RBI's Financial Stability Report, Mutual Fund AUM Growth in 2020, and Buzzing Stocks Today

Wed, 13 Jan Pre-Open

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Extending gains to the 12th straight day, Indian share markets scaled fresh record highs yesterday, led by automobile and financial stocks.

Buying interest was also seen in index heavyweights Reliance Industries and HDFC Bank.

At the closing bell yesterday, the BSE Sensex stood higher by 248 points (up 0.5%).

The NSE Nifty closed higher by 79 points (up 0.54%).

Bharti Airtel and SBI were among the top gainers.

The BSE Mid Cap index ended up by 0.4%, and the BSE Small Cap index ended up by 0.3%.

On the sectoral front, gains were largely seen in the energy sector, automobile sector and realty sector.

Healthcare and FMCG stocks, on the other hand, witnessed selling pressure.

Shares of MRF, Eicher Motors and Bajaj Electricals hit their 52-week highs.

Crude oil prices rose yesterday on expectations of a drawdown in crude oil inventories in the United States for a fifth straight week, but investor worries over climbing coronavirus cases globally capped price gains.

Top Stocks in Focus Today

Among the buzzing stocks today will be Tata Motors.

Tata Motors-owned Jaguar Land Rover (JLR) released its 2020 sales figures, which reflected a considerable hit as a result of the Covid-19 pandemic but highlighted signs of recovery as sales in China remained strong.

For the calendar year 2020, retail sales for Jaguar Land Rover were 425,974 (vehicles), down 23.6% from 2019, reflecting the industry impact of Covid-19 particularly in the first half of the year when plants were shut down for more than two months. However, the company said it has since seen sales increase quarter-on-quarter (QoQ) by over 53% in the quarter ended September 30, 2020, followed by a 13.1% increase in the most recent quarter.

Retail sales for the quarter ending December 31, 2020 were 128,469 vehicles, 13.1% higher than the 113,569 vehicles sold in the preceding quarter, but down 9% on the same period last year. The company said China sales were particularly encouraging as they were up 20.2% on the prior quarter and 19.1% year-on-year (YoY).

GAIL (India) share price will also be in focus today. GAIL (India), the nation's largest gas distribution firm, will on Friday consider buyback of shares with a view to returning surplus cash to shareholders.

In a stock exchange filing, the company said its board will meet on January 15 to consider share buyback as also payment of interim dividend for the fiscal year ending March 2021.

The government, which holds 52.1% of GAIL, is likely to participate in the buyback just as it did in the case of NTPC, Engineers India, RITES and KIOCL.

The government has asked at least eight state-run companies to consider share buybacks as it scours for ways of raising funds to rein in its fiscal deficit.

The firms asked to consider share buybacks include Coal India, NTPC and NMDC.

Note that Finance Minister Nirmala Sitharaman had in her budget for 2020-21 set a target of raising Rs 2.1 lakh crore from privatisations and sale of minority stakes in state-owned companies.

Mutual Fund AUM Grows 17% in 2020

In news from the mutual funds space, a massive rally in the equity markets, bringing in heavy inflows into equity ETFs and open-ended debt funds has helped mutual fund AUM grow 17% to top the Rs 31-lakh-crore-mark in 2020, which is 1 percentage point lower than 2019, according to a report.

During the year, the mutual fund industry added Rs 4.5 lakh crore to the AUM, while in 2019 it grew 18% from Rs 22.86 lakh crore in 2018, when it had grown only 7.5%, as per Crisil data.

The industry not only recovered the losses in March due to a sharp erosion in the equity market and outflows from debt funds but also added Rs 4.5 lakh crore in the year to close at Rs 31.02 lakh crore.

However, according to the Association of Mutual Funds (Amfi), December saw the sixth straight month of outflows with investors exiting open-ended equity funds, with the large-cap, multi-cap and value/contra schemes bleeding the most.

On the other hand, dividend yield funds saw firm inflows to the tune of Rs 14.9 billion in the month.

Coincidentally, the month also saw the highest inflows for the category since Amfi changed its format in April 2019. Sectoral/thematic schemes got Rs 34.1 billion inflows, which is the highest for the category since April 2019.

At the aggregate level, open-ended equity schemes saw net outflows of Rs 101.5 billion in December, only slightly lower than the previous month's net outflows of Rs 129.2 billion.

Gold ETFs attracted net inflows of Rs 4.3 billion in December, reversing the net outflows of Rs 1.4 billion in November, as investors took advantage of the rising gold prices. For the full year, equity ETFs attracted inflows of over Rs 510 billion crore, while gold ETFs saw net inflows of over Rs 66 billion, taking their asset tally to Rs 2.56 lakh crore and Rs 140 billion, respectively.

Gold and Silver Continue their Volatile Ride

In news from the commodities space, domestic gold and silver prices continued their volatile ride of this year amid mixed global cues.

On MCX, February gold futures edged 0.4% higher yesterday to Rs 49,548 per 10 grams, while silver futures advanced 1.1% to Rs 66,223 per kg.

On Monday, gold prices had risen 0.7% after a massive fall on Friday.

A rebound in the US dollar from three-year lows along with a surge in 10-year US yields has been weighing on non-interest-bearing gold since the start of this year even though expectations build up for further massive US stimulus.

Gold prices had surged 25% in 2020 on the back of massive stimulus, and rising safe-haven demand. In August last year, gold had hit a record high of Rs 56,200.

Speaking of the precious yellow metal, in his latest video for Fast Profits Daily, Vijay Bhambwani talks about why gold and silver prices crashed last week on Friday.

What does this event mean for the long-term trend in prices? Should traders change their bullish stance?

Vijay answers these questions in the below video. Tune in to find out more:

RBI Financial Stability Report: GNPAs May Rise Sharply by September 2021

In news from the banking sector, the Reserve Bank of India's (RBI's) Financial Stability Report (FSR) of December 2020 has stated that banks' gross non-performing assets (GNPAs) may rise sharply to 13.5% by September 2021, and escalate to 14.8%, nearly double the 7.5% in the same period of 2019-20, under the severe stress scenario.

The FSR, released on Monday, gave a caveat: "Considering the uncertainty regarding the unfolding economic outlook, and the extent to which regulatory dispensation under restructuring is utilised, the projected ratios are susceptible to change in a nonlinear fashion".

In his foreword, RBI Governor Shaktikanta Das noted: "Stretched valuations of financial assets pose risks to financial stability. Banks and financial intermediaries need to be cognizant of these risks and spillovers in an interconnected financial system."

State-run banks are seen being the worst-affected among bank groups with their GNPA ratio expected to increase to 16.2% by September 2021 under the baseline scenario from 9.7% in September 2020.

The FSR mentioned that "stress test results indicate that four banks may fail to meet the minimum capital level by September 2021 under the baseline scenario, without factoring in any capital infusion by stakeholders.

As for non-banking financial companies (NBFCs), credit given by NBFCs grew by a mere 4.4% as compared with 22% in 2018-19.

Gross NPAs of NBFCs increased to 6.3% on March 2020 from 5.3% on March 2019. Asset quality is expected to deteriorate due to disruption in business operations caused by the pandemic, especially in the industrial sector, one of the major recipients of NBFC credit.

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.

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