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Sensex at All-Time High; Energy & IT Stocks Top Gainers
Wed, 18 Jul 09:30 am | Rini Mehta, TM Team

Asian stock markets are higher today as Japanese and Hong Kong shares show gains. The Nikkei 225 is up 1% while the Hang Seng is up 0.3%. The Shanghai Composite is trading up by 0.4%. Wall Street stocks rose on Tuesday, with the Dow Jones Industrial Average posting its fourth consecutive session of gains after Federal Reserve Chairman Jerome Powell expressed an optimistic US economic view and solid earnings bolstered the outlook for a robust reporting period.

Back home, India share markets opened the day on a firm note. The BSE Sensex is trading up by 146 points while the NSE Nifty is trading up by 49 points. The BSE Mid Cap index opened up by 0.2% while BSE Small Cap index opened up by 0.4%.

The rupee is currently trading at 68.63 to the US$.

All sectoral indices have opened the day in green with energy stocks and IT stocks witnessing maximum buying interest.

PSU Banks opened the day on a mixed note with Indian Overseas Bank & Corporation Bank leading the gainers. In the latest development, the government has announced an infusion of Rs 113.4 billion in five public sector banks as part of its Indradhanush scheme, which was unveiled in 2015.

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This is the last tranche of infusion under the scheme.

The five banks are Punjab National Bank (PNB), Indian Overseas Bank, Andhra Bank, Corporation Bank & Allahabad Bank.

Of the Rs 113.4 billion, Rs 28.2 billion will be infused in PNB, Rs 21.6 billion in IOB, Rs 20.2 billion in Andhra Bank, Rs 25.6 billion in Corporation Bank, and Rs 17.9 billion in Allahabad Bank.

In October last year, the government had announced a Rs 2.11 trillion recapitalisation plan, of which Rs 1.4 trillion was to be raised through recapitalisation bonds, while banks were required to raise the balance through share sales.

The two-year recapitalisation programme was aimed at helping state-run banks to deal with rising bad debts and spur credit growth.

After the euphoria of recapitalisation, bad loans have come to haunt them. Post the Gitanjali Gems fiasco, PSBs are yet to fully recover from its impact.

PSBs have had a difficult year, to put it mildly.

PSBs Struggle Despite Government Help

This underperformance was despite the huge boost they got from the government last year. On 24 October 2017, the government announced a Rs 2.11 trillion PSB capitalisation plan. This move was aimed at reviving the PSBs from the bad loan mess.

The next day was a field day for investors in PSBs. PSB stocks went up between 30% and 47%. Despite this, the return in the year was way below average. PSBs like PNB have crashed more than 45% over the last one year.

Using recapitalisation bonds can only act as a short-term measure to the crisis afflicting Indian public sector banks today. Such a measure will not address the structural issue in the banking system, i.e. the poor standard of lending and poor governance system.

Our big picture editor, Vivek Kaul, talks about moral hazard risk arising out of recapitalization. He writes:

  • "If the government bails them around this time around, the banks know that they can count on the government bailing them out the next time around as well. And this means that they can follow fairly loose standards of lending, in order to lend money quickly."

So, have we reached the bottom? Or there are more Nirav Modi stories waiting to come out?

We, at Equitymaster believe, rather than bottom fishing, one should look at banks run by strong management and a differentiated lending strategy available at reasonable valuations.

Moving on to the news from IPO space. HDFC Asset Management Company, the country's second largest mutual fund firm, has fixed a price band of Rs 1,095-1,100 per share for its initial public offering. The IPO is estimated to garner Rs 28 billion.

The initial share sale offer will be open for public subscription from July 25 to 27.

HDFC AMC operates as a joint venture between Housing Development Finance Corporation (HDFC) and Standard Life Investments.

Reportedly, the proposed IPO will put up to 25.4 million equity shares of the fund house on sale, of which 8.6 million shares will be put up by HDFC and up to 16.8 million shares by Standard Life.

HDFC AMC is selling a 4.1% stake in the IPO, while Standard Life will offload 8%.

