 "Financial sector shares gain; HDFC, ICICI Bank up 5%")
Shares of financial sector were in limelight with the CNX Finance index rallied nearly 4% after Housing Development Finance Corporation (HDFC) and ICICI Bank has rallied more than 5% each on the National Stock Exchange (NSE).
At 02:54 pm, CNX Finance index was up 3.7% compared to 2% rise in the CNX Nifty.
Power Finance Corporation (PFC), Rural Electrification Corporation (REC), HDFC and ICICI Bank have rallied between 5%-10%, while LIC Housing Finance, HDFC Bank, Axis Bank, Reliance Capital, Bajaj Finserv, Mahindra & Mahindra Financial Services and Kotak Mahindra Bank up 2%-4% on the NSE.
According to media reports Union Cabinet is likely to consider this week a proposal to recast Rs 4.3 lakh crore loans of nine state power distribution companies with a view to bring down their liabilities. CLICK HERE TO READ FULL REPORT.
Parag Jariwala, VP – Institutional Research, Banking and Financial services, Religare Capital Markets said “SDR (Strategic Debt Restructuring) may be evoked by the banks and due to change in the ownership / structure of the loans, it should get upgraded to standard category immediately. The state electricity boards (SEB) restructured loans account for 1-3% of total loans for public sector undertaking (PSU) banks.”
Current rate of interest on these loans is 12-14%. Bonds guaranteed by state government will pay 8.5%-9.5%. There will be impact on margins for PSU. However, we believe that reduction in asset quality risk will more than offset margin concerns, he adds.
According to Jariwala, PSUs with higher exposure to SEBs and government owned infra lenders like REC/PFC will benefit the most.
Among the individual stocks, PFC has rallied 11% to Rs 251 on the NSE. REC surged 7% to Rs 293, followed by ICICI Bank and HDFC up 5% each at Rs 281 and Rs 1,257 respectively.
At 02:54 pm, CNX Finance index was up 3.7% compared to 2% rise in the CNX Nifty.
Power Finance Corporation (PFC), Rural Electrification Corporation (REC), HDFC and ICICI Bank have rallied between 5%-10%, while LIC Housing Finance, HDFC Bank, Axis Bank, Reliance Capital, Bajaj Finserv, Mahindra & Mahindra Financial Services and Kotak Mahindra Bank up 2%-4% on the NSE.
According to media reports Union Cabinet is likely to consider this week a proposal to recast Rs 4.3 lakh crore loans of nine state power distribution companies with a view to bring down their liabilities. CLICK HERE TO READ FULL REPORT.
Parag Jariwala, VP – Institutional Research, Banking and Financial services, Religare Capital Markets said “SDR (Strategic Debt Restructuring) may be evoked by the banks and due to change in the ownership / structure of the loans, it should get upgraded to standard category immediately. The state electricity boards (SEB) restructured loans account for 1-3% of total loans for public sector undertaking (PSU) banks.”
Current rate of interest on these loans is 12-14%. Bonds guaranteed by state government will pay 8.5%-9.5%. There will be impact on margins for PSU. However, we believe that reduction in asset quality risk will more than offset margin concerns, he adds.
According to Jariwala, PSUs with higher exposure to SEBs and government owned infra lenders like REC/PFC will benefit the most.
Among the individual stocks, PFC has rallied 11% to Rs 251 on the NSE. REC surged 7% to Rs 293, followed by ICICI Bank and HDFC up 5% each at Rs 281 and Rs 1,257 respectively.