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Major Asian stock markets have opened the day on a dismal note with stock markets in Japan and South Korea trading lower by 4.4% and 1.7% respectively. Major indices in Europe and US ended their previous session deep in red with benchmark indices in France and US falling as much as 4.2% and 1.6% respectively. The rupee is trading at 68.01 per US$.
Indian stock markets have opened the day on a flattish note after yesterday's sharp plunge. The benchmark indices slumped more than 3% yesterday. The BSE Sensex is trading lower by 23 points (down 0.1%) and NSE Nifty is trading higher by 13 points (up 0.2%). Both, BSE Mid Cap and BSE Small Cap are trading lower by 1.2% and 1% respectively. Sectoral indices have opened the day on a mixed note with stocks from oil & gas and capital goods sectors witnessing maximum selling pressure. However, stocks from telecommunication and information technology space are witnessing buying interest.
State Bank of India (SBI) reported its results for the quarter ended December 2015. The company's net profit dipped by 62% to Rs 11.1 billion on the back of higher provisions. The fresh slippages tripled to Rs 206.9 billion as compared to the preceding quarter. This pushed up the gross non-performing assets (NPA) to 5.1% from 4.1% at the end of September quarter.
The bad loans increased on the recent directives of the RBI to recognize visible stressed assets as NPAs and to set aside money to cover the risk of the default. Reportedly, bank has set aside a sum of Rs 76.4 billion to manage these bad loans during the quarter. The management hinted that there will be more pain to come in the coming quarters on the asset quality front.
Further, bank's total advances grew by 12.9% YoY led by a growth in corporate loan book. Net interest income (NII), difference between interest spent on deposits and that earned on loans, declined by 1.24% to Rs 136 billion. The net interest margins too fell to 2.93% from 3.01% in the preceding quarter.
The stock is trading down by 2%.
Hero MotoCorp too reported its results for the quarter ended December 2015. The company's net sales grew 7% YoY to Rs 72.9 billion on the back of festive demand. The company's two wheeler sales in volume as well as value terms grew by 2.5% and 6.7% respectively as compared to a year ago. Reportedly, average vehicle revenue grew by 4% because of a better product mix. However, demand for two-wheelers remained sluggish on account of deficit monsoon in the preceding two years which have impacted the rural wages and their discretionary spending.
Inspite of lukewarm growth, company's net profits grew by 36.5% YoY to Rs 7.9 billion on the back of lower raw material costs. The cost reduction programmes introduced three year back also reduced the overall expenditure. This led to operating margins expanding by 3.5% to 15.6%. Further, decline in the raw material cost coupled with a better product mix led to operating profits growing by 38.6% during the quarter.
A pick up in the rural discretionary spending will be the key things to watch out for going forward. The stock is trading up by 1%.
After yesterday's sharp plunge we believe global markets are likely to remain under pressure going forward. None of the concerns of global investors are likely to go away anytime soon. Indian markets too may continue to experience the fallout of this turmoil. However, long term investors need not be concerned. Times like these could offer good opportunities to enter good quality stocks at reasonable valuations.
In order to remain relatively immune from the market crash, we have found "5 Warning Signals" or "5 Red Flags" that show up in a business right before its stock price plummets.
In fact, ensuring that you're not investing in businesses which show these "5 Warning Signals" could potentially be the difference between creating wealth and incurring losses with your stock market investments.
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