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MOSL: Morning India (7/October/19): 1. EcoScope (RBI cuts repo rate; lowers GDP growth forecast); 2. Bulls and Bears; 3. HDFC Bank; 4. Godrej Consumer; 5. Zee Entertainment; 6. Consumer

MOrning India (7/October/19): 1. EcoScope (RBI cuts repo rate; lowers GDP growth forecast); 2. Bulls and Bears; 3. HDFC Bank; 4. Godrej Consumer; 5. Zee Entertainment; 6. Consumer

 

Today’s top research idea

Ecoscope: RBI cuts repo rate; lowers GDP growth forecast

• In a unanimous decision, RBI cut its repo rate by 25bp to 5.15%, taking cumulative cut to 135bp for CY19. Monetary policy stance was maintained as 'accommodative.'
• While RBI revised up 2QFY20 inflation forecast to 3.4% from 3.1%, it kept 2HFY20 estimate unchanged at ~3.6%. With inflation averaging ~3.2% over Jul-Aug'19, this implies that RBI expects inflation at ~3.9% in Sep'19 (our estimate: 3.8%).
• RBI lowered its FY20 growth forecast from 6.9% earlier to 6.1%. Notably, while RBI expects 2QFY20 GDP growth at 5.3%, it forecasts sharp revival to ~6.9% in 2HFY20.
• With repo rate at 5.15%, real interest rate will fall to ~1.5% for 2HFY20 (assuming RBI's inflation forecasts). Further rate cuts thus depend on incoming data. Our numbers suggest that headline inflation could touch 4% in Oct'19 and average ~4.7% in 4QFY20. This limits scope of further rate cuts. However, if inflation stays sub-4%, there could be space of 1-2 more rate cuts in FY20.

Piping hot news

HP to cut about 7,000 to 9,000 jobs in restructuring push

Personal computer maker HP said on October 4 that it will cut about 7,000 to 9,000 jobs as part of its fiscal 2020 restructuring plan. HP estimates that the plan will result in annualized gross run rate savings of about $1 billion by the end of fiscal 2022, it said. The company had about 55,000 employees worldwide as of October 31, 2018, according to a filing with the U.S. Securities and Exchange Commission.