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Markets will remain closed on 15th August 2018.
We wish all our readers a Happy Independence Day!

Rating agencies: Whom to trust?
Mon, 14 Nov Pre-Open

When S&P downgraded the United States from its AAA notch in August, other rating agencies remained silent. The world watched in horror as America had to step down from its top perch. Now, while S&P has upgraded India's banking sector, Moody's has assigned it a negative outlook. Now, what exactly is the reason for this difference? Or is S&P really losing the plot. The rating agency recently mistakenly downgraded France's top credit rating. Two hours later, the agency released a note saying that this was due to a technical error. Are these ratings just hogwash Well, they definitely should not be followed blindly.

Well, when it comes to the Indian banking sector, concerns are definitely at the fore. Gross non-performing loans (NPA) for the 36 listed banking entities in India swelled to Rs 1.1 trillion, a 33% rise over last year, according to Livemint. A move to the system based recognition of NPAs, the rising interest rate environment and slower economic growth all contributed to this spike. Moody's downgraded the sector to negative from stable citing lower profitability, worsening asset quality and capital concerns as its main concerns. It expected an increase in provisioning over the next 12-18 months, which would further impact profits.

S&P on the other hand declared that Indian banks are not in muddy waters. They do not have heavy exposure to high risk lending. Plus they have a very negligible presence of complex financial products like derivatives and collateralized assets. Exposure to sovereign debts of the troubled Eurozone countries is also minuscule. Their American and European counterparts however fare poorly on these counts. S&P also stated that the government and especially the regulator RBI have been prudent in their support to the system. Indian banks also have a stable base of core customer deposits, and their dependence on external borrowings is limited. Thus puts the system less at risk in light of a global meltdown. This strength was seen during the 2008 crisis as well. Even though there are concerns in the system about a shortfall in capital, especially for mammoth lender State Bank of India (SBI), the capital adequacy maintained by Indian lenders is higher than what the Basel II standard requires.

Banking stocks have taken a beating over the past 9-10 months. The Bankex has corrected by around 20% since the start of the year, and is currently trading at a price/earnings multiple of around 13 times compared to 17.5 times in January. Thus, we believe that most of the concerns that Moody's highlighted, have already been priced in. Plus, the fundamental strength of Indian banks and the long term prospects of the economy cannot be denied. While short term pains may continue to exist, we believe that this sector has a strong ability to bounce bank. S&P may have got its facts right this time around.

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Stock Market Updates

CITY UNION BANK Surges by 5%; BSE BANKEX Index Up 1.0% (Today's Market)

Aug 14, 2018 03:23 PM

CITY UNION BANK share price has surged by 5% and its current market price is Rs 185. The BSE BANKEX is up by 1.0%. The top gainers in the BSE BANKEX Index is CITY UNION BANK (up 5.1%). The top losers are SBI (down 0.1%) and HDFC BANK (down 0.1%).

PFIZER at All Time High; BSE HEALTHCARE Index Up 2.2% (Today's Market)

Aug 14, 2018 03:04 PM

PFIZER share price has hit an all time high at Rs 2,910 (up 1.7%). The BSE HEALTHCARE Index is up by 2.2%. Among the top gainers in the BSE HEALTHCARE Index today are PFIZER (up 1.7%) and SANOFI INDIA (up 0.2%). The top losers include NARAYANA HRUDAYALAYA LTD (down 0.2%) and GLENMARK PHARMA (down 0.3%).

NIIT TECHNOLOGIES at All Time High; BSE IT Index Up 0.8% (Today's Market)

Aug 14, 2018 03:01 PM

NIIT TECHNOLOGIES share price has hit an all time high at Rs 1,334 (up 3.3%). The BSE IT Index is up by 0.8%. Among the top gainers in the BSE IT Index today are NIIT TECHNOLOGIES (up 3.3%) and ORACLE FINANCIAL SERVICES (up 2.3%). The top losers include MPHASIS LTD (down 0.2%) and ZENSAR TECHNOLOGIES (down 0.7%).

JSW STEEL at All Time High; BSE METAL Index Up 0.2% (Today's Market)

Aug 14, 2018 03:01 PM

JSW STEEL share price has hit an all time high at Rs 350 (down 0.2%). The BSE METAL Index is up by 0.2%. Among the top gainers in the BSE METAL Index today are JSW STEEL (down 1.4%) and TATA STEEL (up 1.4%). The top losers include JSW STEEL (down 0.2%) and VEDANTA LTD (down 0.3%).

DABUR at All Time High; BSE FMCG Index Up 0.7% (Today's Market)

Aug 14, 2018 03:01 PM

DABUR share price has hit an all time high at Rs 453 (up 2.5%). The BSE FMCG Index is up by 0.7%. Among the top gainers in the BSE FMCG Index today are DABUR (up 2.5%) and NESTLE (up 0.7%). The top losers include BOMBAY BURMAH (down 0.2%) and RADICO KHAITAN (down 0.3%).

Sensex Up Over 240 Points; Rupee Touches Record Low (Today's Market)

Aug 14, 2018 12:30 pm

The BSE Sensex is trading up by 242 points, while the NSE Nifty is trading up by 81 points.

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