Sensex Ends 193 Points Higher; Realty and Energy Stocks Witness Buying

Tue, 7 Jan Closing

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Indian share markets traded on a positive note throughout the day and ended higher.

Gains were largely seen in the realty sector and energy sector, while telecom stocks witnessed selling pressure.

At the closing bell, the BSE Sensex stood higher by 193 points (up 0.5%) and the NSE Nifty closed higher by 60 points (up 0.5%).

The BSE MidCap index ended the day up by 0.7%, while the BSE SmallCap index ended up by 1%.

Asian stock markets finished on a positive note as of the most recent closing prices. The Hang Seng was up 0.3% and the Nikkei was up 1.6%.

The rupee was trading at 71.80 to the US$ at the time of writing.

In news from the banking sector, shares of HDFC Bank climbed as much as 2.5% in early trade today after the private sector lender reported strong business growth in the December quarter (Q3FY20).

The bank's total advances grew by 20% year on year (YoY) to Rs 9.3 trillion in Q3FY20, driven by festive season demand.

Total advances stood at Rs 7.8 trillion in Q3FY20 and at Rs 8.97 trillion in September 2019 quarter (Q2FY20).

Deposits stood at Rs 10.7 trillion as of December 31, 2019 growing by 25% compared to Rs 8.5 trillion as of December 31, 2018.

The bank's current and saving account (CASA) ratio stood at around 39.5% against 40.7% in a year ago quarter.

In a statement to the exchanges, HDFC Bank said, "during Q3FY20, the bank purchased loans aggregating Rs 42.6 billion through the direct assignment route under the home loan arrangement with Housing Development Finance Corporation Limited."

HDFC Bank share price ended the day up by 1.6%.

In other news, the RBI on Monday revised the Supervisory Action Framework (SAF) for urban cooperative banks (UCBs) to ensure expeditious resolution of financial stress being faced by some of them.

The revised framework released by the RBI stipulates the thresholds for various parameters that could trigger a corrective action by the UCBs or a supervisory action by the central bank.

A UCB may be placed under supervisory action framework when its net NPAs exceed 6% of its net advances, its CRAR falls below 9%, when it incurs losses for two consecutive financial years or has accumulated losses on its balance sheet.

RBI said that the type of action would depend on the severity of stress.

Further, issue of show cause notice for cancellation of banking license may be considered by the Reserve bank when continued normal functioning of the UCB is no longer considered to be in the interest of its depositors/ public.

Note that this move comes in the backdrop of the scam in Punjab and Maharashtra Cooperative (PMC) Bank causing distress to over 9 lakh depositors.

Statutory inspection of PMC by the RBI had revealed large group exposure of about Rs 62.3 billion to Housing Development and Infrastructure (HDIL) group companies.

Of the total exposure to the HDIL group, only Rs 4.4 billion was disclosed to the RBI, while Rs 57.9 billion remained undisclosed.

Note that the PMC bank fiasco has put small savers in the limelight yet again. These banks have poor lending practices. Depositors have had to pay the price time and again.

In the short run, this has an adverse effect on microfinance lending as well. Micro finance institutions (MFIs) are skeptical about lending to even genuine borrowers in an uncertain environment.

But this is actually a blessing in disguise for MFIs with strong business practices.

After all, last mile connectivity in lending is still a huge opportunity.

Huge Opportunity in Last Mile Lending in India

Here's what Tanushree Banerjee wrote about this in one of the editions of The 5 Minute WrapUp...

• The average ticket size of a microfinance borrower in India is around Rs 38,000 which is much lower than the global average (Rs 65,000).
  
  The sector itself has grown at an average annual rate of 27% for the last 4 years.
  
  Still states like Uttar Pradesh, Bihar, and Madhya Pradesh with a large rural population are highly under-penetrated even today.

A private bank that is part of Tanushree's 7 stocks to buy list has already taken a step in this direction.

It will be a big beneficiary when the microfinance boom plays out in India.

Moving on to news from the pharma space, Glenmark Pharma's subsidiary - Glenmark Pharmaceuticals Inc., USA has been granted final approval by the United States Food & Drug Administration (USFDA) for Deferasirox tablets for Oral Suspension, 125 mg, 250 mg and 500 mg.

It is the generic version of Exjade tablets for Oral Suspension, 125 mg, 250 mg and 500 mg, of Novartis Pharmaceuticals Corporation.

According to IQVIA sales data for the 12-month period ending November 2019, the Exjade Tablets for Oral Suspension, 125 mg, 250 mg and 500 mg market achieved annual sales of around US$ 106.4 million.

Glenmark Pharma share price ended the day up by 1.1%.

Speaking of the pharma sector, in the video below, Tanushree talks in great detail about the pharma sector.

She tells us where the sector stands now and also about the potential for a rebound.

Tune in to find out more...

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

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

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