Banking sector stocks, shares of state-run oil companies and index heavyweight HDFC led the latest upmove on the domestic bourses as investors awaited progress on the passage of the Goods and Services Tax (GST) constitutional amendment bill in parliament. The barometer index, the S&P BSE Sensex, rose 292.10 points or 1.05% to settle at 28,095.34. The gains for the Nifty 50 index were higher than those for the Sensex in percentage terms. The Nifty rose 94.45 points or 1.11% to settle at 8,635.65. The Sensex moved past the psychologically important 28,000 level and attained its highest closing level in more than 11 months. The Nifty attained its highest closing level in more than 15 months. Gains in global stocks aided the upmove on the domestic bourses. The Sensex and the Nifty edged higher for the second straight trading session. All the 19 sectoral indices on BSE edged higher.
The market breadth indicating the overall health of the market was strong. On BSE, 1724 shares rose and 990 shares declined. A total of 198 shares were unchanged. A number of stocks forming a part of the broad based BSE Small-Cap index registered gains exceeding 3%. Nearly 69% of the stocks forming a part of the BSE Small-Cap index and almost 71% of the stocks constituting a part of the BSE Mid-Cap index clocked gains for the trading session. The BSE Small-Cap index rose 1.05%, matching the Sensex's rise in percentage terms. The BSE Mid-Cap index rose 1%, underperforming the Sensex.
Stocks of most state-run oil firms edged higher on media reports that the government is set to start consultations for an ambitious plan to merge 13 state-run oil firms to create an oil sector giant. Vedanta and Cairn India edged higher after Vedanta sweetened the terms of the deal for the merger of Cairn India with Vedanta. Dr Reddy's Laboratories (DRL) edged lower on expectations of subdued Q1 results.
In overseas stock markets, Asian and European shares edged higher as worries over the impact of Britain's Brexit vote eased after policymakers from the Group of 20 countries agreed at the weekend to work to support global growth and better share the benefits of trade. Japanese shares ended near the flat line. Investors are hoping for a big stimulus announcement from the Bank of Japan (BOJ) at the conclusion of a two-day monetary policy review from the Japanese central bank on 28-29 July 2016. Strength in the yen against the dollar post last month's Brexit vote and data showing a slowdown in the Japanese economy have triggered expectations of further easing of monetary policy from the BOJ. A stronger yen hurts the competitiveness of Japanese exporters.
US stocks eked out small gains during the previous trading session on Friday, 22 July 2016, after an upbeat manufacturing report. Markit's preliminary reading of its manufacturing purchasing managers index came in at 52.9 for July 2016 a final reading of 51.3 for June 2016, as production and employment strengthened. Payrolls rose at the fastest pace in a year.
The Federal Open Market Committee (FOMC) is widely expected to keep the benchmark fed funds rates unchanged after the conclusion of two-day monetary policy meeting on 26-27 July 2016. Market participant will scrutinize the Fed statement for clues on policy direction. The Fed has kept the benchmark fed funds rate unchanged after raising it for the first time in nearly a decade in December 2015.
The Sensex rose 292.10 points or 1.05% to settle at 28,095.34, its highest closing level since 10 August 2015. The index jumped 307.13 points or 1.1% at the day's high of 28,110.37. The index lost 66.73 points or 0.24% at the day's low of 27,736.51.
The Nifty 50 index rose 94.45 points or 1.11% to settle at 8,635.65, its highest closing level since 16 April 2015. The index rose 99.95 points or 1.11% at the day's high of 8,641.15. The index lost 24 points or 0.28% at the day's low of 8,517.20.
The total turnover on BSE amounted to Rs 3852 crore, higher than turnover of Rs 3319.14 crore registered during the previous trading session.
