Sensex Ends Day up 200 Points; Metal Stocks Top Gainers

Tue, 28 Aug Closing

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After opening the day in green, share markets in India witnessed positive trading activity throughout the day and ended the day in green, at a new all-time high close. Sectoral indices too ended the day in green, with stocks in the power sector and stocks in the metal sector leading the gains.

At the closing bell, the BSE Sensex stood higher by 202 points (up 0.5%) and the NSE Nifty closed up by 47 points (up 0.4%). The BSE Mid Cap index ended the day down by 0.4%, while the BSE Small Cap index ended the day up by 0.4%.

Asian stock markets finished mixed. As of the most recent closing prices, the Hang Seng was up by 0.2% and the Shanghai Composite was down by 0.1%. The Nikkei 225 was up by 0.1%. Meanwhile, European markets were trading on a positive note. The FTSE 100 was up by 0.4%, The DAX, was up by 0.1% while the CAC 40 was up by 0.2%.

The rupee was trading at Rs 70.12 against the US$ in the afternoon session. Oil prices were trading at US$ 77.1 at the time of writing.

In news from stocks in the banking sector. According to a leading financial daily, banks have decided to refer over 20 of 32 non-performing asset (NPA) accounts to bankruptcy courts as the Reserve Bank of India's (RBI's) deadline for resolution of stressed assets ended yesterday.

On 12 February, RBI had set a 180-day timeline starting 1 March for resolving large corporate loan defaults, failing which banks have to refer these cases for insolvency proceedings.

Among the 20 new accounts that will be referred to the National Company Law Tribunal (NCLT), a majority-including Essar Power, Korba West Power Co. Ltd, Jindal India Thermal Ltd and Sravant Energy Pvt. Ltd-are power projects.

The list also has metal companies, including BMM Ispat Ltd, ISMT Ltd, BRG Iron and Steel and Splendid Metal Products Ltd. Reliance Naval is also among the companies that will be referred to bankruptcy courts

The central bank, through its 12 February circular, asked banks to craft resolution plans for defaulted accounts within 180 days in cases where the exposure is more than Rs 20 billion.

Last year, lenders referred a total of 40 large corporate accounts worth Rs 3.5 trillion to NCLT for initiating insolvency proceedings.

The RBI's strict policies seem to be having a positive impact in the resolution of the long-drawn NPA crisis. However, progress has been very slow.

India Lags in Resolving Insolvencies

Last year, India jumped up 30 places and into the top 100 on the World Bank's 'ease of doing business' index.

However, when it comes to resolving insolvency, India's rank is still low at 103, much below our neighbouring countries.

On both factors (i.e. recovery rate and the time to resolve a bankruptcy), India is slower than even its poorer neighbours.

However, going forward, the IBC framework will change India's position as it is a time-bound process.

Cases once admitted are to be resolved within 270 days; if not, companies go into liquidation.

We already had a taste of success with the successful conclusion of the Bhushan steel case.

Enthused by this success, the finance ministry expects banks to write back more than Rs 1 trillion after the resolution of all 12 big NPA cases that have been referred for insolvency proceedings by the RBI.

We believe, this can be a big boon for the banking sector and the Indian economy. This will not only help banks recover bad loans to an extent but also help bring back credit growth.

Moving on to news from stocks in the FMCG space. Nestle India share price was in focus today after its Swiss parent struck a deal to market the products of US coffee giant Starbucks around the world, outside of its cafes.

Swiss food giant Nestle, which also produces Nescafe instant coffee, had earlier announced that it would pay US$ 7.15 billion for the rights to market Starbucks coffee globally.

The agreement Nestle perpetual rights to sell Starbucks products such as Starbucks, Seattle's Best Coffee and Teavana outside of the U.S. company's coffee shops, and will result in about 500 Starbucks employees shifting to Nestle.

Notably, just last week Nestle India entered into aa partnership with local online retailer Flipkart to launch Maggi Special Masala noodles.

As a part of the partnership, from August 21 consumers can pre-book MAGGI Special Masala Noodles on Flipkart. The company further said this product would also be available exclusively on Flipkart from August 25-30, following which it would be available nationwide through Nestle's strong distribution reach.

Nestle India share price ended the day up by 0.2%.

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