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After opening the trading session on a positive note, Indian equity markets witnessed selling pressure in the final few hours of trade to end flat. At the closing bell, the BSE Sensex closed lower by 21 points, the NSE Nifty finished lower by 14 points. The S P BSE Midcap the S P BSE Small Cap finished down by 0.6% and 0.8% respectively. Losses were largely seen in metal and realty stocks.
Majority of the Asian markets closed lower with Australian shares falling despite another interest rate cut from the Reserve Bank of Australia. Japan's Nikkei 225 was off 1.47%, while the Shanghai Composite gained 0.61%. European markets are sharply lower today with shares in France off the most. The CAC 40 is down 1.65% while Germany's DAX is off 1.26% and London's FTSE 100 is lower by 1.03%.
The rupee was trading at 66.76 against the US$ in the afternoon session. Oil prices were trading at US$ 40.41 at the time of writing.
According to a leading financial daily, ICICI Bank has entered into a Memorandum of Understanding (MoU) with Apollo India Credit Opportunity Management LLC and AION Capital Management to set up an Asset Reconstruction Company (ARC). This step has been taken in order to resolve cases related to bad loans, besides revitalizing and turning around over-leveraged borrowers.
The MoU is subject to regulatory approvals, acquisition of debt exposures from lenders and equity stakes in companies. The ARC will acquire debt from lenders as well as equity stakes in companies. The collaboration seeks to streamline the operations of borrowers, facilitate deleveraging and arrange additional funding on a case-by-case basis. Reportedly, the fund has already committed US$ 825 million in investments in the country.
According to RBI, gross non-performing assets of scheduled commercial banks rose to 7.6% in March 2016 and may increase further to 8.5% in 2016-17 as per a base-case scenario.
With asset stress resolution taking the spotlight, the government and the regulators have been making efforts to relax conditions by allowing up to 100% foreign investment in ARCs, subject to conditions.
ICICI Bank reported a 25% fall in Q1FY17 net profit at Rs 22.32 billion. Bank's profit fell sharply on account of rising bad loans, which now stand at Rs 272 billion. Bank said loans worth Rs 82.5 billion turned bad in the June quarter versus Rs 70 billion in the March quarter. The stock price of the bank continues to fall and finished the trading at Rs 245.4 per share (down 1.5%).
Moving on to news from power sector. According to a leading financial daily, NTPC has chalked out a capital expenditure plan of Rs 300 billion in 2016-17 to add another 4,500 MW power generation capacity to meet rising electricity demand. The company is aggressively pursuing thermal and solar power addition in a serious bid to maintain its 25% market share.
As per the reports, NTPC group contributed 24% of total electricity during FY16 generated in the country with 15% share of country's total installed capacity as on March 2016. In the renewable energy space, the company has committed to central government for setting up 10,000 MW of renewable energy project during the next four to five years.
NTPC is also planning to raise Rs 150 billion from the Green Masala Bonds for which the board has already given its approval. The company has 24,059 MW of power plants under construction, of which about 4,500 MW of plants will be commissioned this year. Therefore, it will require about Rs 1.5 trillion for the construction of the plants (24,059 MW), which will be raised by debt and internal accruals.
The company is in sound financial health. The company's debt to equity ratio has remained reasonable (Subscription Required) when most of its peers in the industry are struggling to deal with a huge debt burden. NTPC's average cost of borrowing is 8% and therefore, it is exploring the rate at which bonds could be offered. NTPC finished the day down by 0.2% on the BSE.
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