Sensex Trades 500 Points Higher; HDFC Bank & Tata Steel Top Gainers

Tue, 16 Jun 12:30 pm

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Share markets in India are presently trading on a strong note, tracking an overnight rally in global markets.

Indian stock markets took cues from global counterparts and surged today as Federal Reserve's corporate bond-buying programme boosted investor sentiment and calmed earlier worries about the second wave of coronavirus infections.

The program, targeted at companies that were in good shape before the pandemic but may now need financing to retain workers and fund operations, will offer up to US$ 600 billion in loans through participating financial institutions to US businesses with up to 15,000 employees or with revenues up to US$ 5 billion.

The BSE Sensex is trading up by 503 points, up 1.5%, at 33,700 levels.

Meanwhile, the NSE Nifty is trading up by 145 points.

The BSE Mid Cap index is trading up by 1.3%, while the BSE Small Cap index is trading up by 1.2%.

On the sectoral front, gains are largely seen in the finance sector and metal sector.

The rupee is trading at 75.85 against the US$.

Gold prices are trading up by 0.1% at Rs 47,015 per 10 grams.

Market participants are tracking Reliance Industries share price as Saudi Arabia's wealth fund Public Investment Fund (PIF) is all set to pick up a 2.3% stake in the oil-to-telecom conglomerate for an estimated US$ 1.5 billion.

In news from the banking sector, ICICI Bank on Monday announced the launch of a facility enabling its salary account customers to get approvals for overdraft instantaneously and in a paperless manner.

Called 'Insta Flexicash', the end-to-end fully digital facility can be availed using the bank's internet banking platform.

Note that this product is being launched at a time when consumption-linked retail credit growth has slowed down. As per latest available data from the Reserve Bank of India (RBI), retail loans grew just 12% year-on-year (YoY) in April against 15.7% a year ago.

The facility can be sanctioned immediately while customers can start using the approved overdraft limit within 48 hours.

The private lender said that interest payable on the overdraft is calculated on the basis of the actual amount availed by the customer, not on the full amount of the overdraft sanctioned.

It also added that the credit limit could be worth up to three times the customer's net salary.

ICICI Bank share price is presently trading up by 3%.

In other news, Axis Bank said that Pralay Mondal will be stepping down from the role of executive director (retail banking) in September to pursue other opportunities.

Before his current stint at Axis Bank, Mondal headed the retail banking vertical at Yes Bank.

Last year, Axis Bank was reported to have seen a slew of resignations with the count going up to 15,000, including branch-level executives.

Among the more high-profile exits were those of former chief financial officer Jairam Sridharan, who now heads Piramal Enterprises' consumer finance division, and former head of bond underwriting Shashikant Rathi.

Axis Bank share price is presently trading down by 1.4%.

Speaking of the banking sector, note that the Bank Nifty index was underperforming the benchmark index Nifty after they hit their lows in March.

There were several reasons behind its underperformance - a rising NPA risk, lack of credit growth, and overcautious nature of banks in lending.

However, it is interesting to note that these problems haven't gone away, but banks have still managed to outperform Nifty in the last two weeks, as can be seen in the chart below:

As per Apurva Sheth, lead chartist at Equitymaster, the reason why banks are outperforming over the past few weeks is because of price action.

Here's what he wrote about it in today's edition of Profit Hunter...

• The price action of Bank Nifty when compared to Nifty suggested that banks are beaten down sharply.
  
  Bank Nifty to Nifty ratio had reached an extreme. The ratio had dropped way below its average and reversion to the mean was due.
  
  The ratio is still far below its average and Bank Nifty will attempt to claw back. Obviously, this won't happen in a hurry or in a straight line. There will be lot of zig-zag moves which will create opportunities for smart traders.
  
  To know how you can make the most of such opportunities, I recommend you read this piece.

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.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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