Meanwhile, the fifth IPO of FY19 - TCNS Clothing is set to open for subscription from today with a price band of Rs 714-716 per share.

Women's apparel maker TCNS Clothing Company raised over Rs 3.4 billion from the anchor investors, ahead of its IPO today. The firm sells its products under W, Aurelia and Wishful brands.

As on 30 September 2017, TCNS sold its products through 418 exclusive brand outlets, 1,305 large format store outlets and 1,361 multi-brand outlets in different parts of the country. It also sold products through six exclusive brand outlets in Nepal, Mauritius and Sri Lanka.

To know our view on the IPO of TCNS Clothing, you can read our entire IPO analysis here (subscription required).

Speaking of IPOs, a merit-based selection primarily including valuation, business, and management quality is the logical way to go about investing in IPOs. If it means going against the herd, so be it. And going by recent past, this strategy has been proven to be successful more often.

To know more, download this FREE report now and discover How to Get Rich with IPOs. This guide will show you how to safely profit from the IPO rush.

To get more updates on share market, click 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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Stock Market Updates

MPHASIS LTD Plunges by 5%; BSE IT Index Down 2.8% (Today's Market)

Oct 19, 2018 02:56 PM

MPHASIS LTD share price has plunged by 5% and its current market price is Rs 1,120. The BSE IT is down by 2.8%. The top gainers in the BSE IT Index are NIIT TECHNOLOGIES (up 5.1%) and NIIT LTD (up 1.4%). The top losers are MPHASIS LTD (down 5.2%) and L&T INFOTECH LTD (down 5.3%).

MAGMA FINCORP Plunges by 5%; BSE 500 Index Down 1.5% (Today's Market)

Oct 19, 2018 02:56 PM

MAGMA FINCORP share price has plunged by 5% and its current market price is Rs 103. The BSE 500 is down by 1.5%. The top gainers in the BSE 500 Index are LAKSHMI VILAS BANK (up 7.7%) and JET AIRWAYS (up 5.9%). The top losers are MAGMA FINCORP (down 5.1%) and PIRAMAL ENTERPRISES (down 9.7%).

TV TODAY NETWORK Plunges by 5%; BSE 500 Index Down 1.5% (Today's Market)

Oct 19, 2018 02:52 PM

TV TODAY NETWORK share price has plunged by 5% and its current market price is Rs 395. The BSE 500 is down by 1.5%. The top gainers in the BSE 500 Index are LAKSHMI VILAS BANK (up 7.2%) and JET AIRWAYS (up 6.4%). The top losers are TV TODAY NETWORK (down 5.1%) and L&T INFOTECH LTD (down 5.5%).

MUTHOOT FINANCE Plunges by 5%; BSE 500 Index Down 1.4% (Today's Market)

Oct 19, 2018 02:48 PM

MUTHOOT FINANCE share price has plunged by 5% and its current market price is Rs 404. The BSE 500 is down by 1.4%. The top gainers in the BSE 500 Index are LAKSHMI VILAS BANK (up 7.3%) and JET AIRWAYS (up 6.5%). The top losers are MUTHOOT FINANCE (down 5.2%) and PIRAMAL ENTERPRISES (down 9.8%).

HEIDELBERG CEMENT Plunges by 5%; BSE 500 Index Down 1.3% (Today's Market)

Oct 19, 2018 02:38 PM

HEIDELBERG CEMENT share price has plunged by 5% and its current market price is Rs 144. The BSE 500 is down by 1.3%. The top gainers in the BSE 500 Index are LAKSHMI VILAS BANK (up 7.4%) and RELIANCE INFRA (up 6.7%). The top losers are HEIDELBERG CEMENT (down 5.3%) and PIRAMAL ENTERPRISES (down 9.3%).

Sensex Down 420 Points; IT Stocks Tank (Today's Market)

Oct 19, 2018 12:30 pm

The BSE Sensex is trading down by 420 points, while the NSE Nifty is trading down by 140 points.

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