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Sensex Ends 300 Points Lower; Metal and IT Stocks Witness Selling
Tue, 20 Nov Closing | Monish Vora, TM Team

Share markets in India witnessed most of the selling pressure during closing hours and ended their trading session on a negative note. Sectoral indices ended on a negative note with stocks in the metal sector and IT sector witnessing most of the selling pressure.

At the closing bell, the BSE Sensex stood lower by 300 points (down 0.8%) and the NSE Nifty closed down by 107 points (down 1%). The BSE Mid Cap index ended the day down 1%, while the BSE Small Cap index ended the day down 0.9%.

The rupee was trading at 71.49 against the US$.

Asian stock markets finished on a negative note. As of the most recent closing prices, the Hang Seng was down by 2.1% and the Shanghai Composite was down by 2.2%. The Nikkei 225 was down 1.1%.

In the news from the telecom space, as per a leading financial daily, Bharti Airtel share price was in focus today as the company has agreed to two and three-year bilateral loans with 10 to 12 lenders.

As per the news, the company is raising more than US$ 2 billion in loans from banks as it faces increased competition at home and the threat of a ratings downgrade to junk.

Note that on November 8 Moody's Investors Service put Bharti's Baa3 rating, its lowest investment-grade evaluation, on review for downgrade citing low levels of profitability and higher debt levels to fund capital spending.

The all-in cost for Bharti's dollar loan, which includes margin and upfront fees for the deals, is about 110-120 basis points over London interbank offered rate (Libor), according to people familiar with the deal.

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It would be interesting to see how this development pans out. Meanwhile, we will keep you updated on all the happenings from this space.

In the news from banking space, shares of 11 state-run banks that are under the prompt corrective action (PCA) framework of the Reserve Bank of India (RBI) were witnessing selling pressure today.

This was seen as principal economic adviser said Sanjeev Sanyal said that we cannot have a Hotel California approach to PCA banks that you can check out anytime but you cannot leave. As per him, there should be a plan on how these institutions come out of PCA.

Note that earlier this year, in May, Finance minister Piyush Goyal had promised all possible support to the 11 state-run banks that are under the Reserve Bank of India's (RBI) Prompt Corrective Action (PCA) framework. He had also expressed confidence that public sector banks will overcome legacy issues very soon.

After meeting chief executives of these 11 PSBs, he said that it will be ensured that the central government gives every possible support to further strengthen the resolve of these banks to come out of PCA framework as quickly as possible.

The 11 banks under PCA are Dena Bank, United Bank of India, Allahabad Bank, Corporation Bank, UCO Bank, Bank of India, IDBI Bank, Central Bank of India, Indian Overseas Bank, Oriental Bank of Commerce and Bank of Maharashtra.

PCA is the process to ensure that banks do not go bust. Under the process, the RBI has put in place some trigger points to take corrective actions on banks which are weak and troubled.

Note that PSB's are in the spotlight for their growing bad loan problems and the painful issue of willful defaulters.

Banks, in principle, must be careful about not extending loans to borrowers with poor creditworthiness or payment track record. That too, irrespective of the size of the borrower.

However, the data from State Bank of India shows that when it comes to big corporate borrowers, our banks literally look the other way. The share of large corporates, in total advances of the banking sector, has almost remained unchanged over past three years (at an average of 55%).

However, their contribution to incremental slippages has been huge. At one point, the big corporate borrowers accounted for nearly 90% of total NPAs of the sector.

Therefore, according to us, banks with large corporate books deserve a lower valuation if they can't keep NPAs in check.

Also, speaking of bad loans and PCA, one should note that there are faster recoveries happening since the Insolvency and Bankruptcy Code (IBC).

If we consider two successful closures, i.e. Bhushan Steel and Electrosteel, the lenders have already recovered close to Rs 421 billion.

If we consider the other two cases of Essar Steel and Binani Cements, then the lenders would receive around Rs 492 billion.

Faster Recoveries Under the IBC

The government expects close to Rs 1.8 trillion through the IBC. Similarly, banks expect to write back more than Rs 1 trillion from the resolution of the 'Dirty Dozen' constituting 12 big NPA accounts referred to IBC by the RBI.

This is what the RBI said in its report on trend and progress in the banking industry:

  • Banks can take advantage of the IBC to clean up their balance sheets and improve performance on a sustained basis to remain competitive. Instead of waiting for regulatory directions, banks can file for insolvency proceedings on their own to realise promptly the best value for their assets.

The IBC is positive for the long-term health of the banking system and it is evolving with time.

More importantly, lending in the next credit cycle will be more disciplined as a result of the above developments.

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

Sensex Ends Marginally Higher; Telecom and Oil & Gas Stocks Witness Buying (Today's Market)

Dec 14, 2018 Closing

While the BSE Sensex closed higher by 33 points, NSE Nifty closed higher by 14 points

Most Active Small-Cap Stocks Today; PC JEWELLER the Most Traded (Today's Market)

Dec 14, 2018 03:53 PM

Here's a list of most active small-cap stocks today. It also includes information on BSE Smallcap index and the broader benchmark indices.

Top 5 Mid-Cap Gainers Today; SUPREME INDUSTRIES Leads the Pack (Today's Market)

Dec 14, 2018 03:52 PM

Here's a list of 5 stocks that gained the most in the BSE Mid-Cap Index today. It also includes information on BSE Mid-Cap index and the broader benchmark indices.

SYNGENE INTERNATIONAL Surges by 5%; BSE HEALTHCARE Index Down 0.8% (Today's Market)

Dec 14, 2018 03:33 PM

SYNGENE INTERNATIONAL share price has surged by 5% and its current market price is Rs 582. The BSE HEALTHCARE is down by 0.8%. The top gainers in the BSE HEALTHCARE Index is SYNGENE INTERNATIONAL (up 5.4%). The top losers are LUPIN LTD (down 0.1%) and IPCA LABS (down 0.2%).

VARUN BEVERAGES LTD Plunges by 6%; BSE 500 Index Down 0.1% (Today's Market)

Dec 14, 2018 02:33 PM

VARUN BEVERAGES LTD share price has plunged by 6% and its current market price is Rs 734. The BSE 500 is down by 0.1%. The top gainers in the BSE 500 Index are RELIANCE NAVAL & ENGINEERING LTD (up 14.0%) and GUJARAT GAS LTD (up 5.4%). The top losers are VARUN BEVERAGES LTD (down 5.6%) and FORTIS HEALTHCARE (down 7.7%).

Sensex Trades Flat; Bharti Airtel & Yes Bank Top Gainers (Today's Market)

Dec 14, 2018 12:30 pm

The BSE Sensex is trading up by 35 points, while the NSE Nifty is trading up by 5 points.

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