All the 19 sectoral indices on BSE edged higher. The S&P BSE Consumer Discretionary Goods & Services index (up 1.12%), the S&P BSE Realty index (up 1.15%), the S&P BSE Energy index (up 1.34%), the S&P BSE Consumer Durables index (up 1.38%), the S&P BSE Oil & Gas index (up 1.52%), the S&P BSE Finance index (up 1.61%) and the S&P BSE Bankex (up 1.65%), outperformed the Sensex. The S&P BSE Healthcare index (up 0.32%), the S&P BSE Metal index (up 0.55%), the S&P BSE Utilities index (up 0.55%), the S&P BSE FMCG index (up 0.66%), the S&P BSE Basic Materials index (up 0.67%), the S&P BSE Telecom index (up 0.72%), the S&P BSE Industrials index (up 0.82%), the S&P BSE Capital Goods index (up 0.84%), the S&P BSE Auto index (up 0.95%), the S&P BSE IT index (up 0.96%), the S&P BSE Power index (up 0.96%) and the S&P BSE Teck index (up 0.96%), underperformed the Sensex.
Bank stocks edged higher on renewed buying. Among public sector banks, Punjab National Bank (up 8.23%), Allahabad Bank (up 6.77%), Canara Bank (up 5.31%), Andhra Bank (up 4.58%), Union Bank of India (up 3.95%), UCO Bank (up 3.86%), Punjab and Sind Bank (up 3.85%), Indian Bank (up 3.74%), Bank of India (up 3.68%), Syndicate Bank (up 3.59%), IDBI Bank (up 2.99%), State Bank of India (up 2.86%), Corporation Bank (up 2.40%), Central Bank of India (up 2.31%), Dena Bank (up 1.54%), United Bank of India (up 1.53%) and Bank of Maharashtra (up 0.45%), edged higher. Vijaya Bank fell 0.35%.
Bank of Baroda (BoB) rose 3.21% to Rs 155.75. The state-run bank during market hours today, 25 July 2016, announced that the Reserve Bank of India (RBI) has imposed a penalty of Rs 5 crore on the bank. Pursuant to the internal audit of BoB, the central bank and investigative agencies in October 2015 were advised by BoB of certain irregularities observed. The RBI carried out the investigation and noted the deficiencies which were reflective of weaknesses and failures in internal control mechanisms in respect of certain AML provisions such as monitoring of transactions, timely reporting to FIU, and assigning of UCIC to customers. BoB said it has fully cooperated with the RBI during the process, leading to the conclusion of its findings. BoB said it has implemented a comprehensive corrective action plan, to strengthen internal controls and to ensure that such incidents do not recur.
Among private sector banks, Federal Bank (up 3.37%), City Union Bank (up 2.90%), ICICI Bank (up 2.12%), Yes Bank (up 2.08%), IndusInd Bank (up 1.26%), Kotak Mahindra Bank (up 0.64%) and Axis Bank (up 0.14%), edged higher.
Index heavyweight HDFC Bank rose 1.23% at Rs 1,246.55. The stock hit a high of Rs 1,249 in intraday trade, which is a record high for the counter. The stock hit a low of Rs 1,225.25 in intraday trade.
Axis Bank edged higher in volatile trade after the bank's management in a post result conference call said it expects a strong credit growth for the lender at around 18-20% in FY 2017. The stock rose 0.14% at Rs 538.30. The stock hit a high of Rs 539.60 and a low of Rs 515 in intraday trade. Axis Bank's net profit fell 21.37% to Rs 1555.53 crore on 13.22% growth in total income to Rs 13852.18 crore in Q1 June 2016 over Q1 June 2015. The fall in net profit was due to a sharp surge in provisions and contingencies. Provisions and contingencies jumped 88.73% to Rs 2117.17 crore in Q1 June 2016 over Q1 June 2015. On a sequential basis, provisions and contingencies surged 81.21%. The bank's net interest income rose 11.36% to Rs 4516.92 crore in Q1 June 2016 over Q1 June 2015. The net interest margin (NIM) declined to 3.79% in Q1 June 2016 from 3.81% in Q1 June 2015. Axis Bank's management reiterated in a post result conference call that NIM is expected to remain above 3.6% as per the guidance given before.
