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Metal Stocks Out of Favour
Wed, 4 May 01:30 pm

The Indian indices are currently trading on a flat note. Sectoral indices are trading on a negative note with stocks from the metal, telecom and auto sectors leading the losses.

The BSE Sensex is trading lower by 14 points (0.04%) and the NSE Nifty is trading down by 7 points (0.1%). The BSE Mid Cap index is trading down by 0.4% while the BSE Small Cap index is trading down by 0.2%. Gold prices, per 10 grams, are trading at Rs 30,112 levels. Silver price, per kilogram, is trading at Rs 40,786 levels. The rupee is trading at 66.50 to the US$.

Crude oil is trading at Rs 2,928 per barrel. Crude oil is witnessing selling pressure this week. This is seen on the back of rising output that has renewed worries for the global supply glut of crude. This sell-off is followed by a rally in crude prices last week that was aided by the Fed's stance on US interest rates. The commodity surged to its 2016 peaks last week. And the effect of this was seen in oil companies too. Tanushree Banerjee, Equitymaster co-head of research, has highlighted the impact of crude oil on domestic oil and gas stocks in one of the editions of The Equitymaster Research Digest (subscription required).

PSU banking stocks are trading on a negative note with UCO Bank and Andhra Bank leading the losses.

As per an article in Times of India, the number of wilful defaulters' who have not repaid their loans to public sector banks (PSBs) despite having the ability to do so shot up by 38% in 3 years. It was noted that the number of wilful defaulters stood at 7,686 at the end of December 2015 as against 5,554 in December 2012.

Further, the amount involved in these cases too shot up by 2.4 times to Rs 661 billion, compared to around 277 billion earlier.

State Bank of India (SBI) retained the top slot among PSBs with exposure to wilful defaulters. The banks' exposure rose 60% to Rs 117 billion in the three years to December 2015. Other PSBs with high exposure to wilful defaulters includes Central Bank of India Rs 44 billion, UCO Bank Rs 42 billion and Oriental Bank of Commerce Rs 38 billion.

Minister of State for Finance Jayant Sinha said that there were 1,365 borrower accounts having outstanding of Rs 5 billion and more at the end of December 2015. He said government has taken specific measures to address issues in sectors such as infrastructure, steel and textiles, where instances of NPAs are high.

The number of rising wilful defaulters is seen rising as lenders finally started issuing the tag amid rising bad loans troubling the Indian economy. The issue came to fore after a surge in NPAs in October-December 2015 due to the recognition of certain stressed accounts by banks as per RBI norms.

One of our articles discusses how the government can deal with wilful defaulters.

As per an article in Financial Express, India's private sector activity eased in the month of April. The Nikkei India Composite PMI Output Index, which maps both manufacturing and services sectors, dropped from 54.3 in March to 52.8 in April, pointing to a softer expansion in private sector across the country.

The drop was seen amid slower expansion in new business inflows in services sector. It was also noted that the rate of cost inflation reached a 13-month high.

The above data has reinforced the views that the Reserve Bank of India (RBI) will have to cut interest rates again in coming months. One shall note that The RBI cut its repo rate by 25 basis points to 6.5% on April 5, its lowest in more than five years. It also raised the reverse repo rate to ensure more availability of cash in the banking system. One of our premium editions of The 5 Minute WrapUp titled 'How Important is the RBI Rate Cut?' has shared some views on what will be the impact of RBI rate cut on Indian companies (subscription required).

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Mar 19, 2018 (Close)