Tag: Bank Nifty

Which sectors may lead and which ones may lag now, BFSI News, ET BFSI

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The week gone by remained choppy. In our previous weekly note, we had mentioned that Nifty is unlikely to see a runaway rise from here on, as the technical setup as well as options data were pointing to consolidation ahead. Nifty traded in a 490-point range over the past five sessions and stayed largely in the corrective mode.
The index consolidated in a broad but defined range, as it dragged the resistance points lower. Following a stable but corrective week, the headline index closed with a net loss of 321 points (-1.80 per cent).

From a technical perspective, Nifty has marked the 17,900-17,950 zone as an intermediate top. This also gets reflected in the Options data, which shows highest Call Open Interest at strike price 18,000 after heavy Call writing activities. The previous five days saw the formation of a broad trading range in the 17,400-17,950 area. Unless the market violates either of these two points, the index should continue to oscillate in this broad range. Any major slippage below the 17,400 level will be damaging for the market.

Following heavy Put writing at 17,400 and 17,500 levels, strike price 17,500 showed highest Put OI. The coming week is likely to see Nifty attempt to stabilise with a positive bias. The 17,650 and 17,750 levels will act as potential resistance points, while support will come in at 17,400 and 17,310 levels.

The weekly RSI stood mildly overbought at the 73.30 level. The RSI was neutral and did not show any divergence against the price. The weekly MACD continued to be bullish and traded above the Signal Line. A large Black Body emerged on the candles; it reflected the directional consensus among the market participants that prevailed during the week.

Pattern analysis showed Nifty was well above the upper rising trend line support. In the event of continued corrective activity, if Nifty tests this trend line support, the next support may emerge in the 17,350-17,400 area. This trend line is drawn from the low point of March 2020 and joins the subsequent higher bottoms.

All in all, it is largely expected that while defending the 17,350-17,400 zone, Nifty may stay in a defined range and continue to consolidate. The most recent price action saw Nifty’s supports being dragged lower to 17,800 from 17,950 level. So, the 17,800 level will be the most immediate resistance if Nifty attempts to gain some stability and pulls itself back.

Over the coming days, we expect a selective sectoral outperformance in the market. There are higher chances that select banks, auto, pharma and PSE stocks will continue to do well. Shorts should be avoided and purchases must be kept highly stock-specific in the coming week.

In our look at Relative Rotation Graphs®, we compared various sectoral indices against CNX500 (Nifty500 Index), which represents over 95 per cent of the free float market cap of all the listed stocks. The analysis showed a lot of inherent strength in the market. The IT and Realty Indices are placed inside the leading quadrant. Apart from this, Nifty Energy Index and the Bank Nifty have rolled inside the improving quadrant. This showed their likely relative underperformance against the broader market.

Dalal Street Week Ahead: Which sectors may lead and which ones may lag now
Dalal Street Week Ahead: Which sectors may lead and which ones may lag now
Along with this, Media, Private Banks, PSE, PSU Bank and Auto Indices are all trading inside the lagging quadrant. However, all these indices are showing a very distinct improvement in their relative momentum against the broader Nifty500 Index. All these groups are likely to put up a resilient show over the coming days. The Nifty Services Sector Index has rolled inside the improving quadrant, while Nifty Commodities and the Metal indices are inside the weakening quadrant. They show no sign of any improvement in their relative momentum. Some stock-specific isolated performances may be seen, but the indices are likely to relatively underperform the broader market.

Important Note: The RRG™ charts show the relative strength and momentum in a group of stocks. In the above chart, they show relative performance against the Nifty500 Index (broader market) and should not be used directly as buy or sell signals.

(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of EquityResearch.asia and ChartWizard.ae and is based at Vadodara. He can be reached at milan.vaishnav@equityresearch.asia)



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Know how banks, financials performed this week, BFSI News, ET BFSI

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The indices were volatile this week, in line with its global peers, while the broader market indices continued to outperform. The BSE Sensex breached its 60,000-mark, while the Nifty extended its winning run to five weeks in a row on Wednesday, posting the longest weekly gaining streak since 20 December 2020.

However, overall, the indices were muted this week, with experts suggesting indices may see further correction on concerns over global economic recovery and US inflation.

