Indian Share Market Opens Weak; Banking Stocks fall

Thu, 13 Oct 09:30 am

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Major Asian stock markets have opened the day on a negative note with the stock market in Japan and Singapore is trading lower by 1.3% and 0.9% respectively. Benchmark indices in Europe too ended their previous session in red with benchmarks indices in Germany ending the day lower by 0.5%.

The rupee is trading at 66.54 per US$.

Indian stock markets have opened the day on a negative note. The BSE Sensex is trading lower by 181 points (down 0.7%) and the NSE Nifty is trading lower by 55 points (down 0.7%). Both, BSE Mid Cap and BSE Small Cap are trading lower by 0.6% and 0.3% respectively.

Major sectoral indices have opened the day on a negative note. Stocks from capital goods sector are witnessing selling pressure.

As per an article in Livemint, IndusInd Bank reported its results for the quarter ended September 2016. Net profits of the company grew by 26% YoY to Rs 7 billion during the quarter on the back of higher interest income and stable asset quality.

Net interest income considered to be the core income of the bank grew by 33% YoY during the quarter to Rs 14.6 billion. Net interest margins (NIMs) too expanded to 4% in the September quarter.

Further, total advances grew at a robust pace of 26% led by strong growth in retail and corporate loans. Asset quality too remained stable as Gross Non-Performing Asset (GNPA) as a percentage to total loans stood at 0.9% during the September quarter.

As the company has been growing its balance sheet at a fast pace, a check on the asset quality will be the key things to watch out for going ahead. The share price of IndusInd Bank is trading higher by 0.9%.

In another news update, the corporate debt restructuring (CDR) failure rate rose to 43% at the end of the June from 36% a year ago. In terms of absolute figures, loans worth Rs 972.4 billion had failed at the end of June.

This means that banks have failed to recover around 25% of the loans approved for corporate debt restructuring in the past fifteen years.

The failure rate has increased mainly on account of the loans which had been given to the infrastructure companies. This just goes on to state that the banks were restructuring the loans only to avoid higher provisioning requirement so as protect their bottom-line.

However, since March 2015 banks have gone slow on CDR as Reserve Bank of India (RBI) have mandated that lenders would have to provide as much for a restructured loan as they did for a bad loan.

The recovery of the restructured loans will be the key things to watch out for going forward to gauge the financial health of the banks especially public sector banks.

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