Indian stocks rebound and Sensex ends above 44K-mark for first time
Indian stock indices, BSE Sensex and NSE Nity50, hit fresh all-time highs on Wednesday, before setling at record closing levels.
Sensex touched an all-time intra-day high of 44,215.49 points during the fag end of the trade as the market rebound ater a choppy first half. It closed above the 44,000-mark (44K) for the first time in its history, setling at 44,180.05, higher by 227.34 points or 0.52 per cent from its previous close of 43,952.71 points.
The Nity50 closed at 12,938.25, higher by 64.05 points or 0.5 per cent from its previous close.
Healthy buying was witnessed in banking and auto stocks. The top gainers on the Sensex were Mahindra & Mahindra, Larsen & Toubro and Indusind Bank, while the major losers were
Healthy buying was witnessed in banking, auto stocks and Sensex setled at 44,180.05, higher by 227.34 points from its previous close
Hindustan Unilever, ITC and Titan Company.
Tata Steel surged on Tuesday ater the company said that it is in talks with Swedenbased SSAB to sell its Netherland business.
On Friday, the company said that it has also started discussions with the supervisory board and board of management of Tata Steel Netherlands and the process will move to the next stage including due diligence and stakeholders’ consultations.
The steel major has also initiated the process to separate Tata Steel Netherlands and Tata Steel UK and will pursue separate strategic paths for the Netherlands and the UK business in the future.
Meanwhile, Lakshmi Vilas Bank is set to be folded into the Indian unit of Singapore’s DBS under a plan proposed by the Reserve Bank of India (RBI), which took over LVB on Tuesday due to a “serious deterioration” in its finances.
India’s government said it had also temporarily capped withdrawals from LVB, which has been scouting for a partner since last year amid mounting bad loan and governance issues.
The RBI’S proposed plan would give the
Singaporean bank’s expansion ambitions a fillip as it would vastly increase the footprint of DBS in India, where it only has around 30 branches.
Chennai-headquartered LVB, by contrast, has a vast network of more than 550 branches and 900-plus ATMS across India.
“It’s positive for DBS as it will get a ready customer base, branch network with this merger, and this works in their favour as they’ve been looking to expand in India,” Asutosh Mishra, a research analyst at Ashika Stock Broking, said.
Analysts also noted that despite the crippling size of LVB’S non-performing assets, a merger would give DBS a valuable client base.
“DBS will gain a ready customer and deposit base worth 210 billion rupees which otherwise would be challenge to build for a foreign bank,” said Mona Khetan, an analyst at Dolat Capital.
In a regulatory filing on Tuesday, DBS said it will pump 25 billion rupees ($336 million) into its India unit, if the RBI’S plan is approved. This will be funded from DBS’ existing resources, it added.
LVB did not respond to an email seeking comment.
The proposal took many by surprise as LVB had been locked in talks with Clix Capital around a potential deal.
Clix, part of a company owned by Mumbaibased private equity firm AION Capital, a partnership between New York-based Apollo Global Management and a unit of India’s ICICI Bank , had submited a non-binding offer for LVB in June.
However, RBI said on Tuesday that LVB had failed to submit any concrete proposal and it had therefore appointed an administrator and superseded the bank’s board.
Separately, the bad loan scenario in Indian banks has improved as the net non-performing loans (NPL) are at a six-year-low.
According to a report by Kotak Institutional Equities, net NPLS for banks are now closer to FY2014 levels.
“Impairment ratios showed further improvement with gross NPLS declining 40 bps qoq to 6.7 per cent (30 bps decline qoq to 8.5 per cent for public banks and 40 bps decline qoq to 3.9 per cent for private banks). Net NPLS declined 36 per cent yoy and 15 per cent qoq to 2 per cent of loans with most of the decline seen for public banks,” it said.
It further said that the improvement is less relevant in the context of the Supreme Court ruling, which has prevented banks from recognizing fresh bad loans leading to negligible slippages while there was improvement in recovery and higher write-offs.
It said that banks under its coverage delivered 75 per cent yoy earnings growth with modest revenue growth (7 per cent yoy) but aided by flat provisions. Revenue growth had tailwinds from decline in cost of funds (NII up 16 per cent yoy).
“Sequentially, we saw a sharp recovery in business activity reflected by beter fee income trends and reversal in operating expenses. Unlike the previous few quarters, Covid provisions were restricted to a few banks,” the report said.
It also said that NBFCS surprised with beterthan-expected core earnings reflecting an unprecedented combination of high moratorium, improving disbursements, decline in cost of funds and strong expense management.
“Significantly improving collection efficiency data has excited the Street even as this will be put to test over the next two quarters. In the interim, strong new business momentum, high ECL buffer and access to funding provide comfort,” it said.