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Sensex Ends Marginally Higher; Telecom & Banking Stocks Witness Buying
Tue, 8 Jan Closing | Monish Vora, TM Team

Indian share markets witnessed buying interest during closing hours and ended on a positive note. Gains were seen in the telecom sector, banking sector and healthcare sector, while power stocks and realty stocks witnessed selling pressure.

At the closing bell, the BSE Sensex stood higher by 131 points (up 0.4%) and the NSE Nifty closed higher by 30 points (up 0.3%). The BSE Mid Cap index ended the day down 0.2% and the BSE Small Cap index ended the day up by 0.2%.

Asian stock markets finished on a positive note. As of the most recent closing prices, the Hang Seng was up by 0.2% and the Shanghai Composite was down by 0.3%. The Nikkei 225 was up 0.8%.

The rupee was trading at 70.11 against the US$.

The rupee weakened by 36 paise to 70.04 against the US dollar in opening trade today on rising crude prices and some demand for the American currency from importers.

On Monday, the rupee had gained 4 paise to end at 69.68 against the US dollar following dovish stance by the Federal Reserve.

Market participants awaited the outcome of the US-China trade talks and President Donald Trump's speech.

So far this year, the rupee has declined 1.3%, while foreign investors have sold US$203.80 million in equities and bought US$43.50 million in the debt markets.

In the news from the automobiles sector, Tata Motors share price was in focus today as the company's wholly owned subsidiary - Jaguar Land Rover (JLR) has reported 16.2% rise in its sales in India at 4,596 units in 2018. The company had sold 3,954 units in 2017.

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Last week, the company posted strong growth in US JLR sales.

The total JLR US sales rose 24% at 14,079 units against 11,394 units last year.

The total land rover US sales have risen 33% at 10,617 units against 7,980 units last year and the total Jaguar US sales rose 1.4% at 3,462 units against 3,414 units in December 2017.

Tata Motors share price ended the day up by 2.7%.

To know more about the company, you can access to Tata Motors Q2FY19 result analysis and Tata Motors stock analysis on our website.

Moving on to the news from the banking sector, shares of Gruh Finance and Bandhan bank witnessed selling pressure today amid merger reports.

On Monday, Bandhan bank said that Gruh finance will merge with it in an all-share deal valued at approximately Rs 818 billion based on the closing prices of shares of the two players.

As per an article in the Economic Times, shareholders of Gruh will get 568 shares of Bandhan for every 1,000 shares held.

Here's an excerpt from the article:

  • The amalgamation will result in enhancement of shareholder value accruing from synergy of operations, new products development, integration of technology and information.

The transaction helps lower the promoter stake in Bandhan Bank to 61% from 82%. This means the outstanding number of shares of Bandhan Bank will go up to close to 1.6 billion shares post the merger.

Moreover, the merger will see HDFC Limited owning close to 15% in Bandhan Bank via its holding in Gruh Finance.

Further, the micro credit or unsecured portfolio of Bandhan bank will fall from the current levels of 86% to 58%, thanks to the presence of secured home loans in the combined portfolio.

Note that, the swap ratio was slightly in favor of Bandhan Bank. RBI's banking license rules require the promoters of Bandhan Bank, Bandhan Financial Holdings to lower its stake from 82.3% to 40% within three years of starting a business.

The central bank had penalized the lender for failing to comply with the guidelines within the stipulated timeline by freezing branch expansion and remuneration of founder and chief executive.

Reportedly, the share swap ratio set for the Bandhan-Gruh Finance merger ensures HDFC has got itself a sweet deal.

As per Tanushree Banerjee, Co-head of Research at Equitymaster, mergers and acquisitions are typically evaluated based on the synergies of the businesses and valuations offered.

Here's what she wrote in one of the recent editions of The 5 Minute WrapUp...

  • Turns out Bandhan Bank's acquisition of Gruh Finance is a winner on all counts. Not that the bank has struck a bargain in the share swap ratio. Rather Gruh Finance has been richly valued. But Gruh Finance could help Bandhan become more than a bigger bank.

    Although HDFC (parent of Gruh Finance) is not directly involved in the deal, it is evident that both HDFC and Bandhan Bank want a bigger share of the rural pie. The exponential growth that rural banking has witnessed over past few years offers huge scope. Especially, for entities with proven credit appraisal history.
The Potential that HDFC and Bandhan Bank Tapped Into...

It would be interesting to see how this pans out. Meanwhile, we will keep you updated on all the developments from this space.

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