Stock specific moves, cues from Asian markets, US debt ceiling crisis and uptick in bond yield, strong vaccination numbers were key driving factors this week.

Monday Closing bell: Benchmark indices end flat with positive bias, Nifty Bank up nearly 1%

The BSE Sensex pared 334 points from the day’s high to end 29 points higher at 60,078, while the NSE Nifty50 closed at 17,855. During the day, the Sensex logged a fresh record high of 60,412.

The broader market indices underperformed the benchmark Sensex, as the BSE Midcap closed flat and BSE Smallcap down 0.13%.

The Nifty PSU Bank ended flat with positive bias gaining 0.48%, the Nifty Bank ended 0.90% higher at 38,171, and the Nifty Financial Services ended 0.41% higher at 18,706. SBI and HDFC Bank were among top gainers, while Bajaj Finserv was the top laggard, losing more than 2%.

Tuesday Closing bell: Indices bleed, financials highly underperform

After crashing nearly 1,000 points, Sensex recovered from its day’s low to finally close at 59,668, down 0.68%. The Nifty, meanwhile, tumbled 0.60% to end at 17,749.

The broader market also declined, in tandem with the benchmarks. The BSE Midcap index lost 0.71% and the BSE Smallcap 0.62%.

After a volatile session, Nifty PSU Bank gained 1.24% closing at 2,398. Bank Nifty ended in the red, losing 0.59% to end at 37,945, while Nifty Financial Services ended 0.92% lower at 18,534. Kotak Mahindra Bank was among the top gainers, while Bajaj Finance, Bajaj Finserv, ICICI Bank and Induslnd Bank were top laggards.

Weekly Market wrap up: Know how banks, financials performed this week

Wednesday Closing bell : Indices volatile for second day; PSU Banks gain over 2.5%, financials fall

Indices remained volatile for the second day in a row on Wednesday, ending with losses. S&P BSE Sensex recovered from intraday lows and closed 0.43% lower at 59,4113. NSE Nifty 50 turned positive during the day but failed to hold gains and closed 0.21% lower at 17,711.

Midcap and Smallcap indices outperformed benchmark indices, closing with gains.

Nifty PSU Banks finished the day with 2.72% gains, while Nifty Bank slipped 0.53% ending at 37,743. Nifty Financial Services closed 0.88% lower at 18,371. HDFC was among the worst-performing Sensex constituents, falling 2.15%, followed by Axis Bank, Kotak Mahindra Bank and HDFC Bank.

Thursday Closing bell: Indices witness 3-day losing streak, both down 0.5%

Domestic headline indices ended with losses for the third consecutive session, with the Sensex witnessing a tug of war between gains and losses for most of the day to end 0.48% lower at 59,126. The Nifty50 dropped 0.53% to close at 17,618.

Nifty PSU Bank Index maintained its winning streak, closing with 0.80% gains. Nifty Bank, however, fell below the 37,500-mark, down 0.84% to close at 37,425, while Nifty Financial Services closed 0.37% lower at 18,303.

Bajaj Finserv was the top Sensex gainer, jumping 2.19%, followed by Bajaj Finance. Axis Bank, SBI and Kotak Mahindra Bank were among the top drags.

Friday Closing Bell: Sensex, Nifty witness losses for fourth day, both down 0.5%

Indices settled in the red for the fourth straight day on Friday, with Sensex closing 0.6% lower at 58,766, and the Nifty50 falling 0.5% to close at 17,532.

Nifty PSU Bank index continued its winning streak for the fourth consecutive session, closing 1% higher. Nifty Bank, however, fell more than half a percent to close at 37,225, while Nifty Financial Services closed 0.91% lower at 18,137.

Bajaj Finserv fell more than 3%, and Bajaj Finance, ICICI Bank and Induslnd Bank were among top laggards. Muthoot Finance gained over 5%, and Au Small Finance Bank, Bandhan Bank, PNB were among top gainers.

Key Industry takeaways

Icra revises up FY22 GDP growth forecast to 9%

Ratings agency Icra on Monday revised up its 2021-22 real GDP growth estimate for India to 9 percent from the earlier 8.5 percent. A ramp-up in COVID-19 vaccination, healthy advance estimates of kharif (summer) crop and faster government spending were the factors which led to the revision, the agency said in a statement. Icra on Monday said it expects the second half of the fiscal year to have brighter prospects.

