Yes Bank's Road Ahead
Podcast

The stock markets witnessed selling pressure in the week gone by.

Market participants remained cautious tracking tepid quarterly earnings amid weak cues from other global markets as concerns over the US-China trade war and slow progress of moonsoon weighed on investors' risk appetite.

We talk about the Jalan Committee recommendations on Economic Capital Framework and what it means to the Indian economy.

Yes Bank's shares remained the focus of the week as it reported a 91% drop in fiscal-first quarter profit.

Note that, a 78% drop in Yes Bank shares since August has left Rana Kapoor some US$1 billion poorer.

So, what does this mean for the Yes Bank going ahead? Listen in...

Tune in...


Sensex Ends 560 Points Lower; Auto and Banking Stocks Witness Huge Selling
Closing

India share markets continued to witness selling pressure during closing hours and ended their day deep in the red.

At the closing bell, the BSE Sensex stood lower by 560 points (down 1.4%) and the NSE Nifty closed down by 90 points (down 1.5%).

The BSE Mid Cap index ended the day down 2%, while the BSE Small Cap index ended the day down 1.8%.

Sectoral indices ended on a negative note with stocks in the auto sector and banking sector witnessing most of the selling pressure.

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The rupee was trading at 68.91 against the US$.

Asian stock markets finished on a positive note. As of the most recent closing prices, the Hang Seng was up by 1.1% and the Shanghai Composite was up by 0.79%. The Nikkei 225 was up 2%.

European markets were also trading on a positive note. The FTSE 100 was up by 0.19%. The DAX was trading up by 0.31%, while the CAC 40 was up by 0.17%.

Market participants were tracking RBL Bank share price, Bandhan Bank share price, and IndiGo share price as these companies announced their June quarter (Q1FY20) results today.

You can also read our recently released Q1FY20 results: Mindtree, Wipro, Yes Bank, Federal Bank, Colgate, Tata Elxsi.

In the news from global financial markets, John Williams, vice chairman of the Fed's rate-setting committee, made a case for aggressive interest rate cut. He said when rates and inflation are low, policymakers cannot afford to keep their powder dry and wait for potential economic problems to materialise.

Meanwhile, Fed Board of Governors Vice Chair Richard Clarida said policymakers might need to act early to stimulate the US economy as an insurance policy against rising risks.

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Moving on to the news from the macroeconomic space, Finance Minister Nirmala Sitharaman announced that foreign portfolio investors (FPIs) should consider the option of structuring themselves as companies rather than trusts to avoid paying the increased surcharge announced in Budget 2019.

She said that FPIs registered as trusts will have to pay the new tax surcharge.

The development ruled out hopes that the government may tweak relevant portions of the Finance Bill to ring-fence FPIs from the effects of the super-rich tax.

So far in July, FPIs have pulled out more than Rs 50 billion from the cash segment of the Indian equity markets.

From the banking sector, RBL Bank share price was in focus today as the private sector lender reported double-digit growth across key parameters in June quarter.

Profit during the quarter grew 41% year-on-year (YoY) to Rs 2.67 billion in Q1FY20. The growth here was driven by strong net interest income (NII), operating income, and other income.

Net interest income, the difference between interest earned and interest expended, increased 48% to Rs 8.17 billion YoY. Net interest margin stood at an all-time high of 4.3% and healthy loan growth at 35%.

Asset quality remained stable during the quarter as gross non-performing assets (NPAs) stood unchanged at 1.38% of gross advances and net NPA fell 0.65% against 0.69% on sequential basis.

Slippages, however, remained high at Rs 2.25 billion at the end of June quarter against Rs 2.06 billion in Q4FY19.

Provisions for bad loans increased 6.6% sequentially and 52% YoY to Rs 2.13 billion in the quarter ended June 2019.

As per the management commentary, there is some weakness going ahead due to tight liquidity concerns, which dented investors sentiment and resulted in a sharp fall in stock price.

Speaking of the banking sector, it was reported that the scheduled commercial banks (SCBs) credit growth moderated to 12% YoY compared with 12.7% growth in May 2019. The credit growth has improved from 10.9% at end June 2018.

Co-head of Research at Equitymaster, Tanushree Banerjee believes retail and corporate credit are expected to grow by multi-fold over the next few years.

Rising Credit Growth in India

Rising Credit Growth in India

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

  • One theme I strongly believe will play out over the next decade is the credit growth in India.

    The growth I foresee will be due to two reasons. Expanding GDP and credit penetration.

    Recent reforms like Jan Dhan, Mudra Yojna have helped Small and Medium Enterprises (SME's) and self-employed professionals to gain access to loans.

    Credit penetration is also expected to increase in this segment from current levels.

