Sensex Opens Marginally Higher; Realty and Energy Stocks Lead

Wed, 22 May 09:30 am

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Asian stock markets are higher today as Japanese and Hong Kong shares show gains. The Nikkei 225 is up 0.2% while the Hang Seng is up 0.3%. The Shanghai Composite is trading on a flat note.

Back home, India share markets have opened the day on a positive note. The BSE Sensex is trading up by 84 points while the NSE Nifty is trading up by 16 points. The BSE Mid Cap index opened the day down by 0.6%, while the BSE Small Cap index opened down by 0.2%.

Sectoral indices are trading on a mixed note with stocks in the realty sector and energy sector witnessing buying interest while FMCG stocks and metal stocks are trading in red.

The rupee is trading at Rs 69.65 against the US$.

Speaking of Indian share markets, once the exit polls were released on Sunday, the markets reacted positively.

The Sensex notched up gains of more than 1,400 points.

In the Long Run, Elections Don't Influence the Stock Market

But there are two things that history has shown us.

One, is the exit polls should be taken with a pinch of salt. The 2004 elections are a classic case in point where the exit polls predicted a BJP win, while the actual counting resulted in Congress-led UPA gaining clear majority.

Second, near term reactions to elections aside, stock markets in the longer run have been influenced by the Indian economy and growth in corporate earnings.

Indeed, despite the Congress win in 2004 (something not factored in by the markets), the Sensex has been on a major bull run since then.

This, during years when both the UPA and the NDA have been in power.

Market participants are tracking Bank of Baroda share price, Symphony share price, and IndusInd Bank share price as these companies are set to announce their Q4FY19 results later today.

In the news from banking sector, as per a leading financial daily, the Reserve Bank of India (RBI) is said to be reviewing small finance banks' capital and holding structure and may come up with a pari-passu arrangement for all lenders.

Under previous governor Urjit Patel, RBI had directed these lenders to get listed within the deadline as specified in their bank licensing agreements. This meant closing down all other options such as reverse merger of banks and their holding companies.

The review of the norms may immediately benefit Equitas Small Finance Bank and Ujjivan Small Finance Bank. These banks are trying to abide by the listing rule by way of share-transfer schemes.

How this pans out remains to be seen. Meanwhile, we will keep you posted on all the developments from this space.

In other news, the RBI board yesterday sought to create a specialised oversight cadre while reviewing the current structure of supervision at the regulator.

A central bank statement said that with a view to strengthening the supervision and regulation of commercial banks, urban cooperative banks and Non-Banking Financial Companies (NBFCs), the Board decided to create a specialised supervisory and regulatory cadre within the RBI.

The need for the above additional oversight mechanism comes on the rise of the NBFC crisis, failures by credit rating agencies to flag risks, divergence in asset quality by big banks, and alleged lapses by auditors.

Moving on to the news from the aviation space, Jet Airways share price is in focus today. The Hinduja Group is reportedly considering a bid for the debt-laden airline, which has been grounded for more than a month.

Yesterday, shares of the company ended more than 14% higher on back of the above news.

An investment by the Hinduja group is expected to offer a respite to Jet Airways, its employees, as well as lenders and investors. The group is led by billionaire brothers Gopichand and Srichand Hinduja, who are among the UK's wealthiest people.

The bidding process will start this week, having obtained the approval of key stakeholders including founder Naresh Goyal and Etihad airways.

The airline's total liability, including unpaid salaries and vendor dues, is around Rs 150 billion. Several flights have been suspended since April because of a severe cash crunch.

A senior SBI official said that the lenders are likely to meet representatives of the Hinduja Group next week as the announcement of general election results on Thursday and subsequent formation of a new government at the centre would keep the lenders busy this week.

So far, Etihad is the only party to have placed a bid. Its bid is also non-binding and subject to fulfilment of certain conditions by the lenders. Etihad, which holds a 24% stake in Jet Airways, has agreed to infuse up to Rs 14 billion into the carrier.

Also, the cash-strapped airline has seen a slew of top executives and board members leave the airline in the past few months. Last month, Nasim Zaidi quit his position as non-executive and non-independent director on the airline's board citing 'personal reasons' and 'time constraints'.

The airline's independent director, Rajshree Pathy also quit the board in April. Last week, top executive Gaurang Shetty, considered close to founder Naresh Goyal, also resigned from airline's board of directors.

How this all pans out remains to be seen. Meanwhile, we will keep you updated from all the developments from this space.

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

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