Bank of India cuts home, vehicle loan rates, BFSI News, ET BFSI

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State-run Bank of India on Sunday announced a cut in its interest rates on home and vehicle loans by 35 basis point and 50 basis points, respectively.

With this cut, the interest rate on home loans starts at 6.50 per cent against earlier 6.85 per cent, and at 6.85 per cent against 7.35 per cent prior on vehicle loans, the bank said in a release.

This special rate, which is effective from October 18, 2021, till December 31, 2021, is available for customers applying for fresh loans and also for those seeking transfer of loans, it said.

The lender said it has also waived processing charges for both home and vehicle loans till December 31, 2021.

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HDFC Bank’s recast loans rise to 1.7%, NPAs ease, BFSI News, ET BFSI

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Mumbai: HDFC Bank has reported a significant increase in restructured loans under the Covid relief scheme. Analysts are concerned that a large chunk of these loans might turn into non-performing assets (NPAs).

On the positive side, the bank has reported an improvement in gross NPA ratio by 12 basis points (100bps = 1 percentage point) quarter on quarter to 1.35%. Its subsidiary HDB Financial Services also reported a improvement in GNPA to 6.1% from 7.8% in the corresponding quarter last year.

“However, the restructuring pool for the bank surged sharply quarter on quarter to Rs 20,300 crore (1.7% of loans vs. 0.68% in Q1), mainly led by liberal restructuring in the personal loan book. As a prudent strategy, the bank made additional Rs 1,200 crore provisions in Q2 and now carries a contingent plus floating buffer of Rs 9,200 crore (0.8% of loans),” said Anand Dama of Emkay Global in a research note.

Addressing analysts on Saturday, HDFC Bank chief credit officer Jimmy Tata said, “Restructured loans are considered while making the provisions. If there were to be another shock, the balance sheet needs to be much more resilient, historically we have been conservative and our stance does not change”. He added that the bank was monitoring the restructured loan portfolio based on both pre- and post-Covid behaviour of the borrower. “We do not think the impact will be more than 10-20bps on our NPAs at any point in time,” he said.

The country’s largest private lender on Saturday reported a net profit of Rs 8,834 crore for the quarter ended September 2021, up 18% from the previous year.



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At least seven lenders, including Axis Bank, HDFC Bank and ICICI Bank harness GIFT City facilities, BFSI News, ET BFSI

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At least seven lenders, including Axis Bank, HDFC Bank and ICICI Bank, are harnessing the GIFT City facilities to mark a robust Indian presence in the non-deliverable forward (NDF) currency derivatives market, potentially paving the way for eventual currency convertibility that’s considered a draw-card for overseas investments. Average daily volumes in over-the-counter trades at Gujarat GIFT City surged to an estimated $1.5-2 billion from $100-200 million about a year ago, four bankers told ET.

Among the other major participants in the NDF trade are State Bank of India, IndusInd Bank, Kotak Mahindra and Standard Chartered, executives said. “Daily average volumes have surged for offshore OTC NDF trades during the onshore time,” said Bhaskar Panda, executive vice president at HDFC Bank. “This has helped bridge gaps between offshore and onshore prices bringing in relative stability in the exchange rate. This in turn will help attract foreign investors, who always prefer full currency market convertibility.” IndusInd, Kotak and SBI didn’t comment.

The differential between one-month onshore and offshore forwards trade is now less than a paise, which would have been about four-five paise in normal circumstances. A wider differential encourages speculators to tap arbitrage opportunities short-selling rupees or dollars, a potential source for heightened volatility. The one-month Rupee Options Volatility index is now at 4.51 percent versus 7.63 percent nearly a year ago, show data from Financial Benchmarks India (FIBIL). “Axis Bank IBU Branch has been playing a significant role in the NDF markets at GIFT City,” said Lalit Jadhav, CEO – Axis Bank IBU Branch, GIFT City.

