Sensex Ends 234 Points Higher; Healthcare and Realty Stocks Rally

Tue, 16 Jul Closing

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After opening the day on a flat note, Indian share markets witnessed buying interest during closing hours and ended higher.

Barring IT sector, all sectoral indices ended on a positive note with stocks in the realty sector, healthcare sector and consumer durables sector witnessing maximum buying interest.

At the closing bell, the BSE Sensex stood higher by 234 points (up 0.6%) and the NSE Nifty closed higher by 73 points (up 0.6%). The BSE Mid Cap index ended the day up by 0.7%, while the BSE Small Cap index ended up by 0.3%.

Asian stock markets finished on a mixed note as of the most recent closing prices. The Hang Seng was up 0.2% and the Nikkei was down 0.7%. The Shanghai Composite stood lower by 0.2%.

The rupee was trading at 68.65 to the US$ at the time of writing.

In the news from the realty sector, as per a leading financial daily, Indian real estate developers are at risk of going belly-up as growing stress in the nation's credit market is drying up funding. The situation is also same for those willing to pay decade-high rates.

India's year-old credit woes that began after a shock default by the IL&FS Group are still lingering with many mortgage lenders struggling to roll over debt amid downgrades in their credit ratings.

As per India Ratings analysts, challenges to paying debt obligations amid a slump in apartment sales might force developers to sell assets, wherein lenders may face haircuts and exposure losses.

This dim outlook is reflected in the bond market, where dollar notes of property tycoon Mangal Prabhat Lodha have slumped amid weak liquidity and refinancing risks.

Note that, the real estate sector in India has been facing a lot of obstacles lately.

Due to all the headwinds, the number of developers has reduced, and this has created consolidation in the market.

Typically, such a reduction in investment in an industry, i.e. contraction of supply, paves the way for a recovery of profits.

From a supply perspective, the competitive intensity has reduced due to leveraged balance sheets of many developers.

This, in turn, has resulted in subdued launches and stalling of existing projects, thus overall reducing inventory and consolidation in the sector.

With this, the share of organised market players is expected to go up in the medium to long term.

This is a huge opportunity for long term serious players in the sector.

In the video below, Research analyst, Sarvajeet Bodas talks about how Modi's push towards affordable housing can revive the real estate sector and accelerate the economic activity.

Moving on to the news from the banking space, Federal Bank share price was in focus today as the private sector lender reported a 46.3% year-on-year (YoY) rise in standalone profit at Rs 3.8 billion compared with Rs 2.6 billion in the same quarter last year.

Net interest income (NII) for the quarter rose 17.8% to Rs 11.5 billion compared with Rs 9.8 billion in the year-ago quarter.

Gross non-performing assets (NPAs) came in at 2.99% for the June quarter. This was almost the same as 3% in the year-ago quarter, but higher than 2.92% in the March quarter.

The bank made provisions worth Rs 1.9 billion in the June quarter compared with Rs 1.7 billion in March quarter.

Net NPA for the quarter came in at 1.49% in the June quarter from 1.48% in the March quarter and 1.72% in the year-ago quarter.

Speaking of the banking sector, it was reported this month that the scheduled commercial banks (SCBs) credit growth moderated to 12% YoY compared with 12.7% growth in May 2019. The credit growth has improved from 10.9% at end June 2018.

Co-head of Research at Equitymaster, Tanushree Banerjee believes retail and corporate credit are expected to grow by multi-fold over the next few years.

Rising Credit Growth in India

Here's what she wrote about it in one of the recent editions of The 5 Minute WrapUp...

• One theme I strongly believe will play out over the next decade is the credit growth in India.
  
  The growth I foresee will be due to two reasons. Expanding GDP and credit penetration.
  
  Recent reforms like Jan Dhan, Mudra Yojna have helped Small and Medium Enterprises (SME's) and self-employed professionals to gain access to loans.
  
  Credit penetration is also expected to increase in this segment from current levels.
  
  Over the past few years, a lot of banks and NBFCs have started lending to this segment.

So look out for strong well-established financial services players which will benefit the most from this trend.

In the news from commodity space, crude oil witnessed selling pressure today. Losses were seen after news reported more production facilities returned to operation in the US Gulf after Hurricane Barry swept through over the weekend.

Also, Chinese economic data dimmed the outlook for crude demand.

To know more on crude oil, you can read one of Vijay Bhambwani's recent articles: Is OPEC Dying?

And to know what's moving the Indian stock markets today, check out the most recent share market updates here.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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