The core operating profit rose 3.27% to Rs 3558.19 crore in Q1 June 2016 over Q1 June 2015. The figure of core operating profit is arrived at after deducing trading income from operating profit. Axis Bank announced the results after trading hours on Friday, 22 July 2016.
On absolute basis, Axis Bank's gross non-performing assets (NPA) edged higher to Rs 9553.17 crore as on 30 June 2016 from Rs 6087.51 crore on 31 March 2016 and Rs 4251.18 crore as on 30 June 2015. The ratio of gross NPA to gross customer assets edged higher to 2.54% as on 30 June 2016 from 1.67% as on 31 March 2016 and 1.38% as on 30 June 2015. The ratio of net NPA to net customer assets edged higher to 1.08% as on 30 June 2016 from 0.7% as on 31 March 2016 and 0.48% as on 30 June 2015.
Axis Bank attributed increase gross and net NPA to slippages from its watch list loans. As on 30 June 2016, loans outstanding on the bank's watch list reduced 10% over the previous quarter and stood at Rs 20295 crore. The reduction in the watch list primarily represents slippages to NPAs amounting to Rs 2680 crore, which comprises 92% of the total corporate credit slippages. The bank's provision coverage ratio declined to 69% as on 30 June 2016 from 72% as on 31 March 2016.
The cumulative value of net restructured assets as on 30 June 2016 stood at Rs 7363 crore, constituting 1.99% of net customer assets, compared to Rs 8072 crore, constituting 2.25% of net customer assets as on 31 March 2016.
The bank's advances grew 21% year-on-year (YOY) to Rs 3.44 lakh crore as on 30 June 2016. Retail advances grew 24% YOY and stood at Rs 1.43 lakh crore, constituting 41% of the net advances of the bank. Corporate credit grew 21% YOY and stood at Rs 1.58 lakh crore, constituting 46% of net advances. SME advances grew 13% YOY and stood at Rs 43611 crore as on 30 June 2016. Axis Bank said that the bank remains well capitalized to pursue growth opportunities. The bank expects credit growth to be around 18-20% in FY 2017. The bank expects SME growth to be better in FY 2017 compared to FY 2016. The guidance for credit cost is 125-150 basis points for FY 2017. The guidance on credit growth and credit cost was given by the management in a post result conference call.
Index heavyweight and housing finance major HDFC rose 1.80% at Rs 1,380. The stock hit a high of Rs 1,384.90 and a low of Rs 1,350.50 in intraday trade.
Dr Reddy's Laboratories (DRL) edged lower on expectations of subdued Q1 results. The stock fell 3.62% at Rs 3,474.85. The company is scheduled to announce its Q1 June 2016 earnings tomorrow, 26 July 2016. According to reports, a domestic brokerage expects DRL to report flat revenue growth on year-on-year (YoY) basis in Q1 June 2016. The brokerage expects DRL to post a 20% decline in its profit after tax (PAT) in Q1 June 2016. The brokerage has reportedly stated in its earnings preview on DRL that DRL's US business is likely to remain flat, and Russia CIS region sales are expected to grow in single-digit due to currency devaluation. The brokerage expects DRL's India business to report decent 14% YoY growth in Q1.
Shares of passenger car major Maruti Suzuki India (MSIL) edged higher a day ahead of its Q1 June 2016 results. The stock rose 3.11% at Rs 4,550.60. The company is scheduled to announce its Q1 June 2016 results tomorrow, 26 July 2016.
Vedanta and Cairn India edged higher after Vedanta sweetened the terms of the deal for the merger of Cairn India with Vedanta. Shares of Cairn India rose 3.46% at Rs 198.65. Vedanta rose 1.75% at Rs 171.90. As per the revised terms of the merger deal, the public shareholders of Cairn India will receive one equity share of Vedanta for each share held in the company. Additionally, the public shareholders of Cairn India will get four 7.5% redeemable preference shares (RPS) of Vedanta of the face value of Rs 10 each with tenure of 18 months for each share held in Cairn India. As per the original terms of the deal announced in June 2015, Cairn India shareholders were to get one equity share of Vedanta for each share held in the company and one 7.5% redeemable preference shares (RPS) of Vedanta of the face value of Rs 10 each with tenure of 18 months for each share held in Cairn India. The recent commodity price environment has further strengthened the strategic rationale for the merger, the two Vedanta group companies said in a joint statement.