“We have a full-fledged Treasury Desk with robust risk controls and look at trading opportunities in this segment which can potentially help reduce volatility and drive price convergence between offshore and on-shore markets.” Before local banks were allowed to tap the NDF market at GIFT City, the Reserve Bank of India was unable to control NDF moves on the rupee-dollar. Now, the central bank even directs private banks along with traditional public sector lenders to buy or sell units, which is known as NDF market intervention.

“NDF business would be one of the core pillars of our business strategy at GIFT City that provides an excellent platform to meet the global banking needs,” said Anupam Verma, head – international banking unit, IFSC GIFT City, ICICI Bank. RBI had permitted Indian banks, which hold a licence to operate in the International Financial Services Centre in GIFT City – Ahmedabad, to participate in the NDF market from June 1 in 2020. “The liquidity has significantly improved in the NDF market at GIFT City with large local banks transacting,” said Anindya Banerjee, currency analyst at Kotak Securities.

“We are gradually moving towards full capital account convertibility making our exchange rate easily available.” RBI deputy governor T Rabi Shankar Thursday called for a preparedness to meet challenges related to full capital account convertibility as foreign investors get full access to India’s debt market under a dedicated route meant for global bond index inclusion.

“A key aspect of currency convertibility is integration of financial markets,” Shankar said at the fifth Foreign Exchange Dealers’ Association of India (FEDAI) annual day. “An effort has already commenced in the interest rate derivative segment.” “NDF-onshore spreads have substantially narrowed after allowing Indian banks into the NDF space,” he said.



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FPIs pull out Rs 19,000 cr from banking, financial stocks in H1; stay cautious in H2, BFSI News, ET BFSI

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Amid the euphoria in the stock markets, the Foreign portfolio investors (FPIs) have pulled out close to Rs 19,000 crore from the banking and financial sectors in the first six months of the current fiscal.

On the other hand, they have raised their exposure on stocks in the defensive sectors such as consumer goods, IT, pharma and telecom.

According to sector-wise FPI flow data compiled from depositories, FPIs pulled out Rs 18,700 crore from the financial services sector between April and September. Of the total outflows, Rs 13,872 crore went from the banking sector while Rs 4,827 crore was pulled out from ‘other financial services’, which covers financial institutions, non-banking finance companies (NBFCs) and housing finance companies (HFCs).

Nifty Bank lagging far behind vis-a-vis Nifty 50 return on a YTD basis, while the leaders are Nifty Metals, Nifty Realty and Nifty IT.

Banking sector

Within the banking sector, the equity segment witnessed an outflow of Rs 12,964 crore during the April-September period while Rs 1,014 crore went out of the debt segment during H1. On the other hand, the other financial services category witnessed an inflow of Rs 1,159 crore in equities and outflow of Rs 5,797 crore from debt in the first six months of the current fiscal.

“A stand out feature of FPI flows in recent weeks is the outflows from banking and inflows into IT. Even though IT is highly valued, this segment is attracting increasing flows since earnings visibility is high in the segment while banking is struggling with poor credit growth and rising asset quality concerns, V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said.

Defensive sectors

FPIs have been investing in defensive sectors due to rising volatility with the ‘household & personal products’ sector witnessed the highest FPI inflows in the last six months at Rs 6,725 crore followed by consumer durables ( Rs 6,580 crore), retailing (Rs 6,340 crore), telecom (Rs 5,773 crore) and insurance ( Rs 2,881 crore).

Though the economy has recovered in the second half, the market participants are having a cautious outlook as there has been no big jump in loan growth and concerns on NPAs remain.

Going forward, volatility in the global markets as well as global slowdown may impact foreign flows moving into Indian shores.

Also, any direction by US Fed towards tapering of the stimulus measures would make FPI flows into emerging markets volatile and at the same time it would be crucial in dictating the direction of foreign flows into Indian equities.