    Over the past few years, a lot of banks and NBFCs have started lending to this segment.

So, look out for strong well-established financial services players which will benefit the most from this trend.

In the news from commodity markets, crude oil was witnessing buying interest today. Oil prices rose by more than 1% today after the US Navy destroyed an Iranian drone in the Strait of Hormuz, a major chokepoint for global crude flows.

The above development again stoked tensions in the Middle East.

It was a volatile week for crude oil. The commodity saw losses during the past two sessions after official data showed US stockpiles of products like gasoline rose sharply last week.

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As per the data, US domestic crude supplies fell for a fifth straight week. According to data released by the US Energy Information Administration (IEA), US crude inventory for the week ended July 12 fell 3.11 million barrels to 455.88 million barrels.

Meanwhile, volatility was also seen on the back of ongoing geopolitical tensions in the Middle East.

Iran this week said that a small oil products tanker missing in the Strait of Hormuz was in its territorial waters. This stoked fraught relations with Iran's neighbors and the West over threats to shipping in the key oil chokepoint.

How this all pans out remains to be seen. Meanwhile, we will keep you updated on all the developments from this space.

Speaking of crude oil, in the video below, Vijay Bhambwani explains how trading in crude oil is an evergreen strategy. As per him, trading in crude oil offers excellent opportunities in nearly all market conditions due to its unique standing within the world's economic and political systems.

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


Sensex Slips Over 400 Points; Automobile & Healthcare Stocks Drag
12:30 pm

Indian share markets have extended their losses and are presently trading deep in the red amid concerns over growth and earnings recovery.

Barring consumer durables sector and power sector, all sectoral indices are trading on a negative note with stocks in the automobile sector, realty sector and healthcare sector witnessing maximum selling pressure.

The BSE Sensex is trading down by 358 points (down 0.9%), while the NSE Nifty is trading down by 111 points (down 1%). The BSE Mid Cap index is trading down by 1%, while the BSE Small Cap index is trading down by 1.3%.

The rupee is trading at Rs 68.82 against the US$.

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The domestic currency appreciated by 23 paise against the US dollar in early trade today, as market participants pinned their hopes on aggressive interest cut by the US Federal Reserve later this month.

Forex traders said rupee along with most Asian currencies were trading in the positive territory following dovish comments from both New York Fed President John Williams and Vice Chair Richard Clarida.

On Thursday, the rupee had settled at 68.97 against the US dollar.

Moving on, market participants are tracking RBL Bank share price, Bandhan Bank share price, and IndiGo share price as these companies are set to announce their June quarter (Q1FY20) results later today.

You can also read our recently released Q1FY20 results: Mindtree, Wipro, Yes Bank, Federal Bank, Colgate, Tata Elxsi.

In news from the cement sector, ACC share price is witnessing buying interest today. Shares of the company gained 5% in early trade today after the company reported a better-than-expected 39% year-on-year (YoY) growth in consolidated net profit at Rs 4.6 billion in June quarter.

The company had a profit of Rs 3.3 billion in the same quarter last year. Net sales grew 8% at Rs 40.6 billion against Rs 37.7 billion in the corresponding quarter of previous year.

EBITDA margin improved 260 bps to 17% on account of better realizations, operational efficiencies and supply chain efficiency improvement.

Company's management said that despite the subdued cement demand, ACC's strong customer relationships, loyal channel network and range of innovative products have helped the company deliver a robust quarter.

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The company's ready-mix concrete business grew strongly, aided by eight new ready-mix concrete plants in this quarter.

To know more about the company, you can read ACC's latest result analysis on our website.

Moving on to news from the realty sector, Prestige Estates is likely to sign-up 2 prime office project deals in Mumbai. The firm is in talks with D B Realty to enter into a joint development pact for two of the company's projects.

As per an article in a leading financial daily, Bengaluru-based Prestige Group is close to signing a joint development agreement, spanning 4 million sq. ft, to mark its entry into the city's lucrative commercial real estate market.

Prestige Group has been looking to enter Mumbai's office market for several years and has explored similar deals in the past. While the project at Bandra Kurla Complex is entirely new, it will also help develop an under-construction residential project, Turf View, at Mahalakshmi in south Mumbai.

Last month, the company also entered into a joint development agreement with another Bengaluru-based firm, RMZ Corp, to redevelop Mumbai's 60-year old Kamalistan Studio into an office park.

As part of the deal, both companies will develop and sell part of the land belonging to Mahal Pictures, an associate of D B Realty, into an office park.

Prestige Estates share price is presently trading down by 0.9%.

Note that, the real estate sector in India has been facing a lot of obstacles lately.

