Sensex Ends in the Red; Yes Bank Tanks 6% on NPA Disclosure

Fri, 12 May Closing

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Indian share markets edged lower in today's trading session after hitting record highs in the previous sessions, as market participants turned cautious ahead of inflation data. At the closing bell, the BSE Sensex stood lower by 63 points, while the NSE Nifty finished down by 22 points. Meanwhile, the S&P BSE Mid Cap and the S&P BSE Small Cap finished down by 0.7% and 0.8% respectively. Losses were largely seen in bank stocks, consumer durables stocks and power stocks.

Asian stock markets finished mixed as of the most recent closing prices. The Shanghai Composite gained 0.72% and the Hang Seng rose 0.12%. The Nikkei 225 lost 0.39%. Meanwhile, European markets are higher today with shares in London leading the region. The FTSE 100 is up 0.19% while Germany's DAX is up 0.06% and France's CAC 40 is up 0.05%.

Indian Markets Still Dwarfed on a Global Level

Despite all the rising markets and lofty valuations in the Indian stock market, here's some data that vividly shows how small the Indian markets still are on a global scale. The above chart pegs the values of some large and well known US companies relative to the combined market capitalization of all listed companies in India.

As you can see, just the market cap of Apple alone comes to 40% of all of India's listed companies put together. And if you throw in these five companies together, they're value is one and a half times that of all Indian companies' total value. Just goes to show how much room Indian markets still have to grow and mature over the long term.

The rupee was trading at Rs 64.30 against the US$ in the afternoon session. Oil prices were trading at US$ 47.73 at the time of writing.

IT major Infosys has reportedly delayed salary increases to at least July and even later for senior employees, even as it played down fears of job cuts and started taking steps to reduce operating costs.

For employees ranked JL5 (job level 5) and below -- typically those with less than eight years of experience -- the compensation review will be effective from July. Moreover, the review for other employees would be rolled out in subsequent quarters. However, the company is not planning any job cuts.

Infosys share price finished the day up by 2.1% in today's trade.

Moving on to news from FMCG sector. As per an article in The Livemint, Nestle India Ltd and Hindustan Unilever Ltd (HUL) have evinced interest in buying a controlling stake in Havmor Ice Cream Ltd.

Havmor Ice Cream Ltd is the seventh largest ice cream and frozen desserts maker in India with a 3.5% market share. Reportedly, the value of the ice cream and frozen desserts segment in India grew 20% in 2016 to reach Rs 102 billion in sales and is forecast to see a constant value compound annual growth rate of 11% over 2016-21.

HUL has a strong presence in the Indian ice cream space through its brands Wall's, Magnum and Cornetto. Nestle India's presence is in the premium ice cream space with its Mövenpick brand.

HUL share price finished the day up by 0.2% while Nestle India share price finished the day down by 0.5%.

Yes bank share price tanked 6% in today's trade after the company's non-performing asset (NPA) classification varied with the Reserve Bank of India's to the tune of Rs 41.76 billion at the end of March 2016.

A higher bad loan classification would have necessitated higher provisions. The bank's actual provisions of Rs 4.64 billion fell short of the RBI's calculation of Rs 13.22 billion. Yes Bank is the first to report this divergence after RBI increased disclosure norms for banks since it noted instances of divergences in banks' asset classification and the provisioning required as per RBI norms.

Explaining the RBI's assessment, Rana Kapoor, Yes Bank's MD and CEO mentioned that the gross NPAs increased largely due to one single cement borrower (Jaiprakash Associates), the exposure to which stood at Rs 9.11 billion (88% of gross NPAs).

In news from steel sector, India imposed retroactive anti-dumping duties on some steel products of foreign firms including POSCO and Nippon Steel & Sumitomo Metal Corp. This is the latest restriction in a series of protectionist measures that have already drawn international complaints.

The duties on hot-rolled flat products of alloy or non-alloy steel, originating in or exported from China, Japan, Korea, Russia, Brazil and Indonesia, will be effective for five years. The taxes are one of several measures the government has taken over the past two years to protect India's steel industry and that include putting a floor price on imports.

Indian companies such as JSW Steel, Tata Steel and SAIL have already benefited from the restrictions on overseas purchases, with imports falling around 37% to 7.4 million tonnes and exports jumping 102% to 8.2 million tonnes in the year ended 31 March from a year ago.

Steel stocks finished in red with SAIL share price and Jindal Steel share price leading the losses.

Glenmark pharma share price plunged 16% to Rs 758 after the company missed its March-quarter earnings estimate. It reported a consolidated net profit of Rs 1.84 billion in March 2017 quarter, below some average analysts' estimate of Rs 5.48 billion. The company had profit of Rs 1.49 billion in the same quarter year ago. Revenue from operations during the quarter under review increased by single digit 6.5% to Rs 24.57 billion against Rs 23.07 billion in the corresponding quarter of previous fiscal.

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