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RBI asks banks to prepare for major changes in capital account convertibility, BFSI News, ET BFSI

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Hinting at further relaxation in the capital account convertibility norms, RBI Deputy Governor T Rabi Sankar has said the country is on the cusp of some fundamental shifts with regard to currency management.

India has come a long way in achieving increasing levels of convertibility on the capital account and has broadly achieved the desired outcome for the policy choices in terms of achieving a stable composition of foreign capital inflow, Sankar said while addressing the Foreign Exchange Dealers’ Association of India’s (FEDAI) annual day meeting.

Although the Indian rupee is fully convertible for current account transactions, only limited capital account transactions are permitted by the RBI.

“…India is on the cusp of some fundamental shifts in this space with increased market integration in the offing and freer non-resident access to debt on the table. The rate of change in capital convertibility will only increase with each of these and similar measures,” he said.

With that comes the responsibility to ensure that such flows are managed effectively with the right combination of capital flow measures, macro-prudential measures and market intervention, the deputy governor further said.

He futher said market participants, particularly banks, will have to prepare themselves to manage the business process changes and the global risks associated with capital convertibility.

The degree of Balance of Payment convertibility of a country usually depends on the level of its economic development and degree of maturity of its financial markets.

Therefore, advanced economies are almost fully convertible, while emerging market economies are convertible to different degrees, Sankar added.

The regulator’s job

“The regulator’s job is somewhat different. As someone once said, the job of a regulator is like the gas regulator in the kitchen – it cannot ensure the quality of the dish, but it can prevent the kitchen from blowing up.

“The quality of the dish – that is, the efficiency with which the investment needs of the country are met – is up to how well authorised dealers and other intermediaries adjust to the increasingly fuller capital account convertibility,” Sankar said.

The balance of payments (BOP) of a country records all economic transactions of a country (that is, of its individuals, businesses and governments) with the rest of the world during a defined period, usually one year. These transactions are broadly divided into two heads – current account and capital account.

The current account covers exports and imports of goods and services, factor income and unilateral transfers. The capital account records the net change in foreign assets and liabilities held buy a country.

What is capital account convertibility?

The balance of payments, a statement of all transactions made between a country and the outside world, consists of two accounts — current and capital account. While the current account deals mainly with import and export of goods and services, the capital account is made up of cross-border movement of capital by way of investments and loans.

Current account convertibility refers to the freedom to convert your rupees into other internationally accepted currencies and vice versa without any restrictions whenever you make payments.

Capital account convertibility means the freedom to conduct investment transactions without any constraints. It would mean no restrictions on the amount of rupees you can convert into foreign currency to enable you, an Indian resident, to acquire any foreign asset. Under it, there would be no restraints on NRIs bringing in any amount of dollars or dirhams to acquire an asset in India.

The Tarapore committee

The S S Tarapore committee’s report on fuller capital account convertibility in 2006 argued that even countries that had apparently comfortable fiscal positions have experienced currency crises and rapid deterioration of the exchange rate, when the tide turns.

The report had said that most currency crises arise out of prolonged overvaluation in exchange rates leading to unsustainable current account deficits. An excessive appreciation of the exchange rate causes exporting industries to become unviable, and imports to become much more competitive, causing the current account deficit to worsen. Thus, it suggests transparent fiscal consolidation is necessary to reduce the chances of a currency crisis.



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Outward remittances under LRS rose 31%

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Outward remittances under the Liberalised Remittance Scheme (LRS) for individuals rose about 31 per cent year-on-year (yoy) in July 2021 to $1.31 billion, mainly on the back of increase in expenses towards studies and travel, according to Reserve Bank of India (RBI) data.

The remittances were $995.16 million in the year ago period.

This comes even as the global economy seems to be gradually recovering from the unprecedented disruption caused by the Covid-19 pandemic.

As per RBI norms, all resident individuals, including minors, are allowed to freely remit up to $250,000 per financial year (April – March) for any permissible current or capital account transaction or a combination of both.