Aditya Birla Sun Life AMC IPO fully subscribed on Day 2

Weekly Market wrap up: Know how banks, financials performed this week

The initial public offer of Aditya Birla Sun Life AMC Limited was fully subscribed on the second day on Thursday. The Rs 2,768.25crore initial share sale received bids for 2,99,46,460 shares against 2,77,99,200 shares on offer, translating into 1.08 times subscription, according to an update on the NSE.

The qualified institutional buyers (QIBs) category was subscribed 6 per cent, non-institutional investors 40 per cent and retail individual investors (RIIs) two times. The initial public offer is of 3,88,80,000 equity shares.

RBI extends MSF facility for banks until March next year

Weekly Market wrap up: Know how banks, financials performed this week

The Reserve Bank of India (RBI) on September 28 said it has extended the marginal standing facility (MSF) relaxation for banks until March 31. Earlier, this facility was given till September 30.

Under MSF facility, banks are allowed to avail of funds by dipping into the Statutory Liquidity Ratio (SLR) by up to an additional one percent of net demand and time liabilities (NDTL), i.e., cumulatively up to 3 percent of NDTL.

“With a view to providing comfort to banks on their liquidity requirements as also to enable them to continue to meet LCR requirements, it has been decided to continue with the MSF relaxation for a further period of six months, i.e., up to March 31, 2021,” the RBI said.

US Fed’s tapering inclination may impact India’s FPI inflows, says CARE Ratings

Weekly Market wrap up: Know how banks, financials performed this week

The US Federal Reserve’s indication of tapering asset purchases is likely to impact the flow of funds into Indian markets, but may not be immediate, CARE Ratings said in a report.

The tapering is likely to affect India’s foreign portfolio inflows. Earlier when the Fed had announced tapering in 2013, FPI inflows to India had shrunk in the 2015-18 period.

RBI lifts PCA curbs on Indian Overseas Bank

Weekly Market wrap up: Know how banks, financials performed this week

The Reserve Bank of India on 29, September lifted Prompt Corrective Action restrictions from the Indian Overseas Bank, the central bank said in a release.

The decision came after the bank reported its earnings for the year ended March 31, 2021, and the RBI observed that IOB was not in breach of the PCA parameters. IOB has also provided a written commitment that it would comply with the norms of Minimum Regulatory Capital, Net NPA and Leverage ratio on an ongoing basis



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Know how Banks and Financials performed throughout the week, BFSI News, ET BFSI

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Domestic benchmark indices witnessed some exhaustion this week, after a healthy rally seen in the past weeks, with the BSE Sensex gaining around 9% last month.

Developments around the US economy, revival of activity in Europe amid rising Covid-19 infections, improving economic data, positive earnings expectations and healthy pick up in daily inoculations were considered to be key market driving factors this week.

Last Friday, the BSE Sensex vaulted above the 58,000-mark, while the Nifty50 touched 17,300 points as investors cheered recovery in the economy.

Monday Closing bell: Market continues winning streak; banks and financials underperform

The Nifty50 had a gap up opening, but couldn’t build upon the early gains. The index traded in a narrow range throughout the day and consolidated its gains. During the second half, markets continued to trade on a positive note on the back of strong global cues and domestic economic activity. The Sensex was up 0.29% at 58,296.91, and the Nifty was up 0.31% at 17,377.80.

Bank Nifty closed with losses, ending 0.5% lower at 36,592 points, while Nifty Financial Services closed 0.3% lower at 18,077 points. Shares of IndusInd Bank fell 1.13% as the top laggard, followed by Kotak Mahindra Bank, and HDFC Bank.

Tuesday Closing bell: Market ends in red, banks, financials continue to lose

The Nifty50 had a cautious start on Tuesday, around levels of 17,400. All sectoral indices opened in the green, except for Nifty Bank. Domestic indices reached fresh all-time highs but failed to hold gains and ended the day with marginal losses. The Sensex closed at 58279.48 points, down 0.03%, while Nifty closed at 17362.10, down 0.09%.

Bank Nifty ended the 0.34% lower at 36,468 while Nifty Financial Services closed at 18,102 gaining 0.15%. Axis bank was among the top Nifty Losers while HDFC and IndusInd Bank were among the top gainers.

