Indian Indices Extend Gains; Vedanta & Bajaj Finance Top Gainers

Fri, 9 Aug 12:30 pm

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Share markets in India have extended early morning gains and are presently trading higher amid reports that the government may exempt foreign portfolio investors from additional surcharge.

Barring telecom sector, all sectoral indices are trading in green with stocks in the capital goods sector, finance sector and realty sector witnessing maximum buying interest.

The BSE Sensex is trading up by 418 points (up 1.1%), while the NSE Nifty is trading up by 135 points (up 1.2%). The BSE Mid Cap index is trading up by 1.2% and the BSE Small Cap index is trading up by 1.4%.

The rupee is trading at Rs 70.51 against the US$.

Market participants are tracking Cadila Healthcare share price, BHEL share price, and MRF share price as these companies are set to announce their June quarter (Q1FY20) results later today.

You can read our recently released Q1FY20 results: Tata Steel, Cummins India, Sonata Software, HCL Technologies, Siemens.

In news from the banking sector, Yes Bank has embarked on a plan to generate US$ 285 million by selling shares through a qualified institutional placement (QIP). The sale to institutional investors opened on Thursday evening.

The bank has set a floor price of Rs 87.9 per share for the issue, with a proposed discount of not more than 5%, depending on demand from investors in India and aboard.

Local investment banks JM Financial and Motilal Oswal as well as Hong Kong-based CLSA are managers to the sale. The issue is likely to stay open through the night to attract interest from investors in Europe and the US.

The private lender in a notice to the exchanges said that a committee will meet on August 16 to consider and approve the issue price and final discount.

As per an article in The Economic Times, the bank had originally intended to raise as much as US$ 1billion. However, it had imposed a restriction on the maximum dilution, setting it at 10% of the paid-up equity capital.

Here's an excerpt from the article:

• Since Yes Bank's market cap has fallen to about Rs 200 billion, it cannot raise more than Rs 25 billion on the expanded equity base.
  
  The aggregate amount raised shall not result in increase of the issued and subscribed equity share capital of the bank by more than 10% of the then issued and subscribed equity shares of the bank.
  
  Investors committed to subscribe to the issue include HDFC Mutual Fund, Aditya Birla Mutual Fund and UK's Ashmore Investment Management.

In the June quarter, the bank's core Tier I capital ratio declined to 8%, close to the minimum regulatory requirement of 7.375% for the year ended March 2019 and 8% for that ending in March 2020.

The private lender had to set aside Rs 11.9 billion as market provision on bonds issued by Dewan Housing Finance Corporation (DHFL) and the Anil Ambani-led Reliance Group, which were both outside the bank's Rs 100 billion watch list, raising concerns about the bank's asset quality guidance.

The bank will seek separate approval from the board and shareholders for the second tranche that will be raised through a combination of rights and fresh shares. Sources said that the second round of fund raising of an additional Rs 100 billion is likely to be through a rights issue.

Yes Bank share price is presently trading down by 2.4%.

Speaking of the banking sector, note that public sector banks have struggled due to rising NPAs. NBFCs have struggled after the IL&FS crisis and are wary to lend.

Since the IL&FS crisis, the domino effect has affected all lenders in the Indian economy.

However, there has been a silver lining in this mess. i.e. the increased market share of private sector banks.

It is evident from the chart below that since 2014, private banks have consistently gained market share mainly at the expense of PSU banks.

India's Credit Shift Megatrend

Co-head of research at Equitymaster, Tanushree Banerjee believes this trend is set to continue as PSU banks are still struggling to get out of their NPA mess.

One such good quality private bank makes it in her top 7 stocks to buy list.

These 7 stocks will be a part of many such megatrends that will play out over the next decade in India.

Moving on to news from the textiles sector, shares of Page Industries dipped over 5% intraday to hit a 52-week low of Rs 17,438, after the company reported poor numbers in the quarter ended June 2019.

The company reported a 11% fall in its net profit at Rs 1,106 million against Rs 1,244 million, while revenues grew 2.4% YoY at Rs 8,350 million against Rs 8,153 million.

Earnings before interest, tax, depreciation and amortization (EBITDA) fell to Rs 1,866 million, and margins contracted to 22.3%.

The company's board has declared an interim dividend of Rs 51 per equity share.

On the back of poor results, Credit Suisse cut the company's target to Rs 15,000 per share and also maintained an underperform rating.

Page Industries share price is presently trading down by 4.6%.

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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Indian Share Market Update: Top Gainers and Losers