Due to all the headwinds, the number of developers has reduced, and this has created consolidation in the market.

The chart below shows a sharp decline in the number of developers in major Indian cities.

Supply-Side Consolidation in the Real Estate Industry

Supply-Side Consolidation in the Real Estate Industry

Typically, such a reduction in investment in an industry, i.e. contraction of supply, paves the way for a recovery of profits.

From a supply perspective, the competitive intensity has reduced due to leveraged balance sheets of many developers.

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This, in turn, has resulted in subdued launches and stalling of existing projects, thus overall reducing inventory and consolidation in the sector.

With this, the share of organized market players is expected to go up in the medium to long term.

This is a huge opportunity for long term serious players in the sector.

Research analyst, Sarvajeet Bodas talks about how Modi's push towards affordable housing can revive the real estate sector and accelerate the economic activity in the video below.

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


Sensex Opens in Green; TCS and Bharti Airtel Top Gainers
09:30 am

Asian share markets are higher today as Japanese and Hong Kong shares show gains. The Nikkei 225 is up 1.7% while the Hang Seng is up 1.1%. The Shanghai Composite is trading up by 1.1%. US stocks moved higher on Thursday after a slow start as comments from New York Fed President John Williams helped cement expectations for an interest rate cut from the US central bank at the end of the month.

Back home, India share markets opened the day on a positive note. The BSE Sensex is trading up by 113 points while the NSE Nifty is trading up by 32 points. The BSE Mid Cap index and BSE Small Cap index opened up by 0.3% and 0.2% respectively.

Barring IT stocks, all sectoral indices have opened the day in green with power stocks and telecom stocks witnessing maximum buying interest.

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The rupee is currently trading at 68.77 against the US$.

The rupee depreciated by 15 paise to close at 68.97 against the dollar on Thursday, amid heavy selling in domestic equities and rising crude oil prices.

The rupee opened on a positive note but failed to sustain the gains and settled for the day in the negative territory.

This is the third straight day of fall for the rupee, during which it has lost 43 paise. Reportedly, foreign fund outflows and weak Asian currencies weighed on the local unit.

At the interbank foreign exchange (forex) market, the domestic currency opened at 68.76 per dollar, but lost ground during the day and finally settled at 68.97, down 15 paise over its previous close. The rupee had settled at 68.82 against the dollar on Wednesday.

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The dollar index, which gauges the greenback's strength against a basket of six currencies, fell 0.04% to 97.18.

Speaking of currencies, Vijay Bhambwani, editor of Weekly Cash Alerts, tells you the main reasons why not to trade commodities and currencies the same way you would trade equities. Here's an excerpt of what he wrote...

  • Currencies are traded in pairs and the most liquid is the USDINR. Currencies are traded in four decimal points just as bonds are. The international derivative trader's association has indicated that forex may be traded in 6 decimals in the coming few years.

    It takes months sometimes for the currency pair to pass the next round figure, say from 70 to 71.

    Can you really trade commodities and currencies alike or for that matter, equities and currencies alike? Definitely not!

To know more, you can read Vijay's entire article here: Is Trading in Equities, Commodities, and Currencies the Same?

Moving on to the news from the finance sector. The market capitalisation of Housing Development Finance Corporation Limited (HDFC) crossed Rs 4 trillion on Thursday for the first time ever.

With this, the mortgage lender became the fourth Indian company to achieve this milestone.

HDFC's market capitalisation (m-cap) rose to Rs 4.04 trillion during the day's trade on Bombay Stock Exchange (BSE) after its shares rallied more than 3% to hit a 52-week high of Rs 2,357, in an otherwise weak market.

The m-cap was calculated at the stock's 52-week high price of Rs 2,357. HDFC was top gainer in the 30-share bluechip index, closing at Rs 2,343.9 apiece, up 2.5% on the BSE.

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HDFC has now become the fourth largest company in terms of market capitalisation. Mukesh Ambani's Reliance Industries is the most valued firm with a market cap of Rs 8 trillion, followed by IT bellwether Tata Consultancy Services (TCS) (Rs 7.8 trillion) and HDFC Bank (Rs 65.7 million).

The rise of HDFC is mainly because of stable asset quality, improvement in net interest margins (NIMs) and steady gain in market share. Since the beginning of this year, HDFC share has gained nearly 17% as against 9% growth in the Indian benchmark index BSE Sensex.

The stock has been on buying spree ahead of its first-quarter earnings numbers slated to be released on 2 August 2019.

HDFC share price opened the day down by 10.9%.

The HDFC Group stocks have been such phenomenal wealth-creators that no investor wants to miss any opportunity to pick up a stock with the HDFC brand tag.