The Scheme was introduced on February 4, 2004, with a limit of $25,000 and revised in stages.

In July 2021, remittances towards studies abroad jumped about 53 per cent y-o-y to $423 million; towards travel by 41 per cent to $347 million;gift was up about 35 per cent to $175 million; and towards investment in equity/debt by 48 per cent to $50 million.

Remittance towards maintenance of close relatives was almost static at $243 million.

T Rabi Sankar, Deputy Governor, RBI, in a recent speech, observed that LRS for individuals, while it is open for both current and capital account transactions, is largely (more than 90 per cent) in current account transactions such as travel and studies.

“As the LRS Scheme has operated for some time, there may be a need to review it keeping in mind the changing requirements such as higher education for the youth, requirement of start-ups etc.

“There might even be a case for reviewing whether the limit can remain uniform or can be linked to some economic variable for individuals,” he said.

Outward remittance under LRS had come down about 32 per cent yoy (or by $6.08 billion) in FY21 to $12.68 billion ($18.76 billion in FY22) as the pandemic raged.

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Bond yields trend higher despite softer inflation

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Benchmark yield closed marginally higher this week despite positive inflation data even as rising crude prices, higher US treasury yields and domestic liquidity factor take precedence.

During the monetary policy, the Reserve Bank of India (RBI) halted the G-SAP programme while saying it would increase the quantum of VRRR auctions to Rs6 lakh crore by December.

The central bank last week conducted an 8-day Variable Rate Reverse Repo auction in which the cut-off yield came in at 3.9 per cent. In comparision, the cut-off for a 7-day VRRR auction had come in at 3.61 per cent in the first week of October. The increasing cut-off seems to reflect the central bank’s comfort in paying a higher rate to remove excessive liquidity.

On the positive side, retail inflation dropped to a five-month low of 4.35 per cent in September. Bond market participants are of the view that the next inflation print will most likely come in below 4 per cent due to a favourable base effect. Post that, there could be some rise in inflation, they say.

However, it seems the days when market cheered this sort of news seem to be over, at least temporarily so, as other factors weigh heavily on traders’ minds.

Rising crude price

The halting of G-SAP comes at a time when crude prices are gaining an upward momentum. Brent crude prices closed near the $85-mark last week, having risen by almost $2.5 in a week. To give a context, it has risen by almost $7 / barrel since the beginning of the month.

At the same time, the 10-year US treasury yield touched 1.63 per cent last week, before cooling to 1.575 per cent.

Bond dealers say if both the crude and the US treasury yields continue to rise, it could have an impact on the domestic yields.

Vijay Sharma, senior executive vice-president at PNB Gilts opines that the market is mainly looking at only these two factors.

“Rising crude prices and hardening US Treasury yields are the main factors that are driving the G-Sec yields higher. Under these adverse global conditions, the withdrawal of G-SAP has exacerbated the upmove. The market already knows that the next inflation print would likely come in below 4 per cent given the low base effect. Market participants will be watching out whether at 6.35-6.4 per cent levels, will the RBI do something to stabilise the yields. If crude prices and US treasury yields stabilise, the benchmark bonds could find demand returning at close to 6.4 per cent,” Sharma said.

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Life insurance sees good growth, claims fall post second wave

Banking & Finance

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The life insurance industry is slowly coming back to normal after facing a high claim burden in the first five months of the current fiscal following the second wave of the Covid-19 pandemic.

“The industry is doing well. With every passing month, business is improving. Private sector life insurance companies are doing well and public sector bank-led banca companies are doing especially well,” said Rushabh Gandhi, Deputy CEO, IndiaFirst Life Insurance.

In an interaction with BusinessLine, Gandhi said there are green shoots across the industry as well as for the insurers and there continues to be strong demand amongst consumers for life insurance.