Wednesday Closing bell : Indices tad down; banks, financials among top gainers

Domestic equity indices rebounded from lows in the dying hour of trade to end flat with a negative bias, with mid and smallcaps outperforming the benchmarks. The Sensex and Nifty both ended flat, down 0.05% each at 58,250.26 points and 17,353.50 points, respectively.

Among sectors, Nifty Bank, private bank, PSU bank and financial services rose about a percent each. Bank Nifty gained 0.82% to end at 36,768, while Nifty Financial Services gained 0.57% closing at 18,207. Kotak Mahindra Bank jumped 3.5% to be the top index gainer.

Thursday Closing bell: Market closes on positive note; banks, financials underperform

Domestic indices started Thursday’s session on a flat note amid selling pressure seen in financial stocks. Sensex and Nifty both closed with a gain of 0.09%, higher at 58,305.07 and 17,369.25 respectively.

Nifty Bank ended in red at 36,683 down 0.23%, while Nifty Financial services closed at 18,160, down -0.26%. Kotak Bank and Bajaj Finserv were among top blue-chip performers. HDFC Bank, IndusInd Bank and SBI were among the volume toppers. Meanwhile, SBI Life, Axis Bank, Federal bank and Chola Invest were among the top losers.

Industry Key Takeaways

Tamilnad Mercantile Bank files IPO papers with SEBI
Private-sector lender Tamilnad Mercantile Bank has filed preliminary papers with Securities and Exchange Board of India to mop-up funds through an initial share-sale. The initial public offering (IPO) comprises fresh issue of 15,827,495 equity shares and an offer-for-sale of up to 12,505 equity shares by selling shareholders, according to the draft red herring prospectus (DRHP).

LIC Housing Finance partners with India Post Payments Bank
India Post Payments Bank (IPPB) and LIC Housing Finance on Tuesday announced a strategic partnership for providing home loan products to over 4.5 crore customers of IPPB. LIC Housing Finance was quoting at Rs 416.10, up Rs 11.35, or 2.80% on the BSE.

India’s fintech market to triple to ₹6.2 lakh cr by 2025: MoS Finance Karad
The government’s various initiatives have led to fast growth in the fintech sector, which is likely to triple to ₹6,20,700 crore in value terms by 2025, minister of state for Finance Bhagwat K Karad said on Wednesday.

Highlighting that India is a leader in adopting financial technology among emerging markets, he said, the country had an adoption rate of 87% in March 2020, as compared to the global average of 64%.

Paytm Money launches investment advisory marketplace on platform
Paytm Money, the wealth management division of digital payments major Paytm, on Tuesday said it is creating a wealth and investment advisory marketplace on its platform to offer curated advisory services and products to retail investors.

Paytm Money has partnered with investment startup WealthDesk to offer investment portfolios called ‘WealthBaskets’. A ‘WealthBasket’ is a custom portfolio of stocks and exchange traded funds (ETFs) created by SEBI-registered investment professionals.

India to post strong GDP growth in coming quarters: S&P
India is expected to post strong economic growth in the coming quarters, even as inflation, led by food prices, is likely to remain elevated, S&P Global Ratings said on Wednesday.

The economy is expected to clock 9.5 percent growth in the current fiscal year, followed by 7% expansion in the next year, it said, adding high nominal GDP growth would be important for ensuring fiscal consolidation going forward

Kotak Mahindra Bank slashes home loan rates by 15bps to 6.5%
Kotak Mahindra Bank announced today that it has reduced home loan rates by 15 base points, from Friday till November 8.

The bank is offering this rate in view of the upcoming festive period. The rate of 6.5% will be prevalent for both fresh home loans and balance transfers, and will be available across all loan amounts and is linked to a borrower’s credit profile.

UCO Bank shares spike 16% after RBI lifts PCA restrictions
UCO Bank shares received strong buying demand, rising as much as 15.9 percent on September 9 after the Reserve Bank of India lifted Prompt Corrective Action (PCA) restrictions on the bank.

“The performance of the UCO Bank was reviewed by the Board for Financial Supervision under the RBI. As per published results for the year ended March 31, 2021, the bank is not in breach of the PCA parameters,” said the RBI in its press release published on September 8.



