Sensex Opens Strong; ICICI Bank Surges 6.4% on Positive Q4 Results

Thu, 4 May 09:30 am

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Most of the Asian equity markets are trading on a negative note on today. The Shanghai Composite is off 0.16% while the Hang Seng is down 0.49%. The US and European markets ended mixed after the Federal Reserve held interest rates unchanged.

Meanwhile, share markets in India have opened the day on a firm note. The BSE Sensex is trading up by 147 points while the NSE Nifty is trading up by 30 points. The BSE Mid Cap index opened up by 0.4% while BSE Small Cap index has opened the day up by 0.5%.

Barring metal stocks and energy stocks, all sectoral indices have opened the day in green with bank stocks and PSU stocks leading the gains. The rupee is trading at 64.14 to the US$.

ICICI Bank share price surged 6.1% after the bank's fourth quarter standalone profit jumped 188.4% (nearly 3-fold) to Rs 20.25 billion but bad loans increased sharply due to one account in cement sector.

The profit was largely driven by net interest income and lower provisions but sharp fall in other income and operating income capped growth.

BSE Bankex opened up by 1.3% with Dena Bank and Central Bank being the most active stocks in this space. In a major move by the government to tackle the rising issue of bad loans and non-performing assets (NPAs) with banks the cabinet has cleared the ordinance to resolve the issue.

As per the reports, there are different interpretations about how the ordinance could go about tackling the NPAs issue. One is that it seeks to amend the RBI Act while another is that it could amend the Banking Regulations. A proposal to amend Section 35 A of the Banking Regulation Act through the ordinance route was approved by the Cabinet on Wednesday.

The Union Cabinet approved a new framework for dealing with Rs 6 trillion worth of NPAs in the banking system. Their resolution will enable the liquidation of bad loans and ensure that credit starts flowing through the Indian economy again.

The framework includes the promulgation of an Ordinance to amend the Banking Regulation Act to give more teeth to the Reserve Bank of India (RBI) and its oversight committees to act on behalf of banks while deciding on NPAs. The proposals are now awaiting the President's assent.

Bad Loans Inventory Bloats Up

The total NPAs of banks have mounted to Rs 6148.7 billion as of February 2017. The NPAs have been the highest in the public-sector banks (PSBs) and has been dragging them down.

In the meanwhile, the Cabinet also approved a National Steel Policy that aims to give preference to domestically manufactured iron and steel products for government's infrastructure projects, a move that would boost the sales of debt-laden companies.

Moving on to the news from stocks in pharma sector. Ajanta Pharma share price opened the day on an optimistic note (0.8%) after it reported a 10.7% year-on-year increase in its consolidated revenue for the quarter at Rs 4.77 billion. This was led by 12.5% y-o-y growth in the Indian business and 5.5% y-o-y growth in the business abroad.

Ajanta Pharma reported a 4.64% rise in its consolidated net profit at Rs 1.14 billion for the fourth quarter ended 31 March mainly on account of robust sales. The company had posted a net profit of Rs 1.09 billion for the corresponding period of the previous fiscal.

Further, despite the demonetisation impact on the Indian pharma market, Indian branded generic sales showed resilient growth. Rupee appreciation impacted the export sales growth and the profitability for the quarter.

Speaking of pharma space in India, according to a report by The Hindu Business Line, in spite of the prevailing challenges in the Indian pharma sector is expected to grow up to 45% by 2025 and 58,000 additional employment opportunities are likely to be created in the industry amid the job crisis in India.

Despite the capping of prices, notebandi and GST implementation, all of which are perceived to impact the pharma sector adversely, the industry will continue to grow. In fact, by 2020, the pharma market will be touching US$ 55 billion, with a CAGR of about 15.9%.

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