Lakshmi Vilas Bank Saga, ICRA on Indian GDP Contraction, and Top Buzzing Stocks Today

Mon, 23 Nov Pre-Open

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Indian share markets ended on a higher note on Friday amid positive global cues.

The BSE Sensex, that hit a low of 43,454 on the back of sell-off in IndusInd Bank, Axis Bank, SBI, and Reliance Industries, bounced back nearly 500 points and ended around 43,950 levels.

At the closing bell on Friday, the BSE Sensex stood higher by 282 points (up 0.7%).

The NSE Nifty closed higher by 87 points (up 0.7%).

Bajaj Finserv and Titan were among the top gainers.

The BSE Mid Cap index ended up by 1.2%. The BSE Small Cap index ended up by 0.8%.

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

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

Gold prices were trading up by 0.2% at Rs 50,090 per 10 grams at the time of closing stock market hours on Friday.

To know more about gold, you can check out our detailed article on investing in gold here: How to Invest in Gold?

Speaking of the stock markets, India's #1 trader, Vijay Bhambwani talks about how to beat algorithms, dark pools and vulture traders, in his latest video for Fast Profits Daily.

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Top Stocks in Focus Today

From the defence sector, Bharat Electronics will be among the top buzzing stocks today.

Shares of the company witnessed huge buying interest on Friday on the back of strong management commentary. The company has guided for double-digit growth, sustainable margins and better order inflows suggest strong performance in the medium-term.

In its virtual analyst meet, Bharat Electronics highlighted that it expects double digit (10-15%) topline growth over the medium-term and is likely to be able to maintain EBITDA (earnings before interest, taxes, depreciation, and amortization) margins in the range of 20-21% during this period.

Infosys share price will also be in focus today as On November 19, Simplus, an Infosys company, announced that it has collaborated with Salesforce for a vaccine management cloud solution.

The solution has been built on the Salesforce Platform in support of 'Salesforce Work.com for Vaccines' as the Covid-19 pandemic continues.

Combining Simplus' resources, capabilities, and Salesforce consulting and product expertise, the companies have created an end-to-end vaccine management solution to help support the federal government's (the US) mandate for states to be ready to distribute a coronavirus vaccine, a statement said. Infosys' vaccine management solution covers a broad spectrum of vaccine management, including citizen registration, provider enrolment, supply chain visibility, and vaccine administration.

Market participants will also track State Bank of India share price as the lender has signed a memorandum of understanding (MoU) with the Luxembourg Stock Exchange (LuxSe). The MoU will help SBI and LuxSE set up a long-term cooperation mechanism, and promote ESG (Environmental, Social, and Corporate Governance) and green finance.

Through this MoU, the Luxembourg Stock Exchange would work towards creating a sustainable environment for issuers, asset managers, and investors in terms of ESG focused funds and bonds.

ICRA: India's GDP Contraction Likely Narrowed to 9.5% in Q2FY21

In news from the macroeconomic space, rating agency ICRA said India's gross domestic product (GDP) is estimated to have contracted to 9.5% in the September quarter from 23.9% in Q1FY21.

The recovery, as per the agency, is led by an improvement in construction and manufacturing activities.

In addition to the continued cost-cutting measures, the availability of raw material inventory that had been procured previously at subdued costs supported the earnings of the manufacturing entities in the September quarter compared to the April-June period.

The rating agency said there was a robust recovery in the performance of key construction sectors such as cement sector and steel sector and healthy central government awards in roads and railways during Q2FY21.

The lead indicators of the trade and transport sectors such as railway revenue-carrying freight, generation of goods and services tax (GST), e-way bills, service sector exports and diesel consumption displayed a marked improvement in their year-on-year (YoY) performance in Q2FY21 relative to the previous quarter.

However, the Covid-19 pandemic continued to adversely affect demand in the contact-intensive sectors such as tourism, hospitality and recreation in the quarter.

Moody's had revised India's GDP forecast to a contraction of 8.9% against its earlier projection of 9.6% for the calendar year 2020.

It would be interesting to see how these numbers pan out. Stay tuned for all the updates from this space.

Lakshmi Vilas Bank Debacle: Stock Slides to Hit 52-Week Low

Lakshmi Vilas Bank share price slumped further on Friday and fell 10% to hit a new 52-week low value as investor sentiment remained cautious.

This was the fourth consecutive session of decline for the Lakshmi Vilas Bank (LVB) as investor sentiment was spooked after the government placed the lender under a one-month moratorium and superseded its board.

On Tuesday last week, the government placed LVB under a one-month moratorium, superseded its board and capped withdrawals at Rs 25,000 per depositor.

The step was taken by the government, on the advice of the Reserve Bank, in view of the declining financial health of the private sector lender.

T N Manoharan, former non-executive chairman of Canara Bank, has been appointed as the administrator of the bank.

Note that LVB is the third bank to be placed under moratorium since September last year after the cooperative bank PMC in 2019 and private sector lender Yes Bank this March.

LVB is set to be merged into Singapore-based DBS Bank's Indian unit, DBS Bank India, under an RBI-approved plan.

Reports state that DBS Bank India will bring in additional capital of Rs 25 billion upfront, to support credit growth of the merged entity.

One of the promotors of LVB said that DBS Bank, in 2018, wanted to acquire 50% stake in LVB for above Rs 100 per share but the RBI did not agree.

Speaking of Lakshmi Vilas Bank, if there is any private sector bank that has severely underperformed in the last two years, it has to be Lakshmi Vilas Bank.

Back in May 2019, we wrote an article around how we avoided a 60% loss in Lakshmi Vilas Bank.

Here's an excerpt from the article:

• LVB had an interesting story.
  
  The bank had a new management team in place. The bank was shedding its old image to bring out a new look.
  
  The new management had a clear vision and set several goals. These included deposit and loan growth targets, CASA (current account saving account) ratio targets, a focus on retail loans, and the reduction in cost-to-income ratio.
  
  So far so good.
  
  But the bank had its own legacy issues. These were rising bad loans, a weak balance sheet with a poor capital adequacy ratio (CAR).
  
  The falling CAR was a concern.
  
  The CAR is the ratio of a bank's capital in relation to its risk-weighted assets and current liabilities. The RBI has set the minimum CAR at 9% for all banks.
  
  A ratio below 9% indicates the bank does not have enough capital to expand its operations. It ensures that banks don't expand their business without having adequate capital.
  
  On one hand, LVB had bad loan issues and on the other, it badly needed capital to shore up its CAR.

If you look at the shareholding pattern of LVB during the 2-year time frame between May 2017 to May 2019, retail investors have increased by 15%. The number of shares owned by them increased by 24%.

A typical example of retail investors catching a falling knife!

You can also read one of our latest Profit Hunter issues on the above fiasco here: Lesson for Investors from the Lakshmi Vilas Bank Fiasco.

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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