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India’s banking sector survives covid scare but needs to address these challenges now

Banking & Finance

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The Indian banking sector is resilient, sufficiently capitalized and well-regulated segment.

By Brajesh Kumar Tiwari

In the last parliament session, the Union Cabinet cleared changes (Deposit Insurance & Credit Guarantee Corporation Bill 2021) to the deposit insurance laws to provide funds up to Rs 5 lakh to an account holder within 90 days in the event of a bank coming under the moratorium imposed by the RBI. The government has also permitted raising the deposit insurance premium by 20 per cent immediately, and maximum by 50 per cent. 

The Indian banking sector is resilient, sufficiently capitalized and well-regulated segment. Over the last 7 years the NDA government has been infusing capital into the public sector banks using recapitalization bonds. However, following COVID and the expectations from the Union Budget 2021-22, liquidity has become a huge issue. Since the last few years, several European banks have confirmed certain disposal operations of impaired loans. This has largely contributed to a significant reduction of the NPL ratio. However, the birth of a huge secondary market for bad debts and the unification of standardized large-ticket assets in order to construct a ‘single-name’ portfolio has given way to newer problems. In fact, the banking sector is silently reeling under the challenges thrown towards it, which are:

Maintaining Capital Adequacy:  The capital a bank sets aside for its rainy day or to undertake lending activities acts more like the bank’s risk threshold.  However, in the post-COVID world banks are facing fresh ambush of NPAs on unsecured loans. Earlier RBI has offered moratorium on loans and has also announced the two-year restructuring on loans to safeguard weak borrowers, but this situation hints at the NPAs increasing from 7.5 per cent in September last year to 13.5 per cent by September this year, putting a lot of stress on banks. Unless the government pumps in money externally, banks will be in severe loss creating massive capital adequacy problems. Bad loans and in failing with maintaining the minimum RBI prescribed Capital Adequacy Ratio, banks will have to face severe challenges in due course. Moreover, the Basel IV standards that limit the reduction in capital is due to be formalized in January 2023. Earlier, following the global financial crisis of 2007-08 the international implementation of Basel III was formalized and that has already raised the capital adequacy quotient for banks in order to mitigate risks. Now, Basel IV, according to global banks will raise the bar of capital further, which is definitely a sign of worry for India, given its present state. 

Maintaining Asset Quality: Bad loans are a big problem for the Indian banking sector, especially the PSBs. As per an IMF report 36.9% of the total debt in India is at risk and banks have capacity to absorb only 7.9% loss. Add the COVID crisis to this and the banks are struggling to recover loans from small businesses, which have been severely affected by COVID. The pandemic has put a halt in business all across, so loan recovery is a big question mark, which definitely hurts the banking sector as they struggle to maintain the quality of their assets.   

Maintaining Growth: The overall economic growth of the country is shunted at the moment and an outward push can only help every contributing sector of the economy –corporates, retail, and rural prominently. The growth impetus is financial at the moment and the sooner the sectors recover, the healthier it will be for the banking sector. As of now, the banking sector has no way of fulfilling its growth aspirations and is barely struggling to stay on ground. 

Keeping these top 3 challenges in mind, here are a few suggestions for the banking sector in India, which will help them revive their status.

Things to work out in short term

  • Restructuring: RBI’s restructuring guidelines on loans for individuals and businesses not only work as a relief for the borrowers, but it also gives a scope to banks to maintain their status quo. Banks should use this relief period to improve their asset quality while continuing being a pillar of support to the MSMEs. This restructuring is RBI advised and the framework keeping in mind the benefit of the banks and customers have been specially devised and has come in to effect since April 1, 2021. Since the regulatory guidelines for the loan restructuring are RBI directed so the implications of customers delaying payments will not come harshly on the banks. This gives the financial institutions a chance to reorient themselves. 
  • Lower interest rates on loans: The COVID crisis has pushed the economy to go off track and financial shortages is an evident problem all across. Constant cash flow is a problem with both the service sector and as well as individuals. Indian banking sector should use this premise to their credit and begin offering lower interest rate loans to individuals and MSMEs. This will encourage lending, which will stimulate overall economic growth and give banks a chance to improve on their CAR. Reform has already started in the home loan finance space, interest rates for home loans in India at present have fallen to historic lows. What was around 8.40% during September 2019 is now at 6.49-6.95% range.
  • Improved diligence: While it is necessary to pump in more money in to the system to help sustain businesses and to boost the economy, it is also equally a necessity to keep bad loans at bay. Bad loans lead to higher NPAs over time, so due diligence has to be observed when offering funds. This will help keep frauds and unscrupulous people at distance and the banks will then be able to extend money to rightful and needy businesses or individuals. Proper scrutiny and stringent application measures will help avoid wrongdoings. Moreover, banks should be cautious when giving loans to Indian companies who have heavily borrowed abroad. This is because according to RBI, this will put banks under unnecessary exposure to dollar and will further add to their existing pool of problems. 