Following completion of the transaction, Vedanta plc ownership in Vedanta is expected to decrease to 50.1% from its current 62.9% shareholding. Cairn India minority shareholders will own 20.2% and Vedanta minority shareholders will own 29.7% stake in the merged entity. Sudhir Mathur, CFO and Acting CEO of Cairn India said in a statement that Cairn India shareholders will benefit from exposure to a diversified portfolio of world-class, low cost, long-life assets of Vedanta. Tom Albanese, CEO of Vedanta said that the strategic rationale for merging Vedanta and Cairn India remains highly compelling. Diversified resources companies have delivered superior returns for shareholders historically, Albanese said.
Stocks of most state-run oil firms edged higher on media reports that the government is set to start consultations for an ambitious plan to merge 13 state-run oil firms to create an oil sector giant. BPCL (up 1.77%), HPCL (up 4.22%) and Indian Oil Corporation (up 2.93%) edged higher. Stocks of state-run oil exploration and production firms rose. ONGC (up 1.91%), Oil India (up 0.25%) edged higher. Shares of state-run gas transmission major GAIL (India) fell 1.04% at Rs 390.95. Among refiners, Mangalore Refinery and Petrochemicals (MRPL) rose 10.73% at Rs 89.25. Chennai Petroleum Corporation (CPCL) rose 4.94% at Rs 266.55.
According to reports, the mega merger of 13 state-run oil firms will include ONGC, Oil India, GAIL (India), Indian Oil Corporation, BPCL, HPCL, GAIL (India), Mangalore Refinery and Petrochemicals (MRPL), Chennai Petroleum Corporation (CPCL) and Numaligarh Refinery. According to media reports, the government is also evaluating if the consolidated entity can include all non-corporate government bodies in the oil sector such as Oil Industry Development Board (OIDB), Petroleum Planning and Analysis Cell (PPAC) and Petroleum Conservation Research Association.
Meanwhile, in the global commodities markets, Brent for September settlement was currently down 32 cents at $45.37 a barrel. The contract had fallen 51 cents or 1.1% to settle at $45.69 a barrel during the previous trading session on Friday, 22 July 2016.
Index heavyweight Reliance Industries (RIL) rose 0.30% at Rs 1017.80. The stock hit a high of Rs 1,021.80 and a low of Rs 1,007.80 in intraday trade.
The Sensex and the Nifty edged higher for the second straight trading session. The Sensex has risen 384.82 points or 1.39% in two trading sessions from its close of 27,710.52 on 21 July 2016. The Sensex has risen 1,095.62 points or 4.06% in this month so far (till 25 July 2016). The Sensex has risen 1,977.80 points or 7.57% in calendar year 2016 so far (till 25 July 2016). From a 52-week low of 22,494.61 hit on 29 February 2016, the barometer index has risen 5,600.73 points or 24.90%. The Sensex is off 322.25 points or 1.13% from a 52-week high of 28,417.59 hit on 10 August 2015. The Sensex is off 1,929.40 points or 6.43% from a record high of 30,024.74 hit on 4 March 2015.
Meanwhile, according to media reports, the GST constitutional amendment bill has been listed for discussion in the Rajya Sabha in this week. The GST bill, which has been approved by the Lok Sabha is pending in the Rajya Sabha because of opposition to the bill in its current form by the Congress party. A constitutional amendment bill requires at least 50% attendance and support of two-third of those present and voting in the house. For the GST bill to become a law, the bill also needs to be approved by half the state assemblies after its passage in the parliament. GST, touted as the single biggest indirect taxation reforms since independence, will simplify and harmonise the indirect tax regime in the country. The GST seeks to create a seamless national market in the country by replacing plethora of state taxes and central taxes by one tax. The month-long monsoon session of the parliament will conclude on 12 August 2016.
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