The chart below shows the number of times you could have multiplied your wealth by being an early investor in any HDFC Group company.

The HDFC Group of Multibaggers...

The HDFC Group of Multibaggers

In the chart above, prices for HDFC Ltd, HDFC Bank, and Gruh Finance have been taken as on August 2018. The returns translate as below:

HDFC Ltd delivered compounded returns of 28% over 28.6 years.

HDFC Bank delivered compounded returns of 27% over 23.2 years.

Gruh Finance delivered compounded returns of 22% over 25.5 years.

HDFC Standard Life Insurance delivered absolute gains of 75% in a little over eight months from its issue price of Rs 290 per share.

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


Jalan Committee Recommendations; US-China Trade Worries; Key Q1FY20 Results and Top Stocks in Action
Pre-Open

On Thursday, the Indian share markets fell sharply in late trade as US-China trade worries dragged global peers.

The benchmark BSE Sensex closed 318 points lower at 38,897 level with YES Bank, Tata Motors, ONGC, and Maruti being the top laggards. In an otherwise weak market, only HDFC, HDFC Bank and ITC remained the top gainers. The broader Nifty 50, too, ended at 11,597 mark, down 91 points.

Top Stocks in Focus

Cadila Healthcare share price will be in focus as Zydus announces completion of enrollment in three Phase III trials of Saroglitazar Magnesium in NASH.

Cyient reported 14.1% fall in its net profit at Rs 680 million for the quarter under review as compared to Rs 792 million for the same quarter in the previous year.

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DCB Bank is focusing on granular retail term deposits in order to further improve its deposit profile. As on June 2019, deposits of the Bank grew by 15% to Rs 287.9 billion. Customer Term Deposits grew by 31% and Customer Deposits grew by 26%.

Colgate-Palmolive reported 10.8% fall in its net profit at Rs 16.9 billion for the quarter under review as compared to Rs 1.9 billion for the same quarter in the previous year.

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

Results Corner

Market participants will track Agro Tech Foods, Federal Bank, Network18, TV18 Broadcast, HDFC AMC among others as they announce their March quarter results today.

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Jalan Committee Recommends Transfer of RBI's Surplus Funds

Bimal Jalan Committee has prepared the final report on RBI's Capital Reserve. The committee's last meeting was held on Wednesday.

Reportedly, within 3-5 years, the transfer of surplus funds to different parts of the government has been recommended. It is not known how much the committee has recommended.

Due to the controversy over the central bank and government on the issue of cash surplus, former RBI governor Urjit Patel had resigned in December last year. According to the reports, the RBI has a surplus fund of Rs 9 lakh crore. It is about 28% of the total assets of RBI. The government said that the central banks of other major countries keep 14% of their assets in the reserve fund.

With the surplus funding of the Reserve Bank, the government will be able to control the fiscal deficit. The government has set a target of fiscal deficit equal to 3.3% of GDP in the current financial year.

Meanwhile, catch Tanushree Banerjee talk about how this transfer of surplus could be a catalyst for the economy's turnaround in the video below.

Global Stock Market Drivers

Global shares slipped on Thursday on growing signs that a trade dispute between the United States and China was taking a toll on corporate earnings, with nerves spreading from Wall Street through Asia to European markets.

Contracts on the Nasdaq and S&P 500 indexes were modestly lower after Netflix Inc.'s surprise loss of US customers last quarter sent its shares down after hours.

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With less than two weeks before the Federal Reserve's policy meeting at which investors expect an interest-rate cut, the central bank's anecdotal Beige Book report yesterday suggested the outlook was generally positive and the labor market remains tight.

Yet companies are still struggling to pass on higher wages and tariff-related costs to customers, and the start of earnings season hasn't improved sentiment.

Investors betting on rate cuts in Asia were proven right on Thursday, as central banks in South Korea and Indonesia lowered benchmarks. That's after similar moves by central banks in Malaysia, India and the Philippines.

Oil Prices Edge Lower

Oil edged lower Wednesday unable to shake off the downbeat mood of the last two days in response to a sharp rise in US stockpiles of products like gasoline, pointing to weak demand during the summer driving season in the United States.

Brent crude futures were down 10 cents at US$63.56 a barrel. They fell 1% on Wednesday, and 3% on Tuesday.

US West Texas Intermediate crude futures were down 19 cents at US$56.59. The US benchmark dropped 1.5% in the previous session, and 3% on Tuesday.

Mixed signals from the United States and Iran also left market in limbo. US President Donald Trump said on Tuesday progress had been made with Iran, but Tehran denied it was willing to negotiate over its missile programme.

US officials also said on Wednesday they were unsure whether an oil tanker towed into Iranian waters was seized or rescued.