Four new banking licenses likely

Thu, 9 Sep 11:30 am

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After opening above breakeven, Indian indices are currently trading in the positive territory. While other key Asian markets have also had a strong start, China indices are in the red (down 1%). Currently, heavyweights in the Sensex are trading higher with stocks from banking and realty space leading the gainers. However, stocks from metals and healthcare space are trading weak.

Currently, the BSE-Sensex is trading up by around 75 points, while the NSE-Nifty is up by about 17 points. However, some buying interest is witnessed amongst the mid and small cap stocks as the BSE-Midcap and BSE-Smallcap indices are trading up by 0.8% and 0.6% respectively. The rupee is trading at 46.55 to the US dollar.

Bank stocks are trading strong with Canara Bank and Oriental Bank leading the gains. However, Indian Overseas Bank and Allahabad Bank are trading weak. As per leading news daily, RBI is likely to hand out just four new banking licenses in the initial phase when more than a dozen corporate and NBFCs have lined up for making a banking debut. In addition these four licenses too are likely to be given in a phased manner and not at one go. Further RBI has also set out stringent criteria for allotment of these licenses viz; strong pedigree, dispersed shareholding and no exposure to sensitive sectors like real estate.

Considering these criterion it appears that NBFCs including L&T Finance, SKS Microfinance and Shriram Group stand the best chance of making it to the first list. Apart from this RBI is also expected to set a net worth requirement of Rs 10 bn and ask banks to open 25% of their branches in rural areas. Taking into account these stiff eligibility criteria’s we believe it would not be easy for the NBFCs to get new banking licenses.

FMCG stocks are trading positive with Britannia and Hindustan Unilever leading the gains. These companies have been increasing prices of all their products due to raw material pressure. Now Hindustan Unilever and P&G India have decided to raise prices of their detergents. HUL has hiked prices of ‘Rin’ by 8%. New stocks are however, still to reach retailers. P&G, which was initially giving 250 grams extra on its 1 kg packs of Tide, has hiked prices in an indirect manner by reducing the grammage. The price hike for Tide is around 12%. High prices of linear alkyl benzene, a key input used for making detergents have been hurting the margins of these companies. They have thus now decided to pass these on to the consumers. According to a leading business daily, these price hikes may even be extended to the lower-end detergents for the masses (Wheel-HUL and Tide Naturals-P&G).