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Sensex & Nifty Close at All-Time Highs; M&M Tops the Gainers
Wed, 26 Apr Closing

Share markets in India finished on a strong footing on positive global cues, strengthening of rupee, healthy corporate earnings and FII inflows into the market. At the closing bell, the BSE Sensex closed higher by 190 points, whereas the NSE Nifty finished higher by 45 points. The S&P BSE Midcap and the S&P BSE Small Cap Index ended down by 0.1% and 0.6% respectively.

Among the BSE sectoral indices, realty sector and information technology sector witnessed the selling pressure. Gains were largely seen in stocks from FMCG sector, automobile sector and banking sector.

Asian equity markets finished broadly higher today following the rise in US indexes overnight on the back of strong earnings announcements. The Nikkei 225 soared 1.10% while Hong Kong's Hang Seng gained 0.50% and China's Shanghai Composite finished up by 0.20%. European markets are mixed. The CAC 40 is higher by 0.04%, while the FTSE 100 is leading the DAX lower. They are down 0.08% and 0.07% respectively.

The rupee was trading at Rs 64 against the US$ in the afternoon session. Oil prices were trading at US$ 49.54 at the time of writing.

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The banking space saw some good buying today following remarks by the central bank governor Urjit Patel about ways to resolve the problem of stressed assets of banks.

Reportedly, Urjit Patel has voiced his opinion on the merger of public sector banks and said that fewer banks would be good for the banking sector and also help in dealing with the problem of non-performing assets (NPAs).

According to him, the consolidation would help banks become more efficient in return for government assistance to deal with the NPA issue. He further said that market share of weaker banks was declining and that of stronger banks was increasing, especially the private sector banks, which in a way was a good thing.

One must note that, five associate banks of the State Bank of India (SBI) and the Bharatiya Mahila Bank became part of SBI on 1 April in a merger seen as the likely first step in the consolidation of India's banking system, weighed down by Rs 7 trillion of stressed assets. Thus, Bank consolidation could entail the sale of real estate where branches become redundant as well as offering voluntary retirement schemes to manage headcount.

Dr. Patel said a challenge that India's central bank was grappling with was the large stressed banking sector balance sheets. He noted that a series of measures have been taken in the past year on resolving the problem of the NPAs, including completion of a comprehensive asset quality review of the banks.

Bad Loans Inventory Bloats Up

However, the RBI has done well to focus its attention on the willful defaulters. However, this seems to be a curative measure than a preventive one. Unless the root cause i.e. the initial lending process of banks is put in order, bad debt is likely to remain a cancer on economic growth.

In the instance of the insolvency and bankruptcy code, the RBI has been preparing actively for the next step in an orderly resolution and this will be undertaken concomitantly with the resolution of the weakest bank balance sheets under a revised prompt corrective action framework, he stated.

Meanwhile, Yes Bank share price surged by 1.5% after the bank announced alliance with Paisabazaar.com under which the bank will offer conditionally approved loans to the latter's existing customers.

As part of the partnership, the bank will help Paisabazaar.com through its advanced analytics and data mining capabilities to offer customers of the financial marketplace with customised and conditionally approved offers across retail lending products.

This is for the first time in the industry that a large financial marketplace has entered into a unique customer level alliance with a bank to offer conditionally approved loans to their existing customers. The aim is to make the process of availing a loan easy and seamless and act as a one stop financial solution provider for all retail lending needs of the customer, the reports noted.

Bank stocks finished the day on a mixed note with Andhra Bank & Bank of India leading the gains.

Moving on to news from stocks in automobile sector. M&M share price rallied 3.6% after it a leading financial daily reported that, Mahindra & Mahindra (M&M)'s wholly owned subsidiary - Mahindra Overseas Investment Company (Mauritius), has acquired 100% of the equity share capital of Mahindra Automotive North America Inc. (MANA) in USA.

Owing to this deal, MANA has become a wholly owned subsidiary of Mahindra Overseas Investment Co and in turn, of the company with effect from 25 April 2017.

Post-acquisition, MANA would promote the Mahindra brand in US and expand its reach into US to promote off-road vehicles, the reports noted.

In another development, it was reported that, VE Commercial Vehicles, a joint venture between Volvo AB and Eicher Motors, would invest Rs 5 billion to make trucks that comply with the latest emission norms.

This move comes after India skipped a stage in the chronologically progressive set of standards monitoring automobile pollution. Car and truck makers selling in India have less than four years to transition from BS-IV to BS-VI norms.

The JV has already invested Rs 4 billion on upgrades related to BS-IV compliance and the development of other products. It is India's fourth-biggest maker of heavy-duty trucks.

Eicher Motors share price ended the day down by 0.5%

In another development, Wipro share price surrendered their early gains and fell over 1% after the company offered a muted outlook while announcing its March quarter earnings. The stock had opened on a positive note and gained nearly 4%, but later fell over 1% to Rs 489.4 on BSE during afternoon trade.

Wipro yesterday registered a marginal rise in net profit for the March quarter and offered a muted outlook, but sought to cheer investors by announcing a bonus issue and a likely share buyback. To know more about the company's financial performance, subscribers can access to Wipro's latest result analysis and Wipro stock analysis on our website.

And here's a note from Profit Hunter:

The PSU banks are the talk of the market today after RBI governor Urjit Patel's comments on PSU bank non-performing assets (NPA). Most PSU banks are trading on a positive note with Andhra Bank (+4.38%), PNB (+3.66%) and Bank of India (+3.60%) the top gainers for the day.

Although the PSU Bank Index bottomed with the overall market in February 2016, it has outperformed the Nifty 50 Index by a huge margin. It is up 80% from February 2016 low while the Nifty index is up only 35%.

Currently, the PSU index is trading near its 52-week high, indicating strong ongoing momentum.

The RSI indicator, which measures the strength of the trend, did not go into the oversold territory of 30. This indicates immense strength in the PSU banking space.

Whether the PSU Bank Index continues to outperform the Nifty index will remain to be seen.

PSU Bank Index Outperforms Nifty Index
PSU Bank Index Outperforms Nifty Index 

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May 26, 2017 (Close)

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