Things to work out in long term

    • Technology upgradation: Digitalization is the buzz word for businesses and banking, especially PSBs should adapt to the concept of digital to make banking operating seamless. Technology will make or break the way people look at services in the coming time, so banks should ride the bus before it leaves the stop. From adding top-notch technology to upgrade services to upgrading existing set-up, a lot of opportunities lies in technology and harnessing the same will help bringing in a big change in approaches. 
    • Technology reach: Tech inclusion and tech literacy campaigns should be undertaken to ensure that paperless banking or basic tech services are so easy to use that it is available/accessible and usable to all. This is not undoable. If people can order products on Amazon, use Facebook, why not banking services. Of course, with appropriate security measures in place. 

 

  • Focus on MSMEs: Banks, including PSUs are primarily keeping their attention on retail advances or corporates today. The banking sector mostly chooses to ignore the MSME advances. This trend is not healthy for the economy and will not help banks grow in the days to follow. MSMEs are the backbone of Indian economy and creates employment for 70 million people. This sector has a 16% contribution to the Indian GDP, which as per reports is to become 25% by 2022. Certainly, the prosperity and growth of this sector will help leverage the economy and give it a prosperous enrichment. 

 

  • Customer-centric Innovation: Innovation is key to customer loyalty in today’s day and age and in order to win customer loyalty in long term, banks should focus more on innovation. Keeping pace with the changing environment and other industry practices the banking sector should invest in innovation that will help them serve their customers with ease. The more agile the services and banking practices, the easier it will be for the customer to bank with the partner. 

The pandemic has been an eye opener for everyone in some way or other. However, counting in the positives of the pandemic there is a chance to relook at the economy. This is the right time to repair and reorient as we prepare for a better tomorrow. 

(Brajesh Kumar Tiwari is the Author of “Changing Scenario of Indian Banking Industry” Book; Associate Professor Atal Bihari Vajpayee School of Management & Entrepreneurship (ABV-SME); Member (Innovation Council, JNU); Jawaharlal Nehru University (JNU). Views expressed are the author’s own.)

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NPA risks easing for largest PSU banks but shortage of funds could hit credit growth

Banking & Finance

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State Bank of India, Bank of Baroda, Punjab National Bank, Canara Bank, and Union Bank of India, have all reported an improvement in their asset quality in the first nine months of the current fiscal year.

Risk of a sharp deterioration in the asset quality of five of the largest PSU banks now seems to be abating with the economic recovery picking up pace, said Moody’s Investors Service in a recent note. However, despite this, the rating agency cautioned that such public sector lenders are likely to remain starved of sufficient capital to absorb unexpected shocks and support credit growth. Banks were expected to see a sharp rise in NPAs last year when the pandemic slowed the Indian economy down but despite the economic slump, the asset quality of banks has seen mild improvement.

Risks reducing for banks

State Bank of India, Bank of Baroda, Punjab National Bank, Canara Bank, and Union Bank of India, have all reported an improvement in their asset quality in the first nine months of the current fiscal year. “The gross NPL ratios of the five banks declined by an average of around 100 basis point as of the end of 2020 from a year earlier,” Moody’s said. The estimates even account for loans that have not yet been declared NPAs owing to the Supreme Court order. Lenders are also drawing comfort from the provisions made by them against the expected jump in NPAs.

During the pandemic, various measures were undertaken to support borrowers. This, according to Moody’s has largely helped limited impact of the pandemic on the banks’ asset quality. These measures included loan repayment moratorium, loan restructuring, monetary easing, liquidity infusion, Capital infusion into public sector banks, lowering LCR, among others. “As of the end of December 2020, the five banks restructured 0.7%-2.6% of gross loans, less than our expectations, as the impact of the pandemic on borrowers was not as severe as we had anticipated,” the report said.

