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Nifty Ends Above 10,000; Yes Bank Surges 6% on Strong Q1 Result
Wed, 26 Jul Closing

Share markets in India ended the day higher with Nifty50 settling above the 10,000-mark for the first time. At the closing bell, the BSE Sensex closed higher by 154 points. While, the NSE Nifty finished higher by 56 points. Meanwhile, the S&P BSE Midcap Index and the S&P BSE Small Cap Index ended up by 0.2% & 0.3% respectively.

Barring information technology stocks all sectoral indices finished the day on in green with metal sector and capital goods sector witnessing maximum buying interest.

Overseas, Asian equity markets finished higher today after Wall Street indexes notched record highs. The Nikkei 225 gained 0.48% while Hong Kong's Hang Seng ended up by 0.33% and China's Shanghai Composite was higher 0.12%. European markets are higher today with shares in France leading the region. The CAC 40 is up 0.64% while London's FTSE 100 is up 0.61% and Germany's DAX is up 0.38%.

The rupee was trading at Rs 64.42 against the US$ in the afternoon session. Oil prices were trading at US$ 46.83 at the time of writing.

Bank stocks closed the day on a mixed note with Yes Bank and South Indian Bank leading the gains. Yes Bank share price rose over 6.1% after it reported a 32% rise in quarterly profit, beating estimates, helped by higher interest and fee income.

Net profit rose to Rs 9.7 billion (US$150 million) in the quarter ended 30 June, from Rs 7.3 billion a year earlier.

In terms of asset quality Gross NPA's for the quarter also jumped by 62% yoy to Rs 13.6 billion in Q1FY18 versus Rs 8.4 billion in Q1FY17. In percentage to total advances GNPA's marginally edged up by 18 bps to 0.97% in QFY18 as against 0.79% in Q1FY17.

Speaking of bad loan crisis, during the spiraling bad loan crisis, private banks were largely seen as safer than their troubled public sector counterparts.

Yes Bank leads in Under-reporting of Bad Loans

However, the perceived safety of some of these private sector banks has turned out to be a mirage, an illusion of water created by burning sands in deserts. Here's an excerpt from the recent edition of The 5Minute WrapUp:

  • "This became amply clear after a recent RBI notification mandated banks to report diversion in their reported and audited NPA numbers (varied more than 15%).

    Turns out Yes Bank was the most errant bank.

    It reported a gross bad loan ratio of 0.76% for FY16, much lower than the 5% as per the RBI audit."

Moving on to news from the economy. Amid the intense tariff war following entry of Reliance Jio in the telecom sector, Finance Minister Arun Jaitley has flagged concern of high debt for the sector and said that banks as on whole have an exposure of Rs 976.8 billion in the telecom sector.

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Further, total outstanding (funded) advances by public sector banks to the 'communications' sector stood at Rs 634.2 billion, while total exposure to the sector worked out to be Rs 976.8 billion.

For public sector banks, the gross Non-Performing Asset (NPA) ratio and stressed advances ratio for the sector stood at 3.7% and 11.3% respectively, at the end of 2016-17 fiscal.

In this regard, government has already constituted an Inter-Ministerial Group for tackling stress in the sector. The group's proposals are familiar and have been made by telcos before.

The proposal includes, tax concessions, the use of spectrum as collateral to avail more debt, easier M&A norms, lower spectrum usage charges, and lower license fees., the reports noted.

However, Madhu Gupta, our Research analyst believes none of these proposals are a panacea for the sector. Here's what she wrote in a recent edition of The 5 Minute WrapUp:

  • "It's a sign of their desperation that banks have approached the government with these proposals. Considering their huge exposure to the sector, we believe banks just cannot risk a situation in which telcos start defaulting on their debt".

And here's a note from Profit Hunter:

Yes Bank is the top gainer in the Nifty 50 Index today. Let's have a look at its chart.

The company announced its Q1FY18 results today and the stock reacted by surging 6% for the day.

In an earlier note, we observed the stock forming a bearish flag pattern. The stock did fall 5% from there. But it found support from its previous low near 1,400 and bounced up to resume its up move. The stock tested the 1,400 level twice, which formed a double bottom pattern on the daily chart. The stock then broke out of the pattern and rallied strongly.

Today, as the company announced its quarterly results, it shot up 6% with heavy volumes.

So will the stock retain its current momentum or will it find some selling at its life high?

Yes Bank Reacts to Q1FY18 Results
Yes Bank Reacts to Q1FY18 Results 

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Feb 16, 2018 (Close)