Sensex Opens in Green; Banking Stocks Buck the Trend

Fri, 27 Oct 09:30 am

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Asian stock markets are higher today as technology shares were boosted by upbeat earnings from US hi-tech giants. The Shanghai Composite is up 0.21% while the Hang Seng is up 0.90%. The Nikkei 225 is trading up by 0.94%. US stocks closed higher on Thursday as the latest set of earnings reports gave investors a positive surprise.

Back home, share markets in India have opened the day on a positive note. The BSE Sensex is trading higher by 98 points while the NSE Nifty is trading higher by 13 points. The BSE Mid Cap and BSE Small Cap index opened the day up by 0.2% & 0.4% respectively.

Barring banking sector, all sectoral indices have opened the day in green with consumer durables sector and metal sector leading the pack of gainers. The rupee is trading at 64.79 to the US$.

Bank stocks have opened the day on a mixed note with South Indian Bank and Indusind Bank being the most active stocks in this space. Yes Bank reported a 25% jump in net profit for the second quarter ended September 2017 mainly due to a rapid growth in advances and a rise in fee income.

The bank reported a growth in deposits of 23.4% year-on-year driven by a healthy growth in current and savings account deposit which constituted 37.2% of the total deposits.

The loan book grew 34.9% on the back of robust growth in both corporate and retail businesses. Retail banking advances grew by 78% year-on-year and now constitutes 11.4% of total advances.

However, a sharp increase in provisions due to a Reserve Bank of India direction to recognise some loans as non-performing, moderated the bank's profits.

Net profit increased to Rs 10.02 billion from Rs 8.02 billion a year earlier, but the bank had to set aside Rs 4.47 billion as provisions which was one-and-a-half times higher than the Rs 1.62 billion reported a year earlier.

Meanwhile, Yes Bank reported a divergence in gross bad loans of Rs 63.55 billion for FY17. Divergence refers to the difference between the RBI's inspection report and the bank's own report. As a result of which Yes bank had to make an extra provisioning of Rs 15.36 billion.

This is the second time that the RBI, in its annual risk-based supervision, has observed divergences in both the banks' NPA reporting.

Yes Bank was one of three private sector lenders which had reported a sharp divergence between their asset quality classification and provisioning for 2015-16, and what the RBI deemed necessary. Jammu & Kashmir Bank, Bank of Maharashtra and ICICI Bank were the other banks that had a divergence of more than 15% in their reported gross bad loans.

Yes Bank leads in Under-reporting of Bad Loans

Yes Bank share price slumped by 7.8% in the early trade.

Moving on to the news from IPO space. The initial public offer of Reliance Nippon Life Asset Management was oversubscribed 7.5 times on the second day of bidding on Thursday.

The IPO, which is expected to raise an estimated Rs 15.4 billion, received bids for 319.3 million shares against the total issue size of 42.8 million (excluding anchor portion).

Reliance Nippon Life Asset Management Ltd an asset management company having market share of over 11.4% in mutual funds offerings in India. The company is ranked the 2nd most profitable asset management company in India. The company is promoted by Reliance Capital Limited, which is an RBI registered non-banking finance company and is a part of Reliance Group led by Mr. Anil D. Ambani.

The company manages 55 open-ended mutual fund schemes including 16 ETFs and 174 closed ended schemes and has a network of 171 branches and over 58,000 distributors including banks, financial institutions, national distributors and independent financial advisors as of 30 June 2017.

Is the company leaving enough money on the table for investors? We recently released our IPO note for the above IPO. You can access the same in our IPO section.

In another development, Srei Infrastructure Finance on Thursday said the board of its wholly-owned subsidiary Srei Equipment Finance Ltd has approved raising up to Rs 20 billion through an IPO.

SREI Infra holds 100% of SREI Equipment Finance. The company is planning to list SREI Equipment Finance and the intent is to dilute up to 25% of capital via IPO.

IPOs are all the rage in the share markets these days. With new companies listing by the day, all with promises of superior returns.

However, we don't need thousands of IPOs to get rich. That's not how super investors make their fortunes. But a few good IPOs could certainly become the multibaggers in your portfolio in a few years.

We have reviewed each of them and have released their recommendation notes. You can check the same on their IPO page.

Download this FREE report now and discover How to Get Rich with IPOs. This guide will show you how to safely profit from the 2017 IPO rush.

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

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