“A large part of our portfolio is non-participating products; the contribution of protection business is growing. Quotations for term life are increasing. It is a visible and sustainable trend,” he noted. Claims, which shot up by nearly two to three times in the second wave of the pandemic compared to the first wave, have also come down for life insurers, he further said.

“In the first five months of the year, claims have been very high. Peak deaths happened in May and intimations came in June and July; now it seems to be easing,” he added.

Burdened by high claims, a number of life insurers have reported losses for the first quarter of the fiscal and have also been increasing premium rates.

According to IRDAI data, life insurance companies registered a 22.21 per cent growth in first year premium in September on a year on year basis. Of this, private sector companies registered a growth of 42.42 per cent while LIC recorded a growth of 11.55 per cent last month on an annual basis. IndiaFirst Life Insurance grew by 71.05 per cent in September.

Comeback

Analysts too expect the life insurance sector to continue to stage a full comeback in the second half of the fiscal.

“We have seen a healthy pick-up in growth in the past few months, with September 2021 witnessing healthy trends across most players. We believe premium growth would see strong traction over FY22, with continued focus on non-participating, annuity, while ULIP would see gradual recovery,” said Motilal Oswal in a recent report.

Care Ratings said that while Covid claims are likely to remain elevated in the second quarter, the impact should be minimised compared to the first quarter.

“In the first quarter of the fiscal, the growth in premiums, albeit muted, was driven by unit-linked products and protection plans. However, the life insurance sector witnessed significant claims in the first quarter due to the second wave of the pandemic and profitability suffered as companies made provisions and reserves to alleviate the impact of the claims,” it said.

Growth strategies

Commenting on growth strategies for IndiaFirst Life Insurance, Gandhi said the insurer has been focussing on credit life insurance and expects premium of about ₹300 crore from the segment this year.

“We have managed in our partnership with Bank of Baroda to get attachment rates of over 70 per cent and have started doing covers for all loan products,” he said, adding that the insurer is working on tie ups with a number of other lenders as well.

“Our strategy remains intact. We will remain a multi-channel distribution company with bancassurance as our main focus and contributing 80-85 per cent of premium. On agency, our focus will be on quality not quantity, while on banca our focus will remain on penetration,” he further said.

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Bank of India announce rate cut on home loan, vehicle loan interest rates

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Bank of India (BoI) on Sunday announced a 35 basis points (bps) reduction in home loan interest rate and a 50 bps reduction in vehicle loan interest rate. The new interest rates are effective from October 18, 2021 till December 31, 2021.

Following the reduction, home loan interest rates will start at 6.50 per cent against the current rate of 6.85 per cent and vehicle loan interest rates will start at 6.85 per cent against 7.35 per cent. One basis point is equal to one-hundredth of a percentage point.

This special rate, which is part of the festive offer, is available for customers applying for fresh loans and also for those seeking transfer of loans, the public sector bank said in a statement.

Processing charges have also been waived for both home and vehicle loans till December-end 2021.

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Multibagger NSE Media Stocks: 4 Best Performing Media Stocks In The Last One Year

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Saregama India

The RP-Sanjiv Goenka Group of enterprises owns Saregama India Ltd., India’s oldest music label. With headquarters in Kolkata and offices in Mumbai, Chennai, and Delhi, the company is listed on the NSE and BSE.

For the first time in five years, the company is debt-free. Stock returned 719.63 percent over three years, compared to 92.3 percent for the Nifty Midcap 100. Saregama India Ltd., founded in 1946, is a Small Cap company in the Media & Entertainment industry with a market capitalization of Rs 7,559.40 crore.

Since August 9, 2000, Saregama India Ltd. has issued 15 dividends. Saregama India Ltd. has declared an equity dividend of Rs 20.00 per share in the last 12 months. This translates to a dividend yield of 0.46 percent at the current share price of Rs 4337.50. In the past one year, the stock surged wohoophing 667%, making it the best perforing media stock.

