Stocks of Oil sector firms, private sector banks and index heavyweight HDFC led gains for key benchmark indices, with the barometer index, the S&P BSE Sensex, the Nifty 50 index, both, hitting their highest level in almost three weeks. At 12:16 IST, the Sensex was up 219.87 points or 0.86% at 25,873.10. The Nifty was currently up 67 points or 0.85% at 7,927.75. The market sentiment was positive with exit polls predicting a historic win for the BJP led National Democratic Alliance (NDA) in assembly election in Assam. The NDA rules the central government after an emphatic victory in the 2014 Lok Sabha election. Gains in global stocks aided the upmove on the domestic bourses.
The Sensex jumped 227.27 points or 0.88% at the day's high of 25,880.50 in early afternoon trade, its highest level since 28 April 2016. The barometer index rose 87.96 points or 0.34% at the day's low of 25,741.19 in morning trade. The Nifty jumped 68.35 points or 0.86% at the day's high of 7,929.10 in early afternoon trade, its highest level since 28 April 2016. The index rose 28.45 points or 0.36% at the day's low of 7,889.20 in mid-morning trade.
On the political front, exit polls for the assembly elections showed the Dravida Munnetra Kazhagam (DMK)-Congress alliance heading to victory in Tamil Nadu, West Bengal Chief Minister Mamata Banerjee retaining power in that state, a victory for Communist Party of India-Marxist (CPM)-led Left Democratic Front government in Kerala and a historic win for the BJP led National Democratic Alliance (NDA) in Assam. The Congress-DMK alliance looks set to form government in the Union territory of Puducherry, the post-poll surveys indicated. The counting of votes for assembly elections held in these four states and the Union territory of Puducherry takes place on Thursday, 19 May 2016.
A win for the BJP led NDA in Assam will put BJP in the right shape for the 2017 assembly election in Uttar Pradesh (UP). The UP assembly has 403 seats. The number of seats in Rajya Sabha, or the upper house of parliament, depends on representation in states. A lack of a majority for the NDA in the Rajya Sabha has delayed passage of a key tax reform bill viz. the Goods and Services Tax (GST) bill in the upper house. Finance Minister Arun Jaitley said in an interview to All India Radio recently that the GST Bill will be put to vote in the monsoon session of Parliament if Congress continues to oppose the Legislation. The GST bill, which has been approved by the Lok Sabha, is pending in the Rajya Sabha because of stiff resistance by the Congress. For the GST bill to become a law, the GST bill also needs to be approved by half the state assemblies.
In overseas stock markets, energy stocks led gains in Asian equities as crude oil prices rose. US stocks closed higher yesterday, 16 May 2016, as a surge in oil prices and a rally in tech stocks overshadowed weaker-than-expected manufacturing data from the New York region. The Empire State general business-conditions index, which measures activity in the New York area, nosedived to a reading of negative 9 in early May, from positive 9.6 in April.
Closer home, the market breadth indicating the overall health of the market was positive. On BSE, 1,308 shares rose and 914 shares fell. A total of 162 shares were unchanged. The BSE Mid-Cap index was currently up 0.71%. The BSE Small-Cap index was currently up 0.47%. Both these indices underperformed the Sensex.
Private sector bank stocks gained. Axis Bank (up 2.84%), Kotak Mahindra Bank (up 0.08%) and ICICI Bank (up 0.62%) rose.
HDFC Bank rose 0.01% to Rs 1,163.20. The stock hit a high of Rs 1,178 in intraday trade so far, which is a record high for the counter. The stock hit a low of Rs 1,160 so far during the day.
Yes Bank rose 1.5% to Rs 994. The stock hit a high of Rs 1,000 in intraday trade so far, which is a record high for the counter. The stock hit a low of Rs 986.65 so far during the day.
IndusInd Bank rose 1.4% to Rs 1,095.95. The stock hit a high of Rs 1,096.20 in intraday trade so far, which is a record high for the counter. The stock hit a low of Rs 1,081.25 so far during the day.
PSU bank stocks fell. State Bank of India (SBI) (down 0.76%), Punjab National Bank (down 1.6%), Canara Bank (down 0.67%), Bank of India (down 0.06%) and Union Bank of India (down 2.06%) dropped. IDBI Bank rose 1.18%.
