Sensex Opens Higher; Kotak Mahindra Bank Gains 4.5%

Tue, 2 Jun 09:30 am

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Asian stock markets are higher today as Chinese and Hong Kong shares show gains. The Shanghai Composite is up 0.1% while the Hang Seng is up 0.6%. The Nikkei 225 is trading up by 0.8%. US stocks posted gains on Monday as signs of US economic recovery helped offset jitters over increasingly violent social unrest amid an ongoing pandemic and rising US-China tensions.

Back home, Indian stock markets opened higher.

The BSE Sensex is trading up by 186 points. The NSE Nifty is trading higher by 54 points.

Meanwhile, the BSE Mid Cap index has opened up by 0.6%.

BSE Small Cap index is trading higher by 0.8%.

Except FMCG stocks, all sectoral indices are trading in green.

Healthcare stocks are witnessing maximum buying interest. The index on the BSE is up by 0.8%.

Moving on, gold prices are currently trading up by 0.9% at Rs 47,083.

The rupee is currently trading at 75.54 against the US$.

In the news from banking sector. As per an article in a leading financial daily, Uday Kotak will be selling 2.8% stake worth over Rs 68 billion in the Kotak Mahindra Bank.

Note that, he has had a long run-in with the Reserve Bank over his excess personal holding in the bank.

The stake sale would help bring down his stake in the bank to the RBI-mandated 26%.

The move would also bring the curtains down on a long standoff between the regulator and the bank over the issue, which saw him dragging the RBI to the Bombay High Court in December 2018.

Under the agreement, Kotak had reached with the RBI this January, he has time till 17 August 2020 to pare the promoter group stake which currently is at 28.9%.

Reportedly, the price band for the share sale has been fixed at Rs 1,215 to Rs 1,240 apiece.

Kotak Mahindra Bank share price opened the day up by 4.5%.

In another news, a day after the Yes Bank acquired 24.2% stake in Dish TV India through pledged shares, Dish TV said that disclosure filed by private lender regarding the acquisition contain certain incorrect facts.

Dish TV clarified that as on the date of the communication, the company was not in default of any payment obligations to Yes Bank under the financing facility availed from the lender.

The stock of Yes Bank is in focus today.

Moving on to the news from the economy. Moody's Investors Service cut long-term sovereign rating for India from 'Baa2' to 'Baa3', which is a notch above junk.

The global rating agency maintained its negative outlook, citing structural weaknesses, weak policy effectiveness, and slow reforms momentum even before the Covid-19 pandemic.

The change brings Moody's rating into line with Fitch and Standard and Poor's, both of which rate India BBB-, although they assign stable rather than negative outlooks.

Moody's had raised India's rating by a notch to 'Baa2' in November 2017. In November 2019, Moody's cut its outlook on India to negative from stable. A month later, Standard & Poor's had warned that if an economic recovery does not happen, a rating downgrade may follow.

A 'Baa3' rating is still investment grade, though it is the lowest rating in that grade.

Moody's latest action comes weeks after Finance Minister Nirmala Sitharaman presented the Rs 20 trillion stimulus package. The actual fiscal outlay of the package was less than Rs 2.3 trillion.

Moody's said implementation of key reforms, promised in Prime Minister Narendra Modi's first term, have been relatively weak and have not resulted in material credit improvements, indicating limited policy effectiveness.

The agency expects India's FY21 GDP growth to contract by 4% from 4.2% provisional estimates for FY20. It said that thereafter and over the longer term, growth rates will likely be materially lower than in the past.

Notably, India's GDP growth has been on a consistent decline after peaking out at 7.9% in Q4 of FY18 to 4.7% in Q3 of FY20, as can be seen in the chart below:

Declining GDP Growth for India

Interestingly, there's a silver lining in all this. India can become an outsourcing hub. The global slowdown will mean that countries like the US, will be looking out for low-cost outsourcing destinations like India.

Further, a lot of global buyers have already shifted to India to source ceramics, home appliances, fashion, and lifestyle goods.

Meanwhile, as per the reports, around a thousand foreign manufacturers want to relocate their production to India, a country they see as an alternative to China.

Here's an excerpt from one of the articles Tanushree Banerjee wrote on the Indian economic recovery:

• It's also a fact that India's importance in the global supply chain has never looked better. PM Modi himself referred to that.
  
  Therefore, utilising the stimulus package to tighten India's presence in the global supply chain will be the fastest way to move up the Swoosh index. Any delay or disregard would cost India dearly.
  
  True that Apple, Samsung and several smartphone manufacturers are already considering an expansion of their Indian capacities.
  
  But the land, labour, liquidity, and legal reforms cannot remain on paper if the Make in India dreams are to be realised.
  
  I expect to gather more cues about India's prospects on the Swoosh index over coming months.

Watch this space as Tanushree tracks these Rebirth of India megatrends closely.

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

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