Network18 Media

Network18 Media

Network18 Media & Investments Limited, often known as the Network18 Group or the Network18-Eenadu Group, is an Indian media conglomerate controlled by Mukesh Ambani, the billionaire founder of Reliance Industries.

The stock returned 72.89 percent over three years, compared to 92.3 percent for the Nifty Midcap 100. Sales have decreased by 11.93 percent. For the first time in three years, the company’s revenue has decreased. Network 18 Media & Investments Ltd., founded in 1996, is a Small Cap business in the Media & Entertainment industry with a market capitalization of Rs 8,244.72 crore. Since February 14, 2008, Network 18 Media & Investments Ltd. has declared one dividend.

The stock has increased by 130 percent in the last year, making it one of the top performing media stocks.

Nazara Technologies

Nazara Technologies

Annual sales growth of 78.17 percent surpassed the company’s three-year CAGR of 37.03 percent. Nazara Technologies Ltd., founded in 1999, is a Small Cap business in the Services sector with a market capitalization of Rs 8,433.00 crore. Nazara Technologies was included in Rakesh Jhunjhunwala’s portfolio even though the business was not publicly traded. When Nazara Technologies’ initial public offering (IPO) opened for subscription in March 2021, this was the case. Nazara Technologies’ stock is currently trading at $1,742.80 on the NSE, up around 75% from its issue price of $1,101. In conclusion, this Rakesh Jhunjhunwwala holding company stock has provided investors with a 74% return.

Zee Entertainment

Zee Entertainment

Zee Entertainment Enterprises Ltd., founded in 1982, is a large-cap media and entertainment firm with a market capitalization of Rs 30,722.10 crore. Zee Entertainment Enterprises is a media corporation based in India. It has interests in broadcast, print, internet, film, mobile content, and allied companies, and is headquartered in Mumbai. Stock returned -32.31 percent over three years, compared to 92.3 percent for the Nifty Midcap 100.

Since August 31, 2000, Zee Entertainment Enterprises Ltd. has paid out 26 dividends. Zee Entertainment Enterprises Ltd. distributed an equity dividend of Rs 2.50 per share in the last 12 months.

This amounts in a dividend yield of 0.78 percent at the current share price of Rs 319.85.

Multibagger Media Stocks: 4 Best Performing Media Stocks In The Last One Year

Multibagger Media Stocks: 4 Best Performing Media Stocks In The Last One Year

Company name Price in Rs 1-Year
Saregama India 4,349.00 639.49
Network.18 Media 78.75 107.24
Nazara Technologies 2,769.20 73.94
Zee Entertainment 319.85 71.78

Media Stocks:3 Best Popular Media Stocks In India 2021

Media Stocks:3 Best Popular Media Stocks In India 2021

Sun TV Network

Sun TV Network is an Indian television and radio network based in Chennai, Tamil Nadu. It is one of Asia’s largest television networks and is owned by the Sun Group. Kalanithi Maran founded the company on April 14, 1992, and it now controls a number of television networks and radio stations in a number of languages. The company has had no debt for the last 5 years.

PVR Ltd

PVR is India’s largest multiplex operator, with 176 cinemas and 845 screens spread across 71 locations. PVR’s leading position was further bolstered in August 2018 with the acquisition of SPI Cinemas, which has 76 screens. PVR, as the market leader, can fetch a high brand value and has developed strong relationships with numerous real-estate developers, allowing it to launch properties in prime locations.

Inox leisure

Inox Leisure is one of India’s largest multiplex chains, with 648 screens spread across 153 locations. It is the second-largest multiplex operator, having grown from two properties in FY03 to 153 in FY21 through organic and inorganic expansion.

Disclaimer

Disclaimer

Past performance is not an indication of future prices. Please note investing in stocks is subject to market risks and one needs to be cautious at this point of time as markets have gone-up sharply. Neither the author, nor Greynium Information Technologies Pvt Ltd would be responsible for losses incurred based on a decision made.



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