Sensex Opens 180 Points Down; Metal Stocks Fall

Mon, 5 Mar 09:30 am

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Asian stocks are lower today as Chinese and Hong Kong shares fall. The Shanghai Composite is off 0.38% while the Hang Seng is down 1.58%. The Nikkei 225 is trading down by 0.65%. US stocks closed well off session lows on Friday, helped by a sharp rise in health care shares.

Back home, India share markets opened the day on a negative note tracking global markets. The BSE Sensex is trading lower by 180 points while the NSE Nifty is trading lower by 66 points. The BSE Mid Cap index and BSE Small Cap index opened the day down by 0.4% & 0.3% respectively.

All sectoral indices have opened the day in red with metal stocks and PSU stocks witnessing maximum selling pressure. The rupee is trading at 65.23 to the US$.

In the news from the banking sector. State-run lenders State Bank of India (SBI) and Punjab National Bank has raised their lending rates by up to 20 basis points, a move that will push up the cost of all retail loans, including home, auto and personal loans - both existing as well new.

SBI increased the one-year marginal cost of funds based lending rate (MCLR) by 20 basis points to 8.15% from 7.95% across various maturities. While PNB increased its lending rates by 15 bps to 8.3%.

The decision comes a day after the bank announced a 50-bps hike in term deposit rates across various maturities.

On 28 February, SBI increased the interest rate on various term deposits with immediate effect. For retail domestic deposits below Rs 10 million, SBI fixed interest rate at 6.4% while the interest rate on one-year deposit has been raised from 6.25% to 6.75%.

The lending rate hike also comes in the wake of banks as a whole seeing pick-up in credit demand. After many years of low single-digit credit growth, the quarterly loan demand crossed the double-digit mark at close to 11% in the three months to December 2017.

SBI share price & PNB share price opened down by 0.9% & 1.4% respectively.

Moving on to the news from aviation sector. As per an article in a leading financial daily, divestment-bound national carrier Air India is looking at raising Rs 5 billion by selling land and real estate in 2018-19, and is likely to sell some of its prime properties across the country.

The airline is looking to sell several of its land blocks and real estate including a 4-acre piece of land at Delhi's Baba Kharak Singh Marg, residential colony at Vasant Vihar, a piece of land in Chennai, and a half-acre plot in Mumbai's Pali Hill that houses about 14 apartments.

Air India has been able to mop up Rs 4.5 billion in land monetization since the government-approved Turn Around Plan (TAP) in 2012 set a target of Rs 50 billion for land monetization over a period of 10 years.

Reportedly, the union government, which plans to divest Air India by December, plans to create a special purpose vehicle (SPV) to house the airline's working capital debt (about Rs 350 billion), and some land assets like the former headquarter Nariman Point building and hotels run by the airline.

Speaking of disinvestment target, the target for FY18 is Rs 725 billion. This is the highest target set so far for any year. The government has already collected Rs 523.9 billion so far higher than previous year collection of Rs 455 billion.

Higher Revenue from Disinvestment?

India's fiscal deficit rose to 96.1% of the full-year's target at the end of October. This is on the back of lower revenue realization and a rise in expenditure. This raises concerns of slippage in the current financial year as during the same period of 2016-17, the deficit stood at 79.3% of the target.

With this, the government may clamp down on its expenses and public investment, which may slow down the growth. Alternatively, the government may allow higher fiscal deficit than the target of 3.2%. A third alternative is, higher revenue from disinvestment.

It will be interesting to see how the government approaches disinvestment in the coming months.

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