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Indian share markets finished the volatile trading session in the green zone with Midcaps and Smallcaps indices leading the rally. At the closing bell, the BSE Sensex closed higher by 86 points, whereas the NSE Nifty finished higher by 33 points. The S&P BSE Midcap ended up by 0.7% while the S&P BSE Small Cap Index ended up by 1.1%.
Stock markets in Asia finished mixed as of their recent closing prices. The Hang Seng gained 0.97% while the Shanghai Composite was higher by 0.04%. The Nikkei 225 was even. European markets are mixed today. The CAC 40 is up 0.97% while the DAX gains 0.15%. The FTSE 100 is off 0.17%.
The rupee was trading at Rs 64.64 against the US$ in the afternoon session. Oil prices were trading at US$ 51.24 at the time of writing.
In news from Indian bank stocks, Yes Bank Ltd share price fell 3.8% after the bank reported sharp rise in its provisioning and bad loans. Yes Bank reported a doubling of gross non-performing assets (NPAs) to Rs 20.18 billion in the March quarter, as it had to set aside an additional Rs 2.28 billion to cover potential loan losses. Yes Bank's gross NPAs were at 1.52% at the end of the March quarter and net NPAs were at 0.81%.
Meanwhile, RBI has brought down the net NPA levels required to include the bank under PCA framework to a level of 6% now as against 10% earlier; thereby mandating the banks to increase the provision coverage on the NPAs for remaining outside the PCA framework.
According to an article in The Economic Times, based on the revised PCA framework, a total of 16 PSBs out of 21 (excluding SBI associates) and two out of 16 private banks will require taking mandatory corrective actions such as raising capital levels, restricting the dividend payments, branch expansions or face restrictions on management compensation to come out of the PCA framework.
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According to ratings agency ICRA, these steps will strengthen the banking system over the medium term. While it will allow the stronger and well-managed banks to grow; the onus of improving the systems and procedures will be more on the weaker banks and their management.
The report said that the capital requirement, especially for public sector banks (PSBs) is enormous. The same during FY 2018 and FY 2019 is estimated at Rs. 1.25-1.35 trillion of which Rs 800-850 billion must be by way of core equity capital.
ICRA expects a further weakening in asset quality during FY2018 and consequently pressure on internal capital generation and increasing capital requirements under the Basel III capital adequacy framework.
Moving on to news from steel stocks. National Aluminium Company Ltd (Nalco) share price finished the day on an encouraging note (up 0.5%) after it was reported that the company has received green nod for its third phase expansion of the alumina refinery complex in Koratpur district, Odisha at a cost of Rs 43.57 billion.
The proposal is to set up fifth stream with a capacity of 1 million tonnes per annum (MTPA) as well as steam-cum co- generation power plant (SPP) of 18.5 MW capacity.
With the proposed expansion, the NALCO's alumina production capacity will increase from 2.27 MTPA to 3.27 MTPA, while SPP capacity will expand from 92.5 MW to 111 MW.
The company, which has abundant supply of quality bauxite from captive ore and adequate manpower, is expanding production capacity as it sees export opportunity of additional 1 million tonnes of alumina from 2021 onwards.
Meanwhile, Tata Steel was looking at higher exports this year and seeking opportunities in South East Asian market following strong prices.
According to company's managing director, a lot of investment will be needed to drive growth of steel sector. He added that either the steel industry generates it or investors find it attractive and put in money. The growth of India's steel industry will be a great opportunity for the capital equipment market across the world. This is an opportunity for them to invest in India.
Meanwhile, the government's proposal to give domestic steel makers a preference in government projects should protect them from cheaper imports. In February, domestic steel output rose by 12.9% YoY, as large private steel producers such as Tata Steel and JSW Steel ramped up output. Imports during the first eleven months of FY17 dropped by 39% YoY.
But the bigger concern is weak consumption growth. The consumption data over the past few months clearly show that there are no takers for domestic steel. So, steel makers have been forced to export more, with overseas shipments up by 78% YoY in the fiscal till February.
Tata Steel share price finished the day up by 0.6%.
Yesterday, Yes Bank announced its Q4FY17 results after market. The stock opened gap down and is now trading -4%.
The MACD indicator also gave a negative crossover after forming a negative divergence with the price. This indicates a loss of momentum.
So did the quarterly result mark the start of a downtrend for Yes Bank or this is only a temporary disruption to the current uptrend?
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