Sensex Finishes in Red; PNB Plunges 10%

Wed, 14 Feb Closing

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Indian share markets witnessed selling pressure in the final hour of trade. At the closing bell, the BSE Sensex closed lower by 145 points and the NSE Nifty finished lower by 39 points. The S&P BSE Mid Cap finished up by 0.2% while S&P BSE Small Cap too finished up by 0.2%.

Losses were largely seen in PSU stocks, bank stocks and pharma stocks.

Asian stock markets finished mixed as of the most recent closing prices. The Hang Seng gained 2.27% and the Shanghai Composite rose 0.45%. The Nikkei 225 lost 0.43%. European markets are higher today with shares in Germany leading the region. The DAX is up 0.72% while London's FTSE 100 is up 0.65% and France's CAC 40 is up 0.59%.

Rupee was trading at Rs 64.12 against the US$ in the afternoon session. Oil prices were trading at US$ 58.78 at the time of writing.

The Market cap to GDP ratio for Indian companies too is close to dangerously high levels. While this is still some way off the peak of FY-08, when it had once reached close to 150, it's relatively high.

FY17 saw this ratio reach close to 80. It is also expected to increase further given the moderate growth expectations in India's GDP for FY18. Warren Buffett once considered this as one of the best valuation metrics to gauge the markets.

Past history shows some correlation between the ratio and the share market. 2008 saw Sensex decline by 38%, when this ratio crossed the 100 mark. Also, the market has bounced back sharply when this ratio was low.

The Warren Buffett Indicator Suggests Indian Equity Market Is Overvalued

The basic assumption in this ratio is that whenever the GDP of the country grows, the market performance will reflect it. Also, when stocks do well, it can be extrapolated to assume the Indian economy is doing well.

In news from banking sector, Punjab National Bank (PNB) share price is in focus today after the bank said that it had detected "fraudulent and unauthorised" transactions worth about US$ 1.8 billion at one of its branches in Mumbai.

India's third largest public-sector bank added that the transactions were effected for the benefit of a select few account holders with their apparent connivance. Based on these transactions other banks appear to have advanced money to these customers abroad.

The bank did not name the people involved but said it had reported the deals to law enforcement agencies and would decide whether it faces any liability arising out of the transactions later.

It further said in the bank, these transactions are contingent in nature and liability arising out of these on the bank shall be decided based on the law and genuineness of underlying transactions.

The fraudulent transactions are the equivalent of eight times the lender's 2017 net income of about Rs 13.2 billion.

PNB share price plunged 10% marking its steepest drop since October 2017.

Bank of India share price fell 7.9% to Rs 133.5 after it reported a net loss of Rs 23.41 billion during the third quarter ended 31 December as provisioning for bad loans rose 72% due to high non-performing assets ratio.

Subsequently, Bank of Baroda share price too declined 1.8% after it reported a 55.8% decline in its December quarter net profit due to higher provisions and lower other income. Net profit for the quarter fell to Rs 1.11 billion for the quarter ended 31 December from Rs 2.52 billion a year ago.

Moving on to news from FMCG sector. As per an article in The Economic Times, Britannia Industries has plans to launch around 50 new products under its existing as well as new categories by the end of the next fiscal as part of efforts to be a total food company.

Britannia will launch dairy products and croissants by October-November this year through its joint venture with Greek cakes and confectionery major Chipita.

Besides, the company will continue with its strategy of adding new countries in its list and scout for new markets in Africa, while foraying into Bangladesh and Myanmar.

The company is also in the process of setting up a Rs 10 billion plant at Ranjangaon, Pune which would be an integrated food park. The company will also be adding tow plants in Guwahati and export-oriented unit at Mundra SEZ which would be commercialised early next year.

Britannia share price surged in morning trade before finishing down 0.3% on the BSE.

Power stocks finished the day deep in red with GVK power Infra share price and Reliance power share price leading the losses.

As per The Economic Times, NTPC has won a tender to supply 300 megawatts (MW) of electricity to Bangladesh for 15 years.

NTPC said supply of electricity is likely to commence from June 2018 after commissioning of 500 MW HVDC inter-connection project between India and Bangladesh. India currently exports approximately 600 MW electricity to Bangladesh.

This comes against the backdrop of an uncertain outlook for the Indian power sector with the National Democratic Alliance (NDA) government trying to revive electricity demand in the country. NTPC's projects account for 16% or 51,635MW of India's installed power generation capacity of 331,117.58MW.

India already has power grid links with Bhutan, Nepal and Bangladesh, and is building power projects in the three countries. It also plans to develop power transmission links with Myanmar and Sri Lanka.

India has also been pursuing closer ties in the energy sector with Bangladesh, helping the markets to integrate.

Meanwhile, the company may borrow about Rs 160 billion next financial year for adding 6,900 MW of fresh electricity generation capacity by March 2019.

NTPC has planned capital expenditure of Rs 230 billion for 2018-19, which includes both debt and equity, essentially for capacity addition through the greenfield route.

NTPC share price finished the day down by 1.2% on the BSE.

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