Sensex Ends 150 Points Higher; Banking Stocks Witness Buying

Thu, 13 Dec Closing

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Indian share markets continued their momentum and ended the day on a positive note. Gains were largely seen in the banking sector, consumer durables sector and realty sector.

At the closing bell, the BSE Sensex stood higher by 150 points (up 0.4%) and the NSE Nifty closed higher by 54 points (up 0.5%). The BSE Mid Cap index closed higher by 0.8%, while the BSE Small Cap index ended the day up by 0.7%.

Asian stock markets finished on a positive note as of the most recent closing prices. The Hang Seng stood up by 1.3% and the Nikkei was trading up by 0.9%. The Shanghai Composite stood higher by 1.2%.

European markets were also trading on a flattish note. The FTSE 100 was up by 0.03%. The DAX was up by 0.02% while the CAC 40 was up by 0.01%.

The rupee was trading at 71.59 to the US$ at the time of writing.

Bandhan Bank share price witnessed buying interest today after the Reserve Bank of India allowed the bank to open as many as 40 new branches, the first time since it put a restriction on the bank's branch opening spree three months back.

In September, the Reserve Bank of India had barred Bandhan Bank from opening new branches without its approval and had ordered it to freeze the MD's salary over its failure to meet shareholding rules.

The RBI took the decision as the bank was not able to bring down the shareholding of non-operative financial holding company to 40%, as required under the licensing condition.

According to RBI's new licensing guidelines, the bank's promoter, Bandhan Financial Holdings Ltd, has to reduce its stake from 82% to 40% within three years of commencing the business.

In other news, the Indian share market regulator allowed decided to allow mutual funds to create segregated portfolios with respect to debt and money market instruments in case of credit events while ensuring fair treatment to all unit holders.

This creation of segregated portfolios is to separate distressed, illiquid and hard-to-value assets from other more liquid assets in a portfolio.

It prevents the distressed assets from damaging the returns generated from more liquid and better-performing assets.

The market regulator in a statement said that with a segregated portfolio, investors who may take the hit when the credit event happens shall get the upside of future recovery.

These measures, along with a raft of other steps, were announced after the board meeting on Wednesday.

The board also took note of the proposal to review the valuation norms applicable to mutual fund schemes investing in debt and money market instruments.

In the news from the banking space, Yes Bank share price was in focus today. The lender today said it is on track to name new Managing Director and Chief Executive Officer within the deadline given by the Reserve Bank of India (RBI).

The bank said its nomination and remuneration Committee (N&RC) and Board of Directors have finalised the recommendation for non-executive part-time chairman position and shall be promptly seeking requisite approvals from the RBI.

It further added that the 'Search & Selection Committee' (SSE) has discussed and deliberated on the final shortlisted external and internal candidates presented by Korn Ferry post their comprehensive interviews and assessment.

The final recommendation will be submitted to the RBI by the board of directors post their next meeting scheduled on January 9, 2019.

The development comes as the lender was hit by a series of resignations lately.

The stock of the bank plunged to its lowest levels in over two years earlier this month after credit rating agencies ICRA and CARE ratings downgraded the bank's debt instruments.

ICRA downgraded domestic long-term ratings of the bank's senior debt instruments to 'ICRA AA' from 'ICRA AA+' and its subordinate debt instruments to 'ICRA AA-' from 'ICRA AA'.

Meanwhile, CARE Ratings cut domestic ratings of Yes Bank's senior debt instruments to 'CARE AA+' from 'CARE AAA' and subordinate debt instruments to 'CARE AA' from 'CARE AA+'.

Earlier last week, Moody's also downgraded the bank's foreign currency issuer rating and changed the outlook on the bank to 'negative' from 'stable'.

To know more about the company, you can access to Yes bank Q2FY19 result analysis and Yes bank Stock Analysis on our website.

Speaking of corporate banks, Sarvajeet offers an interesting observation on a corporate bank stock.

Here's what he wrote in one of the recent editions of The 5 Minute WrapUp...

• Corporate banks have underperformed retail-focused banks in the last five years. The chart below shows the annualised returns of the last five years.

Corporate Banks Underperforming Retail-focused Banks

• Retail-focused banks such as HDFC Bank and Kotak Mahindra bank performed significantly better compared to corporate banks. One of the important reasons for this outperformance is stable asset quality. They could maintain gross NPAs below 1% in the previous five years.
  
  Whereas corporate focused banks such as ICICI Bank, Axis Bank, and SBI are facing serious asset quality issues. Not to mention, some of these banks had management issues as well. No wonder these banks not only underperformed retail-focused banks, but also the BSE Bank index as well.
  
  But as I mentioned earlier, the worst is behind them.
  
  We recommended a corporate bank in Smart Money Secrets.
  
  Its aggressive clean-up of its corporate loan book, hiring the right people at the top, adoption of digital technology, and using algorithms in its core operations, bodes well for the bank and its stock. Smart Money Subscribers can access the report here.

If you do not have access to Smart Money Secrets, you can sign up 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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