Dearth of capital to result in uneven recovery

Despite the green shoots, capital shortage remains a risk. “The banks will continue to face shortages of capital to both absorb any unexpected stress and support credit growth, with high credit costs continuing to suppress profitability,” they added. This shortage in the capital could result in an uneven recovery for the Indian economy with various vulnerable industries facing a setback. The banks’ asset quality can also deteriorate more than anticipated, with exposures to the MSMEs, in particular, posing risks, Moody’s said.

The government planned to infuse Rs 20,000 crore into public sector banks this fiscal year and another Rs 20,000 in the next financial year. While the capital infusions will help the banks meet Basel capital requirements, it will not boost credit growth, according to the report. This would result in some banks turning to the market. Canara Bank and PNB have already raised some capital from equity markets.

On the other hand, in an earlier note, Moody’s said that private sector banks have raised sufficient capital buffers to tide through any hiccups going forward. Asset quality of private lenders remains supported by the same measures that have aided their public sector peers.

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Bank Nifty constituents hit new highs after Budget 2021, BFSI News, ET BFSI

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by Syed Fasiuddin

Bank Nifty constituents hit new highs shortly after Finance Minister Nirmala Sitharaman announced her budget for 2021. The Bank Nifty, since the announcement of the budget, which included numerous reforms aimed towards the BFSI sector, including the setting up of a bad bank, amendments towards the Insurance Act of 1938, the recapitalisation of public sector lenders, and the proposed divestment of two public lenders and one general insurer, amongst others, sparked cheer in the market – recording a 3074 point jump.

Public Bank stocks jump
Government owned lenders and constituents of the Bank Nifty Index – including the State Bank of India, Punjab National Bank (PNB), Bank of Baroda, recorded sharp single and double digit rises in values since February 1, when the budget was first announced. SBI within the day recorded a spectacular jump of 7.21%, closing at Rs 333.10 – rising by Rs 22.40. PNB and BoB recorded jumps of 1.26% and 1.01%, respectively, on February 2. PNB at the end of day traded at Rs 36.20, whilst BoB traded at Rs 74.65 – rising by 0.45 and 0.75 points, respectively.

Private lender stocks cheer
Private lenders RBL Bank, Federal Bank, HDFC Bank and Bandhan Bank recorded the highest jumps since the budget was first announced, rising by 11.52%, 10.08%, 9.9% and 9.84% respectively. RBL Bank recorded a jump of 25 points, closing at RS 242.00 at the end of market hours. HDFC Bank alone rose by 140.9 points, trading at Rs 1560, since the budget was announced, whereas Bandhan Bank rose by 30.40 points, to close at Rs 339.35, on February 2. Kerala based Federal Bank also recorded a 7.35 point jump to trade at Rs 80.25 by the close of the BSE.


Other constituents of the Bank Nifty, including ICICI Bank, Kotak Mahindra Bank and Axis Bank, recorded similar gains, jumping by 9.61%, 8.47% and 8.13%, respectively. ICICI Bank rose by 54.20 points to close at Rs 618.45, whereas Kotak Mahindra Bank and Axis Bank recorded an increase of 145.50 points and 53.65 points, respectively, to close at Rs 1863.50 and Rs 713.70.

Bankers remain optimistic
Both public and private bankers expressed optimism at the budget unveiled by Nirmala Sitharaman, on February 1. Dinesh Kumar Khara, Chairman of the State Bank of India (SBI), said “The Union Budget has unveiled a set of well-crafted and robust policies that encompasses the vision of an Atmanirbhar Bharat. The Budget has rightly envisaged a substantial jump in capital expenditure that has a strong multiplier impact on the economy. The decision to open up the insurance sector, setting up a DFI and an ARC, privatizing a couple of public sector banks are all positive steps for the financial sector.”

The Chairman of India’s largest lender further said “One of the cornerstones of this budget is fiscal numbers that are transparent and has the potential to surprise us on the upside. In principle, the budget has rationalized the off-balance-sheet borrowings and headline fiscal deficit numbers, which will overtly please markets and even rating agencies. The fact that the expenditure announcements in the budget have been matched with the status quo on taxes will please everyone and bolster market sentiments.”

