Key equity index, the BSE Sensex, today staged a dramatic comeback after the country’s largest bank, State Bank of India (SBI), announced a jump of nearly 200 times in fourth-quarter net profit.
The 30-share Sensex gained nearly 400 points from intra-day low levels to close at 16,152. Stock brokers turned optimistic on banking shares after SBI made a pitch to global rating agencies for an upgrade. The broader index, S&P CNX Nifty of the National Stock Exchange, rose 0.44 per cent or 21 points to close at 4,891. The Bank Nifty, a gauge of banking shares, rose 1.7 per cent. The SBI stock rose five per cent to close at Rs 1,942.
The SBI result indicates concerns over asset quality of Indian banks have peaked. The state-run lender reported a net profit of Rs 4,050 crore during the quarter ended March, compared to a measly Rs 21 crore during the same quarter last year. The bottom line was boosted by less provisioning towards bad loans, standard assets and bond investments as yields softened. Healthy growth in core income also pushed up the profit.
“Better-than-expected results from SBI led the turnaround. European markets also provided much-needed support. We believe the government will take further steps to improve the economy,” said Dipen Shah, head of fundamental research, Kotak Securities.
Among the top private sector lenders, ICICI Bank and HDFC Bank rose 2.26 per cent and 0.9 per cent, respectively. YES Bank, UCO Bank, IDBI Bank, Development Credit Bank and Syndicate Bank moved up between 1.6 and three per cent.
Foreign players, however, say after decent results from most banks this quarter, they are watching global crude oil prices for cues to invest in India.
According to provisional data, foreign institutional investors were net sellers of nearly Rs 250 crore today. “Without downplaying India’s current vulnerability to the euro zone-triggered risk-aversion, relatively low non-food core inflation and falling crude oil prices are positives for the market,” said Christopher Wood, equity strategist at CLSA Asia Pacific Markets. "A further significant decline in oil prices would mark a significant positive (for the Indian market)," he said in his weekly newsletter.
Crude oil futures slid in Asian trading today due to euro-zone woes and disappointing US economic data, reinforcing the recent risk-off sentiment. On the New York Mercantile Exchange, light, sweet crude futures for delivery in June traded at $91.98 a barrel, down $0.58 in the Globex electronic session. July Brent crude on London's ICE Futures exchange fell $0.90 to $106.59 a barrel.
The equity market effect was also seen on the rupee, which saw a bounce-back to 54.43 against the dollar from a record low of 54.89. The rupee has been falling sharply as foreign investors have been pulling money out of the country. For the week, both the Sensex and the Nifty fell 0.8 per cent.
Earlier, major Asian markets ended with sharp losses. Japan's Nikkei 225 slumped 2.99 per cent, South Korea's Kospi lost 3.40 per cent and China's Shanghai Composite fell 1.44 per cent. Among European indices, the UK's FTSE 100 was down 0.76 per cent, Germany's Dax was up 0.21 per cent and France's CAC 40 was down 0.02 per cent at 6.15 pm.