Sensex Opens in Green; Metal and Telecom Stocks Lead

Thu, 4 Jun 09:30 am

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Asian stock markets are lower today as Chinese and Hong Kong shares fall. The Shanghai Composite is off 0.3% while the Hang Seng is down 0.3%. The Nikkei 225 is trading up by 0.1%. Wall Street rallied broadly on Wednesday with the Nasdaq approaching record highs as signs of an economic recovery from mandated shutdowns helped investors look beyond US social unrest and pandemic worries.

Back home, Indian share markets opened higher.

The BSE Sensex is trading up by 158 points. The NSE Nifty is trading higher by 46 points.

Meanwhile, the BSE Mid Cap index has opened up by 0.2%.

BSE Small Cap index is trading higher by 0.6%.

Sectoral indices are trading mixed. Metal stocks are witnessing buying interest.

Oil & gas stocks are trading in the red.

Moving on, gold prices are currently trading down by 1.5% at Rs 46,099.

The rupee is currently trading at 75.46 against the US$.

In the news from Pharma sector. Aurobindo Pharma posted a 45% year-on-year (YoY) jump in its consolidated net profit for the January-March quarter as strong formulation sales across its markets boosted its margins.

The drugmaker's revenue grew 16.4% YoY, with sales of anti-retrovirals increasing 31% YoY.

Formulation sales in the US and Europe, its two largest market, grew 20.5% and 26% respectively.

Revenue from its active pharmaceutical ingredients business, however, were down 18%, primarily due to a 35% slump in sales of the non-betalactum antibiotic class.

Aurobindo Pharma's research and development spend for the quarter stood at Rs 2.4 billion, which is 3.9% of its revenue.

Aurobindo Pharma share price opened the day up by 3.7%.

Moving on to the news from banking sector. In a major move, the central government is said to have begun discussions on privatizing one or more public sector banks (PSBs), acting on a proposal made by the nation's apex think tank body NITI Aayog.

As per the reports, Bank of Maharashtra, Indian Overseas Bank and the Punjab & Sind Bank could be the three candidates which may be considered for the exercise which could mark a watershed moment for the banking sector in India.

It should be noted that all three of the banks have been kept free of any consolidation exercise so far.

Reportedly, the NITI Aayog's proposal is said to have been aimed at avoiding future possibilities of government bailouts of the banks by use of taxpayer money.

The proposal thus advises the government to allow long-term private capital into the banks.

To further strengthen the banking industry of the nation, NITI Aayog has also advised the government to allot banking licenses to select industrial houses with the caveat that they would not be allowed to lend to group firms.

How this pans out going forward remains to be seen.

Meanwhile, I recently reached out to Tanushree Banerjee, who is closely tracking the banking sector in the current scenario. Here's her view on the sector...

• The Covid-19 lockdown has hit cash flows of both individual borrowers and corporates. This, in turn, will impact their loan repayment capability.
  
  The RBI's repo rate cut came as a temporary lifeline for Indian companies with debt on books. It will offer both companies and retail borrowers some breather. If banks use this phase judiciously, it may save the NPA ratios from worsening significantly.
  
  However, only the banks that have adequate capital and provisioning cushion may be able to tide over the economic crisis. Eventually, another round of consolidation in private sector banks, like the one after 2002, cannot be ruled out.

Tanushree's latest StockSelect recommendation is one such midcap bank.

You can read the entire report here (requires subscription).

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

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