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Rising Bad Loans, September Quarter Results, and Top Buzzing Stocks Today
Mon, 26 Oct Pre-Open | Monish Vora, TM Team

Share markets in India ended marginally higher on Friday.

At the closing bell on Friday, the BSE Sensex stood higher by 127 points (up 0.3%).

The NSE Nifty closed higher by 33 points (up 0.3%).

Maruti Suzuki and Mahindra & Mahindra were among the top gainers.

The BSE Mid Cap index ended up by 0.6%. The BSE Small Cap index ended up by 0.7%.

On the sectoral front, gains were largely seen in the auto sector and consumer durables sector.

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IT stocks, on the other hand, witnessed selling pressure.

At 8 am today, the SGX Nifty was trading up by 27 points, or 0.2% higher at 11,960 levels. Indian share markets are headed for a positive opening today following the positive trend on SGX Nifty.

Gold prices were trading up by 0.2% at Rs 50,888 per 10 grams at the time of closing stock market hours on Friday.

Gains were seen as expectations that a US stimulus package would eventually be passed offset pressure from a stronger dollar.

New: 5 Pandemic-Proof Smallcaps You Should Know About...

Even with the recent volatility in prices, gold remains among the best performing commodities this year to combat the fallout from the coronavirus pandemic.

So, is the rally over? Will gold and silver prices fall?

India's #1 trader Vijay Bhambwani doesn't think so. Vijay believes the bull market still has a long way to go.

In one of his videos, he tells you why. Tune in to the video to find out more.

Speaking of the current stock market scenario, note that Indian share markets have climbed back to their highest levels since the pandemic began.

The Sensex breached the 40,000-mark. Meanwhile, the Nifty went past the 12,000-mark.

As per Richa Agarwal, lead smallcap analyst at Equitymaster, there could still be a lot of steam left to this smallcap rebound rally.

Richa believes if you focus on the quality of business, margin of safety in valuations, and an optimum asset allocation, you are likely to create huge wealth for yourself.

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Top Stocks in Focus Today

Dr Reddy's Laboratories will be among the top buzzing stocks today as the DCGI has granted permission to the pharma giant for conducting Russian Sputnik V vaccine against Covid-19 in India on 100 volunteers.

News agency Sputnik quoted the organization as saying that the vaccine will be tested in the second phase of its clinical trials before moving on to phase 3.

Earlier this month, the expert committee of DCGI had recommended granting permission to Dr Reddy's Laboratories for conducting phase 2 clinical trials of Russian COVID-19 vaccine candidate, Sputnik V, in India.

Housing finance companies (HFCs) will also be in focus today as the RBI has asked HFCs to deploy at least 60% of their net assets in the business of providing finance for housing, and those who still don't have that ratio, must do so in a phased manner by March 31, 2024.

SBI Cards: Huge Spike in Bad Loans on Covid-19 Impact

State Bank of India's credit card arm SBI Cards and Payment Services said its gross non-performing assets (NPAs) rose to 4.3% as on September 30 compared to 2.3% a year ago.

The company added that this figure would have been 7.5% had there not been a Supreme Court order that restrained declaring some Covid-related defaults as bad loans.

One reason for the NPA spike in this quarter is that default numbers for the first quarter were suppressed due to the standstill on repayments allowed by the Reserve Bank of India (RBI). Defaults rose in the second quarter as the moratorium ended and customers began experiencing stress on repayments.

The bad loan numbers could go higher as currently there is a Supreme Court order stating that any account, which was not classified as NPA as of August 31, cannot be declared as an NPA until the next hearing or judgment as the case may be.

The above data is indicative of the distress in the self-employed segment of retail borrowers, where most defaults are seen.

As per a leading financial daily, around 84% of SBI Card's customers are salaried. Of this, 38% work in the public sector and 24% in large corporates. Yet, 9% of the company's receivables of Rs 240 billion are under the RBI's resolution plan, indicating that these borrowers are facing financial stress.

The company has made additional provisions of Rs 7.6 billion since the pandemic. Card spends were expectedly down 10% at Rs 295.9 billion because of the lockdown, closure of malls and air-travel curbs.

How these numbers pan out in the coming months remains to be seen. Meanwhile, we will keep you updated on all the developments from this space.

Speaking of the finance sector, note that the market crash impacted all stocks, but finance stocks took the worst hit.

Even as the Sensex made a comeback to pre-Covid levels, the slowdown and asset quality concerns amid the moratorium extension, is an overhang on the financial sector.

Richa Agarwal, lead Smallcap Analyst at Equitymaster, expects a long road to recovery for this sector.

Here's what she wrote about it in one of the editions of the Profit Hunter:

  • Just to be sure, being cautious in this sector makes sense to me. However, I believe it would be folly to paint all financial stocks with the same brush.

    Financials, especially NBFCs, have gone through multiple disruptions and challenges in the last few years - demonetisation, the IL&FS crisis, and now...coronavirus and moratoriums. This has led to a liquidity squeeze for these players, due to a risk aversion attitude among investors and lenders.

    The streak of disruptions will force inefficient and unorganised players in this sector to scale back. I also see a consolidation happening. The survivors and beneficiaries of this shift will be the well capitalised companies with balanced growth and high asset quality.

