Relief Rally for Indian Indices, PSB Merger Scheme, Upcoming IPOs, and Top Cues in Focus Today

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Indian share markets ended on a strong note yesterday, tracking global cues.

Benchmark indices extended gains as the session progressed, as relatively better factory output data from China supported investor sentiment.

China's official purchasing manufacturers' index (PMI) bounced to 52, from a record-low 35.7 in February, while services PMI stood at 52.3 versus the previous 29.6 as factories began to re-open.

At the closing bell yesterday, the BSE Sensex stood higher by 1,028 points (up 3.6%) and the NSE Nifty closed higher by 317 points (up 3.8%).

The BSE Mid Cap index ended up by 2.5%, while the BSE Small Cap index ended up by 3%.

On the sectoral front, gains were largely seen in the oil & gas sector, FMCG sector and metal sector.

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Our special report, How to Trade the Coronavirus Crash, has the answer. Just claim your FREE copy here...

Also, speaking of gloomy economy, coronavirus fears and falling markets, Ajit Dayal has written an insightful piece, sharing his views in an edition of The Honest Truth.

Here's a snippet from the article:

• Is the meltdown over?
  
  While the unravelling of the debt excess in the US and the developed world may have some more to play out, the question on an investor's mind in India is: Is the mayhem over and what should I do next?
  
  On the face of it, there is some interesting Upside Potential, or potential profit, if you were to buy the specific stocks now and assume, they get back to their past peak levels over, say, the next 2 to 3 years.
  
  With the help of either some jaadu mantar or some good policy.
  
  But there are some "bets" I would be very cautious about: Yes Bank, Reliance and the INR, for instance.

You can read his entire article here: The Market Gets a Viral Attack.

RBI's PSB Merger Scheme Amid Covid-19

The Reserve Bank of India (RBI) has revealed that the scheme of merging 10 Public Sector Unit (PSU) banks into four bigger lenders is on schedule despite the country-wide coronavirus lockdown and will come into force from 1 April 2020.

Reportedly, the Oriental Bank of Commerce and United Bank of India will function as the branches of the Punjab National Bank starting from the next month.

Similarly, all Allahabad Bank branches will be treated as branches of the Indian Bank and all branches of Andhra Bank and Corporation Bank will function as Union Bank of India branches with effect from 1 April 2020. Also, Syndicate Bank will function as the branch of Canara Bank.

The notice for the above amalgamations was released at the start of March this year.

However, unions of bank officers had written to the Prime Minister Narendra Modi last week asking for a delay in the deadline in view of the coronavirus lockdown.

On 26 March, Finance Minister Nirmala Sitharaman made it clear that there would be no change in plans and the merger scheme will come into effect from 1 April. This statement was reiterated by the RBI later.

Customers and depositors of merging banks will be treated as customers of the bigger banks into which they have merged.

Speaking of PSBs, which banks look the best match post the latest matchmaking of PSU banks?

Needless to say, most investors would also be worried about the level of NPAs and current and savings accounts (CASA) of the merged entities.

Lower NPA ratio and sustenance of high CASA, in the future, could signal the banks' fitness levels to lend more.

But what could go unnoticed is the efficiency potential of the merged entities.

Post-merger, the employee per branch ratio of the consolidated PSU entities could be in the range of 7 to 9 per branch. This would be almost half that of their private sector counterparts like HDFC Bank and Kotak Bank.

India's Top 6 Public Sector Banks Are Getting Fitter

Leaner operations would mean use of technology to support growth.

So, we would not be surprised if the PSU entities leverage technology at a much bigger scale than their private sector peers, in a few years.

From the IPO Space...

In latest developments from the IPO space, Equitas Small Finance Bank (ESFB) has missed the March 31 deadline to list its shares on the exchanges as mandated by the regulator, as coronavirus pandemic spooked the bank's listing plans.

Under the Reserve Bank of India's (RBI) regulatory requirements, after a small finance bank reaches the net worth of Rs 5 billion, listing will be mandatory within three years of reaching that net worth.

In case of Equitas Small Finance Bank, the deadline was on or before September 4, 2019, which was extended to March 31, 2020.

In other news, Kerala-based ESAF Small Finance Bank has received regulatory nod to float its initial public offering (IPO).

The company had filed its Draft Red Herring Prospectus (DRHP) on January 6, 2020 with the markets regulator for a Rs 9.8 billion IPO.

According to the DRHP, the IPO comprises a fresh issue worth Rs 8 billion and an offer for sale (OFS) aggregating up to Rs 1.8 billion.

OMCs Witness Buying Interest

In news from the energy sector, shares of oil marketing companies witnessed buying interest yesterday as crude oil prices remained near 18-year lows amid demand destruction fears due to coronavirus pandemic.

Prices, however, recovered ground after US President Donald Trump and Russian President Vladimir Putin agreed to talks aimed at stabilizing energy markets.

Oil markets have faced a double whammy from the coronavirus outbreak and a price war between Saudi Arabia and Russia after OPEC and other producers failed to agree on deeper cuts to support oil prices in early March.

The BSE Oil & Gas index rose over 8.5% yesterday with all its constituents ending in green.

Shares of Hindustan Petroleum Corporation (HPCL) and Bharat Petroleum Corporation (BPCL) gained in the range of 12-14% yesterday, while GAIL, ONGC, Indian Oil Corporation (IOC) and Indraprastha Gas surged 6-8%.

Reports state that, Saudi Arabia, the de facto leader of the Organization of the Petroleum Exporting Countries (OPEC) is planning to boost its oil exports to 10.6 million barrels per day (bpd) from May on lower domestic consumption.

Meanwhile, global oil refiners have cut their throughput because of the slump in demand for transportation fuel, with European refineries slashing output by at least 1.3 million bpd.

Note that, crude oil prices had crashed earlier this month in what was the worst price dip since the 1991 Gulf War with Brent prices plunging to US$ 31 per barrel.

In a recent article, we have written the entire timeline showing economics of falling crude oil prices. You can check the same here: All About the 30% Crash in Crude Oil - 10 Points.

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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