Indian Indices Trade Marginally Higher; FMCG Stocks Witness Buying

Tue, 18 Sep 12:30 pm

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Stock markets in India are presently trading marginally higher. Sectoral indices are trading on a mixed note with stocks in the FMCG sector and healthcare sector witnessing maximum buying interest. Realty stocks are trading in the red.

The BSE Sensex is trading up 12 points (up 0.1%) and the NSE Nifty is trading up 8 points (up 0.1%). The BSE Mid Cap index is trading down by 0.2%, while the BSE Small Cap index is trading down by 0.3%.

The rupee is trading at 72.49 to the US dollar.

In the news from commodity space, crude oil is witnessing selling pressure today. Losses were seen on the back of worries that rising trade tensions between the US and China could dent global crude demand.

The trade dispute has brought up concerns about the potential for slower growth in oil consumption, and has offset supply concerns stemming from the upcoming US sanctions on Iran.

Note that crude oil prices are witnessing buying interest lately. This doesn't bode well for the Indian economy, as it not only affects fuel prices, but also has many other repercussions on the macroeconomic level.

Rising crude oil prices can be a big worry for the Modi government as well as it has been a big beneficiary of lower crude oil prices.

Apart from that, what does rising crude oil prices mean for stock markets?

Richa Agarwal, editor of Hidden Treasure, tracks the oil and gas sector very closely. She believes the rise in crude oil prices is a bearish sign for stock markets globally. At the same time, any market correction, will throw up interesting buying opportunities in small-cap stocks.

This is what she wrote...

• After hitting a low of US$ 30 per barrel in January 2016, prices have more than doubled this year.
  
  While the Hidden Treasure team looks for long-term wealth creators, such macro situations can help to recommend such stocks at a bargain. The ones who keeps calm, when everyone else is losing their heads, will gain the most when the tide turns.

It would be interesting to see how Iranian sanctions will influence crude oil prices. Meanwhile, we will keep you posted on all the updates from this space.

From the IT sector, Infosys share price is in focus today as the company said it has doubled its investment in US-based software firm TidalScale by putting in an additional US$ 1.5 million through the Infosys Innovation Fund.

In the news from banking sector, State Bank of India (SBI) share price is also in focus today. This comes as the bank announced that it will sell eight of its non-performing assets (NPAs) to recover dues worth over Rs 39 billion. As per the news, the bank has invited bids from asset reconstruction companies (ARCs) and financial institutions (FIs).

Of the above eight accounts, Kolkata-based Rohit Ferro Tech has the highest loan outstanding against SBI at Rs 13 billion, followed by Indian Steel Corporation Ltd at Rs 9.3 billion, Jai Balaji Industries at Rs 8.5 billion, and Mahalaxmi TMT Pvt Ltd at Rs 4 billion.

The e-bidding for these accounts will take place on September 26.

Note that SBI's gross NPAs rose to 10.6% of the total advances at the end of June this year. This was against 9.9% a year ago. In value terms, they increased to Rs 2,128 billion, from Rs 1,880 billion a year ago.

Also speaking of NPAs, PSB's are in the spotlight for their growing bad loan problems and the painful issue of willful defaulters.

The chart below shows the banks that have the highest number of willful defaulters.

Unsurprisingly, Punjab National Bank tops the list. But the others aren't too far behind.

Banks with the Highest Number 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.

While the bad loans struggle at PSBs has been going on since a decade, bureaucracy and a lack of autonomy have ensured the sub-optimal profitability and asset quality of these state-run banks.

That's the reason we've been wary of PSU banks since 2014. This was well before the market had caught a whiff of the NPA problem. We've recommended just two large PSU banks in StockSelect since then...and already successfully closed both of them.

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

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