    Investors who identify these stocks now and are willing to be patient with returns, will be rewarded with huge rebound gains.

Richa recently recommended one such stock - a high quality NBFC. Subscribers can read the report here (requires subscription).

And if you are not a Hidden Treasure subscriber, here's where you can sign up.

Q2FY21 Results: Ambuja Cement Net Profit Rises 50% YoY; HDFC AMC Posts 8% Fall

Cement maker Ambuja Cement reported a consolidated net profit of Rs 8 billion, a 50.5% year-on-year (YoY) increase for the quarter ended September, mainly on account of the company's cost reduction programs coupled with volume growth.

The company registered 8% YoY volume growth and a 10% YoY growth in net sales at Rs 28 billion. Sales volume for the quarter was at 5.7 million tonnes, which was higher than the volume of 5.2 million tonnes for the same period last year.

The company expects rural and agriculture sectors to lead the revival in economic activities. This, along with a continued focus on infrastructure development and affordable housing will support cement demand in the mid-term.

Further, the company declared an interim dividend of Rs 17 per share which shall be paid on and from 19 November 2020.

HDFC AMC, the second largest asset management company in India, saw its profit after tax (PAT) fall 8% YoY to Rs 3.4 billion as compared to Rs 3.7 billion, for the quarter ended September.

The fund house revenue fell 8% quarter-on-quarter (QoQ) to Rs 4.6 billion from Rs 5 billion. Operating profit was Rs 3.5 billion, lower by 7% over the previous year's Rs 3.8 billion in the same period.

Operating margin for the quarter improved to 37 basis points compared to the previous quarter's 34 basis points of its Assets Under Management (AUM).

Bajaj Auto posted an 18.8% YoY drop in net profit at Rs 11.4 billion for the quarter ended September 30.

Total revenue from operations declined 7.2% YoY to Rs 71.6 billion. Operating profit stood flat at Rs 12.3 billion.

The auto major sold 1,053,337 units in Q2FY21, down 10% YoY, against 1,173,591 units in Q2FY20.

On the other hand, the company witnessed 6% growth in two-wheeler sales at 5,50,195 units in the domestic market. However, total two-wheelers sales and commercial vehicles sales including exports witnessed a fall of 2% and 53%, respectively.

To know more, you can read Bajaj Auto's Q2FY21 result analysis on our website.

And to know what's moving the Indian stock markets today, check out the most recent share market updates here.

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

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Stock Market Updates

APL APOLLO TUBES at All Time High; BSE CAPITAL GOODS Index Up 0.8% (Today's Market)

Dec 2, 2020 03:34 PM

APL APOLLO TUBES share price has hit an all time high at Rs 3,530 (up 2.1%). The BSE CAPITAL GOODS Index is up by 0.8%. Among the top gainers in the BSE CAPITAL GOODS Index today are APL APOLLO TUBES (up 2.1%) and LAKSHMI MACHINE (up 2.6%). The top losers include L&T (down 0.1%) and SOLAR INDUSTRIES (down 0.3%).

CROMPTON GREAVES CONSUMER ELEC. at All Time High; BSE CONSUMER DURABLES Index Up 2.0% (Today's Market)

Dec 2, 2020 03:34 PM

CROMPTON GREAVES CONSUMER ELEC. share price has hit an all time high at Rs 333 (up 2.7%). The BSE CONSUMER DURABLES Index is up by 2.0%. Among the top gainers in the BSE CONSUMER DURABLES Index today are CROMPTON GREAVES CONSUMER ELEC. (up 2.7%) and TITAN (up 3.3%). The top losers include VIP INDUSTRIES (down 0.1%) and WHIRLPOOL OF INDIA (down 0.7%).

JINDAL SAW Share Price Up by 5%; BSE METAL Index Up 2.6% (Today's Market)

Dec 2, 2020 03:34 PM

JINDAL SAW share price is trading up by 5% and its current market price is Rs 76. The BSE METAL is up by 2.6%. The top gainers in the BSE METAL Index is JINDAL SAW (up 5.1%).

AIA ENGINEERING Share Price Up by 11%; BSE CAPITAL GOODS Index Up 0.7% (Today's Market)

Dec 2, 2020 03:22 PM

AIA ENGINEERING share price is trading up by 11% and its current market price is Rs 2,090. The BSE CAPITAL GOODS is up by 0.7%. The top gainers in the BSE CAPITAL GOODS Index is AIA ENGINEERING (up 10.7%). The top losers are HINDUSTAN AERO. (down 0.1%) and THERMAX (down 0.3%).

ADANI POWER Share Price Up by 10%; BSE POWER Index Up 1.4% (Today's Market)

Dec 2, 2020 03:18 PM

ADANI POWER share price is trading up by 10% and its current market price is Rs 46. The BSE POWER is up by 1.4%. The top gainers in the BSE POWER Index are ADANI POWER (up 10.5%) and ADANI TRANSMISSION (up 11.9%). The top losers are RELIANCE INFRA (down 0.2%) and BHEL (down 0.6%).

Sensex Trades 89 Points Lower; Dow Futures Down by 126 Points (Today's Market)

Dec 2, 2020 12:30 pm

BSE Sensex is trading down by 89 points, while the NSE Nifty is trading down by 10 points.

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