent of pre-Covid times. The average number of passengers per flight too, fell from 91 in April to 71 in May.

The total number of passengers flown by domestic carriers in May nosedived to 2.1 million from 5.7 million in April. The January-March period had seen 7.5 million passengers each month.

This, coupled with rising fuel costs ( 11 per cent Q-o-Q) and rupee depreciation ( 1.2 per cent Q-o-Q), will adversely impact airline earnings.

Domestic traffic is now recovering, but it is still far from pre-Covid levels. According to aviation sources over 3 million passengers flew in the first nineteen days of July whereas 3 million passengers flew in June. Yet despite signs of recovery challenges persist.

“Rising crude prices and rupee depreciation will further hurt aviation However, hikes in the floor of fares in April and June will provide some interim relief to aviation as yields would improve. Cargo business is likely to improve further for both IndiGo and SpiceJet driven by demand.

Overall, we expect the losses for both the to widen QoQ in Q1FY22,” said Centrum Institutional Research.

Centrum estimates net loss of Rs 2,730 crore for IndiGo in Q1FY22, higher than net loss of Rs1,160 crore in Q4FY21, mainly on account of sharp fall in traffic (down 52 per cent QoQ), rise in aviation turbine fuel prices (up 12% QoQ) and rupee depreciation against the dollar.

It expects SpiceJet’s net loss at Rs 490 crore in Q1FY22, higher than Rs 240 crore in Q4FY21.