AMFI's Stock Classification, Deterioration in Bank's Asset Quality, and Buzzing Stocks Today

Wed, 6 Jan Pre-Open

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Indian share markets scaled fresh lifetime highs and ended higher yesterday.

Benchmark indices extended their winning streak to the tenth straight day amid buying seen in index heavyweights HDFC, Axis Bank, TCS and HDFC Bank.

At the closing bell yesterday, the BSE Sensex stood higher by 261 points.

Meanwhile, the NSE Nifty closed higher by 67 points.

Axis Bank, HDFC and TCS were among the top gainers.

Tata Consultancy Services (TCS) share price continued its upward trend, hitting a new high of Rs 3,113.

The company is scheduled to announce its Q3FY21 results on Friday, January 8, 2021. The board will also consider declaration of a third interim dividend to the equity shareholders.

The BSE Mid Cap index ended up by 1.4%. The BSE Small Cap index ended up by 0.7%.

Sectoral indices ended on a mixed note. Gains were largely seen in the banking sector, IT sector and finance sector.

Metal stocks and energy stocks, on the other hand, witnessed selling pressure.

Gold prices for the latest contract on MCX were trading up by 0.4% at Rs 51,605 per 10 grams at the time of closing stock market hours yesterday.

To know more about gold, you can check out our detailed article on investing in gold here: How to Invest in Gold?

Speaking of stock markets, Vijay Bhambwani, in his latest video, talks about indices versus stocks.

What is the better option, trading indices via ETFs or trading individual stocks?

What are the pros and cons of each?

Tune in to the video to find out more:

Top Stocks in Focus Today

HDFC will be among the top buzzing stocks today.

Shares of Housing Development Finance Corporation (HDFC) hit a record high of Rs 2,658.55 yesterday, up 3% after the housing finance company reported a healthy 26% year on year (YoY) pick-up in individual loan disbursement during October-December quarter (Q3FY21).

During the quarter ended Q3FY21, the profit on sale of investments was Rs 1.6 billon. This was on account of the sale of 2.55 million equity shares of HDFC Life Insurance Company.

HDFC's shareholding in HDFC Life is now at 49.99%. This has met the Reserve Bank of India (RBI's) mandate of reducing the corporation's shareholding in HDFC Life to 50% or below by December 16, 2020, HDFC said in quarterly update.

KNR Constructions share price will also be in focus today as the company said that it has been awarded an order worth Rs 6 billion including GST, by Project Director, Highways (FAC), Chennai-Kanyakumari Industrial Corridor Project, Chennai.

The order includes upgrading Cheyyur-Vandavasi Polur Road (SH-115) and construction of bypasses for Vandavasi town and one realignment for Maruthadu Village.

From the chemicals sector, market participants will also track Alkyl Amines share price as the company on Monday announced stock split and expansion plans.

Further, the company added that the board will approve financial results for the quarter and nine months ended December 31. The board will consider the declaration of interim dividend, if any, on the equity shares of the company for the financial year 2020-21.

Stock Classification by AMFI: Yes Bank and Five Others Classified as Large Caps

In news from the mutual funds space, Yes Bank, Adani Enterprises, PI Industries, Jubilant FoodWorks, Hindustan Aeronautics and Gland Pharma made entry to the large-cap group of stocks, as per the classification list of large-cap, midcap, and smallcap stocks, released by the Association of Mutual Funds of India (AMFI).

On the other hand, NMDC, MRF, United Breweries, Container Corporation, GIC, Bank of Baroda and Max Healthcare were shifted to the mid-cap group from the large-cap group.

Laurus Labs, IndiaMART InterMESH, Dixon Technologies, Navin Fluorine, AstraZeneca Pharma, Bombay Burmah, Suven Pharma and Persistent Systems were among the stocks that moved from smallcap to midcap club.

On the other hand, Indiabulls Housing Finance, Kajaria Ceramics, Apollo Tyres, Cholamandalam Financial Holdings, V-Guard, PVR, Symphony and Future Retail were among the stocks that moved from midcaps to smallcaps.

This classification of stocks will be effective for the February-to-July 2021 period.

As per the market regulator's circular dated October 6, 2017, mutual funds have one month to align their portfolios as per the fresh list.

Note that last year in September, the market regulator tweaked its October 2017 circular, mandating multi-cap funds to invest at least 25% each in smallcaps, midcaps and largecap stocks, leaving the remaining 25% to their discretion.

All mutual funds are required to comply with the latest provisions by the first week of February 2021.

Assuming every fund rebalances, the circular is expected to trigger a move of around Rs 280 billion from largecaps to smallcaps.

Richa Agarwal, lead smallcap analyst at Equitymaster, believes this move would be net positive for select smallcap stocks. She believes this could be a once in a decade opportunity to get rich from select smallcaps.

Delay in RBI's Financial Stability Report Sparks Concerns on Asset Quality

In news from the banking sector, the Reserve Bank of India's (RBI) unexpected decision to delay the annual Financial Stability Report (FSR) has raised concerns over a possible deterioration in asset quality.

The RBI has deferred the release of the FSR to 11 January.

Last week on 29 December, the central bank published its annual report On Trend And Progress Of Banking In India 2019-20, where it pointed to a likely worsening in banks' asset quality.

Reports state that the delay in FSR comes amid the lack of clarity on asset quality. According to RBI data, 40.4% of all loans were on moratorium as on 31 August, highlighting borrowers' inability to repay in the aftermath of Covid-19.

However, bankers maintain that debt recast requests, allowed by RBI after the end of the six-month moratorium, have been much lower than anticipated.

According to the Trend And Progress report, although gross bad loans moderated in FY20 and even so far in FY21, asset quality may sharply deteriorate.

The central bank cited the uncertainty induced by the pandemic and its real economic impact to say that asset quality concerns will remain elevated.

Banks wrote off Rs 2.37 trillion loans in FY20 and the asset quality improvement was led by write-offs.

We will keep you updated on the latest developments from this space. Stay tuned.

And to know what's moving the Indian stock markets today, check out the most recent share market updates here.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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