Kotak Mahindra Bank founder Uday Kotak, expressing his views on the budget, tweeted “A Budget for growth with next-gen reforms. Focus on healthcare, infra, financial sector. A stable tax regime, higher borrowings for capex. Specific reforms: disinvestment & monetization, opening up of insurance, cleanup plan for stressed assets. Sign of a self confident India.”

Chandra Shekhar Ghosh, MD & CEO, Bandhan Bank, noted “The government has prioritised spending on growth at this stage, in the hope that such growth would help manage the fiscal deficit subsequently. A substantial increase announced in the expenditure on healthcare and infrastructure will help boost economic growth, including the MSME sector and generate employment. Overall, it was a growth-centric Budget aimed at securing India’s long-term economic interest.



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Nifty ends with fresh record highs above 14,550; Nifty Bank adds 1%, BFSI News, ET BFSI

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Nifty bank index traded Green at Rs 32,339 adding 1.06%, while BSE Bankex ended at 36,450 adding 0.62%.

Shares that contributed the most were- IDFC First Bank at Rs 47 adding 6.07% followed by Bank of Baroda at Rs 70 (10.12%), PNB at Rs 36 (4.58%), SBI at Rs 292 (3.54%), HDFC Bank at Rs 1,481 (2.04%). While all the other major indices remained green, Kotak Mahindra traded lower at Rs 1,903 (-1.79%), Bandhan Bank at Rs 391 (-4.15%) and Induslnd Bank at Rs 927 (-0.16%).

Nifty Financial Services ended at 15,711 adding 0.68%. Amongst the top gainer were Cholamandalam at Rs 443 adding 3.81% followed by Power Finance at Rs 121 (1.42%), Bajaj finance at Rs 5,042 (1.16%), Indiabulls Hsg at Rs 234 (0.13%). Bajaj Finserv shares traded lower at Rs 8,959 (-0.30%) along with HDFC Shares at Rs 2,747 (-0.13%).

Other key takeaways

India’s GNPA could double by September
The central bank on Monday said that the gross non-performing asset (GNPA) ratio of banks could double to reach 13.5% by September this year in a base scenario while on the higher side it is expected to reach 14.8%. The GNPA ratio is used to assess loan losses in the banking sector.

The RBI in the report said that if a severe stress situation occurs the bad loan ratio of the banking system could be the highest since March 1997, when it stood at 15.7%.

PSU Banks under strain
“Two important developments are: bond yields rising in the US and the dollar index again rising above 90. Both these are negatives from the emerging market perspective, but FII inflows continue to be robust, pushing markets higher. Meanwhile the RBI in its Financial Stability Report expressed concern about high potential NPAs of the banking system which may rise above 14%.

PSU banks are likely to be under strain.The well-capitalized large private sector banks are strong and are likely to gain from the woes of the PSU banks,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Rupee ends at days high
With the dollar Index and US yields rising and RBI warning on stock markets/asset prices it seems that we may see some risk aversion in near term. Indian rupee recovered from the lows and ended at day’s high at 73.25 per dollar, amid buying saw in the domestic equity market. It opened marginally lower at 73.42 per dollar against previous close of 73.38 and remained in the range of 73.24-73.47.

Gold Updates
Gold prices in India rebounded to trade flat with a positive bias on the Multi Commodity Exchange (MCX) Tuesday tracking a mixed trend in the international spot prices, while silver prices also traded flat.

Gold futures for February delivery rose 0.09% to Rs 49,383 per 10 grams as against the previous close of Rs 49,341 and the opening price of Rs 49,320 on the MCX. Silver futures traded 0.10% higher at Rs 65,619 per kg. The prices opened at Rs 65,444 as compared to the previous close of Rs 65,555 per kg.

US stocks finish lower with new risks:
A slide in shares of technology giants weighed on the broader market Monday as investors grew wary of the potential for heightened regulation tied to the market’s most enduring winners.

The S&P 500 declined 25.07 points, or 0.7%, to 3799.61 after hitting a record on Friday. The tech-heavy Nasdaq Composite dropped 165.54 points, or about 1.3%, to 13036.43. The Dow Jones Industrial Average shed 89.28 points, or 0.3% to 31008.69.



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