Helping You Build Wealth With Honest Research
Since 1996. Try Now

MEMBER'S LOGINX

     
Invalid Username / Password
   
     
   
     
 
Invalid Captcha
   
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  


Indian Indices Trade Marginally Higher; Metal Sector Up 1.6%
Thu, 4 Jan 11:30 am

Stock markets in India are presently trading marginally higher. Sectoral indices are trading on a positive note with stocks in the metal sector and capital goods sector witnessing maximum buying interest.

The BSE Sensex is trading up 67 points (up 0.2%) and the NSE Nifty is trading up 19 points (up 0.2%). The BSE Mid Cap index is trading up by 0.4%, while the BSE Small Cap index is trading up by 0.7%. The rupee is trading at 63.39 to the US dollar.

In the news from the macroeconomic front, as per an article in the Economic Times, independent experts are of the view that India's economy is likely to grow 6.4-6.7% in the current financial year. This is down from 7.1% growth seen in 2016-17.

The estimates come ahead of the release of first official estimate scheduled on Friday.

The national economy expanded 6% in the first half of the year, with growth improving to 6.3% in July-September from a three-year low of 5.7% in the previous quarter.

Note that a sharp revival of 7% in the manufacturing sector had pushed up the overall GDP growth to 6.3% in the September 2017 quarter, as can be seen in the chart below. Gross value Added (GVA) that excludes product taxes and subsidies recovered from 5.6% in June 2017 quarter to 6.1% in September 2017 quarter. However, both agriculture and services continued to remain on a slow wicket.

Economy on Path to Recovery


While the above trend suggests an uptick in growth, it may still be early days, as the economy continues to grapple with several headwinds. As we wrote in a recent edition of The 5 Minute WrapUp...

  • Firstly, a part of the recovery during the September quarter is a one-off effect due to restocking by channel trade with the notebandi impact waning. Although GST is likely to usher in greater transparency and efficiency in the supply-chain network, the initial teething problems are likely to delay the recovery process.

    Secondly, with registered growth of a mere 1.2% in the September quarter, exports continue to plateau. This may be due to falling comparative advantage enjoyed by some labour intensive industries in the global markets. Therefore, until these structural issues are resolved, the competitiveness of India's export cannot be fully utilised.

A sustainable recovery will be possible only after the disruptive impact of GST stabilises and other structural issues get resolved.

Just Released: Multibagger Stocks Guide
(2018 Edition)

In this report, we reveal four proven strategies to picking multibagger stocks.

Well over a million copies of this report have already been claimed over the years.

Go ahead, grab your copy today. It's Free.

NO-SPAM PLEDGE - We will NEVER rent, sell, or give away your e-mail address to anyone for any reason. You can unsubscribe from The 5 Minute WrapUp with a few clicks. Please read our Privacy Policy & Terms Of Use.

We will be tracking the developments in this space and keep you updated. Stay tuned.

In the news from the banking space, the finance ministry has approved proposal for infusion of Rs 75.7 billion in 6 weak public sector banks (PSBs) as part of the recapitalisation plan to bolster capital adequacy ratio.

All these banks, which got capital support, are under prompt corrective action of the Reserve Bank of India (RBI). The funding comes under Indradhanush plan of the government which promised Rs 700 bn infusion over period of four years ending March 2019.

The banks include Bank of India, IDBI Bank, UCO Bank, Bank of Maharashtra, Dena Bank and Central Bank of India. These banks have received equity through preferential issue of shares from the government with two of them informing stock exchanges about the development.

The government, as a part of its Indradhanush Plan to revitalise state-owned lenders, had proposed to infuse Rs 700 bn out of Budgetary Allocations in them. However, so far, it has infused Rs 518 bn in public sector banks (PSBs).

In October, the government also announced the recapitalisation plan to inject Rs 2.11 trillion into public sector banks over a period of two years. This move was mainly aimed at resolving the long standing non-performing assets (NPA) problem of PSBs. It is expected to shore up the capital of state-run banks, spurring them to clean up the bad loan mess and revive lending.

The implementation of this initiative will, however, take some time. As we wrote in a recent edition of The 5 Minute WrapUp...

  • ...if historical data is anything to go by, implementation of such initiatives take a long time, especially in India. Recovery takes the longest time here as compared to other developed nations. India takes an average of 4.3 years to resolve insolvencies as compared to one year in the US. Also, recovery rates in India are amongst the lowest at 26.4%.

So while recapitalisation will benefit PSBs, it appears to be a temporary cure for a recurring disease. The main problem is the lending and corporate governance processes these banks follow.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

Read the latest Market Commentary


Equitymaster requests your view! Post a comment on "Indian Indices Trade Marginally Higher; Metal Sector Up 1.6%". Click here!