Bank of Baroda (BoB) dropped 1.06%, with the stock extending steep losses registered during the previous session triggered by the dismal Q4 results. The stock lost 8.23% to settle at Rs 142.20 yesterday, 16 May 2016. BoB reported net loss of Rs 3230.14 crore in Q4 March 2016 compared with net profit of Rs 598.35 crore in Q4 March 2015. The result was announced after market hours on Friday, 13 May 2016. BoB said that its asset quality has stabilized and that the management expects the bank to return to black during the current financial year. The state-run bank posted a massive net loss of Rs 5395.55 crore in the year ended 31 March 2016 (FY 2016) as against a net profit of Rs 3398.43 crore in the year ended 31 March 2015 (FY 2015). The reason for the massive net loss was due to additional provisions that the state-run bank made with respect to certain loans in Q3 December 2015 and Q4 March 2016 as a part of an asset quality review (AQR) being carried out by the Reserve Bank of India for the banking sector as a whole. The provision coverage ratio (PCR) of the bank improved to 60.09% as on 31 March 2016 from 52.7% as on 31 December 2015. The bank proposes to maintain provision coverage ratio (PCR) above 60% in FY 2017.
The total restructured standard assets of the bank dropped to Rs 13735 crore on 31 March 2016 from Rs 17135 crore as on 31 December 2015. In a post result conference call, BoB's management said that it has high performance confidence for Rs 7300 crore of restructured advances. The SMA 2 category (interest payment overdue by 60 days) advances of the bank stands at Rs 13153 crore at end March 2016, with high confidence for Rs 5750 crore of advances. Thus, the bank has about balance Rs 6434 crore of restructured advances and Rs 7394 crore of SMA 2 category advance under watch list together at Rs 13828 crore. On the basis of accounts under watchlist, the bank expects fresh slippages likely to be around Rs 15000 crore for FY 2017 lower than Rs 26863 crore in FY 2016. The bank is expecting strong recoveries and upgradation of Rs 10000 crore in FY 2017. The bank has deployed about 1,000 employees to focus on recoveries across the country.
The bank expects to improve domestic net interest margins (NIMs) to 3% in the year ending March 2017 (FY 2017) from 2.6% in the year ended 31 March 2016 (FY 2016). It proposes to improve overseas NIM to 1.25% in the immediate term and 1.75% in the medium term. The bank expects return on equity (RoE) at 7-8% for FY 2017 and 14-15% in the year ending March 2018 (FY 2018).
IT stocks saw mixed trend. HCL Technologies (up 1.76%), TCS (up 0.79%), Infosys (up 0.54%) and MphasiS (up 0.19%) rose. Oracle Financial Services Software (down 0.41%) and Tech Mahindra (down 0.39%) fell.
Wipro slipped 0.29%. Wipro has announced a partnership with Xactly Corporation, a leading provider of enterprise-class, SaaS and cloud-based incentive solutions for employee and sales performance management. The partnership will offer sales performance management (SPM) solutions for customer organizations across industry sectors in a software as a service model. The announcement was made after market hours yesterday, 16 May 2016.
Meanwhile, with a view to aid the development of corporate bond market, the Reserve Bank of India in consultation with the Ministry of Finance has decided to allow investment by foreign portfolio investors (FPIs) in unlisted debt securities and securitised debt instruments subject to certain restrictions. In a draft circular issued yesterday, 16 May 2016, the RBI said that FPIs can invest in the primary issues of non-convertible debentures/bonds by a public company issued in demat form, provided that the issuing company does not use the borrowing proceeds for real estate activities, purchase of land, investing in capital market or on-lending to other entities. FPIs can also invest in securitised debt instruments issued by a special purpose vehicle (SPV) set up for securitisation of assets where banks, FIs or NBFCs are originators. FPIs can also invest in securitised debt instruments issued and listed in terms of the Securities and Exchange Board of India Regulations on Public Offer and Listing of Securitised Debt Instruments, 2008. The RBI has invited public comments on draft circular by 25 May 2016.
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