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Sensex Trades in Green; Bank Stocks Witness Selling
Thu, 17 Aug 01:30 pm

After opening the day on a flat note, the Indian share markets have reversed the trend and are currently trading above the dotted line. Sectoral indices are trading on a mixed note, with stocks in the IT sector and the metal sector witnessing maximum buying interest. Stocks in the banking sector and the auto sector are trading in the red.

The BSE Sensex is trading up 101 points (up 0.3%) and the NSE Nifty is trading up 41 points (up 0.4%). Meanwhile, the BSE Mid Cap index is trading up by 0.2%, while the BSE Small Cap index is trading up by 0.8%. The rupee is trading at 64.09 to the US$.

In news from stocks in the banking sector. HDFC Bank is in focus today after the private sector lender reduced interest rate on savings bank accounts by 50 basis points to 3.5% for deposits up to Rs 5 million.

The bank, in a regulatory filing said that it will continue to pay 4% interest on deposits of above Rs 5 million. The new interest rates will be effective from August 19, 2017.

Another private bank, Yes Bank also cut saving bank interest rate by 100 basis points (1%) to 5% for balance less than Rs 100,000.

The bank's action follows the decision by State Bank of India (SBI). SBI was the first bank to cut the savings deposit rate by 50 basis points to 3.5% for deposits up to Rs 10 million.

SBI's rate cut could ignite a rate war among the large state-run and private banks, but most mid-sized and small finance banks looking to gain incremental market share could decide to hold rates.

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Bank of Baroda also followed suit and cut the rate to 3.5% on deposits of up to Rs 5 million. While Kotak Mahindra Bank retained the existing rates of 5% on savings deposits up to Rs 100,000 and 6% on deposits between Rs 100,000 and Rs 10 million, it reduced the rate on savings deposits of amounts above Rs 10 million crore and up to Rs 50 million from 6% to 5.5%.

The move comes at a time when credit off-take is at a decade low.

According to RBI data, credit off-take was down to a decade low of 5.1% in FY17 compared to 10.7% a year ago. This was despite a declining cost of borrowing. The data shows the economy might still be reeling from the aftershocks of notebandi.

Credit Growth at Lowest Levels in a Decade

Rural regions bore most of the brunt of the lending slowdown. RBI data shows that growth in rural loans between 30 September 2016 and 31 March 2017 was a mere 2.5%. The picture becomes clearer when you compare it with growth of 12.9% in the second half of 2015-16.

Apart from notebandi, rising NPA levels are also hampering the banks' ability to lend. Banks with significant bad loans on their books are reluctant to lend to even healthy companies. This will adversely impact the growth of the economy going forward.

At the time of writing, HDFC Bank share price was trading down by 1%.

Moving on to news from stocks in the pharma sector. Cadila Healthcare share price is in focus today.

Cadila Healthcare announced that it had received final ANDA (abbreviated new drug application) approval from the US Food and Drug Administration (USFDA) for its Telmisartan and Hydrochlorothiazide Tablets.

Telmisartan and Hydrochlorothiazide Tablets, will be manufactured at the company's formulation manufacturing facility at Moraiya, Ahmedabad.The drug is used to treat hypertension (high blood pressure).

Citing IMS Health sales data for the 12 months to June 2017, the company said Telmisartan and Hydrochlorothiazide achieved annual sales of US$ 66.5 million.

The company's current portfolio consists of 140 products authorised for distribution in the US marketplace and has so far filed over 300 abbreviated new drug applications (ANDAs) since it commenced filings in 2003-04.

At the time of writing, Cadila Healthcare share price was trading down by 0.3%.

The Indian pharmaceutical industry has come under a lot of regulatory pressure in the past few years.

The sector has faced great volatility over the years.

We had written about the current predicament of Indian pharma companies in one of the premium editions of the 5 Minute WrapUp:

  • Over the past few years, risk in the US markets has increased. The US Food and Drug Administration has become stricter on products entering US borders. Surprise inspections have increased and companies are being issued warning letters. This has impacted the business and earnings of Indian pharma players, causing major volatility for the sector.

The list of pharma sector woes is long. So, is there light at the end of the tunnel? Girish Shetty, our research analyst thinks there is.

As per him, it doesn't make sense to paint all pharma stocks with the same brush. The leaders of the industry will certainly survive this phase. There are interesting, niche pharma stocks that are worth your attention.

Facing pricing pressures in the domestic and export markets, currency fluctuations, as well as manufacturing issues related to their plant, there is a transformation happening in the overall sector as to how business is done and will be done in the future.

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

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