Financials extend rally; IndusInd, Shriram Transport surge over 20% in 1 wk

In the past week, the S&P BSE Finance index has rallied 10 per cent, against a 5 per cent gain in S&P BSE Sensex.

Shares of financials, including banks, non-banking financial companies (NBFCs), housing finance companies (HFCs) and microfinance institutions (MFIs), continued trading higher for the fifth straight day on Friday, after companies reported a good set of numbers and asset quality improvement in September quarter (Q2FY21).

CSB Bank, Spandana Sphoorty Financial, Indiabulls Housing Finance, RBL Bank, Shriram Transport Finance and Manappuram Finance from the S&P BSE Finance index were up more than 5 per cent on the BSE. Bajaj Finserv, IndusInd Bank, DCB Bank, CreditAccess Grameen and Muthoot Finance were up between 3 per cent and 5 per cent.

At 02:26 pm, the S&P BSE Finance index was up 1.8 per cent, as compared to a 1.2 per cent rise in the S&P BSE Sensex. In the past week, the BSE Finance index has rallied 10 per cent, against a 5 per cent gain in the benchmark index.

Credit Suisse has turned bullish on banks as it believes the space may see a re-rating and earnings upgrades. The brokerage highlighted that earnings for FY21 and FY22 are beginning to see upgrades led by banks.

“We have strong overweight positions on banks. Private and PSU banks were a rare sector that de-rated year-to-date. Going forward, they are likely to benefit from re-rating, as well as earnings upgrades. While private bank trailing P/B vs the market has bounced from a discount, it is still very much below the highs seen last year,” ” said Credit Suisse strategists, led by Neelkanth Mishra, in a note.

Among the individual stocks, IndusInd Bank was up 5 per cent to Rs 747 in intra-day trade today, surging 28 per cent during the week. The asset quality of private sector lender improved in Q2FY21. The overall asset quality performance was encouraging as gross non-performing assets (NPA) and net NPA ratio declined by 32 bps and 34 bps to 2.21 per cent and 0.52 per cent, respectively.

“Post balance sheet realignment, the management is geared to pedal growth ahead with focus on certain segments. Thus, we expect business momentum to pick from here on with operational parameters expected to show improvement. Improving collection efficiency and ample provision buffer is expected to arrest volatility in earnings but return ratios are seen improving gradually to 9.3 per cent in FY22E. Further, quantum of advances to be restructured remain key monitorable. Therefore, until clarity emerges on asset quality front, we maintain our HOLD rating,” ICICI Securities said in result update.

Shriram Transport Finance advanced 6 per cent to Rs 862 in intra-day trade, thus soaring 24 per cent in the current week. For Q2FY21, Shriram Transport reported a better-than-expected net profit at Rs 685 crore, on the back of net interest income (NII) of Rs 2,022 crore and lower-than-estimated provisioning. The company had posted a profit of Rs 765 crore and NII of Rs 2,056 crore in previous year quarter.

Asset quality improved sequentially as GNPA ratio declined to 6.42 per cent from 8 per cent and NNPA ratio declined to 3.64 per cent from 5.1 per cent in Q1FY21. GNPA and NNPA stood at 8.8 per cent and 6.15 per cent, respectively as of Q2FY20. Assets under management (AUM) grew 4.8 per cent year-on-year (YoY) at Rs 1.13 trillion during the quarter.

COMPANY	LATEST	1-WEEK BEFORE	GAIN(%)
CARE RATINGS	408.50	298.60	36.8
INDUSIND BANK	737.50	585.60	25.9
SHRIRAM TRANS.	849.60	692.70	22.7
ST BK OF INDIA	219.30	189.25	15.9
PNB GILTS	44.20	38.25	15.6
BAJAJ FINANCE	3789.90	3307.65	14.6
SHRI.CITY UNION.	912.00	797.30	14.4
BANDHAN BANK	330.70	289.25	14.3
BAJAJ FINSERV	6306.00	5573.40	13.1
IIFL FINANCE	84.45	74.75	13.0
MAGMA FINCORP	41.85	37.05	13.0
CITY UNION BANK	166.10	148.05	12.2
ICICI BANK	440.20	392.55	12.1
SPANDANA SPHOORT	601.00	537.50	11.8
RBL BANK	194.05	174.25	11.4
CHOLAMAN.INV.&FN	303.40	273.10	11.1
KOTAK MAH. BANK	1719.00	1547.60	11.1
H D F C	2130.00	1922.75	10.8
HDFC BANK	1305.00	1183.45	10.3
CENTRUM CAPITAL	17.30	15.70	10.2