Sensex Opens Flat; Realty and Telecom Stocks Drag

Wed, 23 Oct 09:30 am

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Asian share markets are lower today as Japanese and Hong Kong shares fall. The Nikkei 225 is flat while the Hang Seng is down 0.9%. The Shanghai Composite is trading down by 0.3%. US stocks ended lower on Tuesday, giving up early gains after British lawmakers rejected the government's proposed timetable for passing legislation to ratify its deal to exit the European Union.

Back home, India share markets opened flat with a negative bias. The BSE Sensex is trading down by 50 points while the NSE Nifty is trading down by 16 points. The BSE Mid Cap index up down by 0.3% and BSE Small Cap index opened up by 0.1%.

All sectoral indices have opened the day in red with realty stocks and telecom stocks witnessing maximum selling pressure.

The rupee is currently trading at 71.01 against the US$.

In the news from the banking sector. Axis Bank incurred a loss of Rs 1.1 billion for the quarter ended 30 September, due to a one-time hit of Rs 21.4 billion as the value of future relief through deferred tax assets (DTA) will fall because of the corporate tax rate cut.

Adjusted for this extraordinary item, net profit would have surged 156% to Rs 20.3 billion from Rs 7.9 billion a year earlier.

Axis Bank said it has been fully adjusted through Q2FY20 financials, which has impacted the earnings significantly.

Asset quality improved as the bank wrote off Rs 31 billion in the second quarter of FY20. Gross non-performing assets as a percentage of total assets stood at 5.03% in the September quarter compared with 5.25% in the June quarter.

The bank added fresh bad loans worth Rs 49.8 billion in the second quarter compared to Rs 48 billion in the previous quarter. Corporate slippages stood at Rs 28.6 billion.

Operationally, the bank's performance improved with net interest income growing 17% year-on-year to Rs 61 billion. Net interest margins stood at 3.51% at the end of September quarter.

Its loan book saw a growth of 19% with the retail loan book growing at 23% year-on-year. Growth in retail was led by strong growth in the unsecured portfolio, auto and small business banking, while SME witnessed a marginal blip in growth.

The corporate segment witnessed single-digit growth on a year-on-year basis, primarily led by degrowth in the international book. Net interest margin improved by 11 basis points, sequentially, due to a rise in spread and interest reversal.

Axis Bank share price opened up by 1.1%.

2019 has been brutal for some banking stocks.

The market has severely punished them. This is due to issues such as worsening asset-quality, corporate governance, and inadequate capital.

Stocks such as Yes Bank and Lakshmi Vilas Bank are down more than 70%.

Falling Knives in the Banking Sector

Surprisingly, RBL Bank is the latest victim added to the worst performers list of 2019. You see, RBL Bank is down 64% from its recent high in May 2019.

What's the issue here?

Well, the management expects to face challenges in recovering some loans in the near term.

They have guided for elevated stress in a few corporate accounts, rising non-performing assets, and higher provisioning. This could impact the earnings of the bank.

Does this situation seem familiar to you?

Falling stock prices could be enticing. After all, we love deep discounts and good bargains.

But if you're thinking of buying these stocks it's important to remember this point - If a stock is in a falling spree, there's probably a good reason behind it.

And realising this in a falling market is the first step towards correcting one's investing process.

Moving on to the news from pharma sector. As per an article in a leading financial daily, Lupin has received approval for its Divalproex Sodium Extended-Release Tablets USP, 250 mg and 500 mg, from the United States Food and Drug Administration (USFDA).

The approval has been received to market a generic equivalent of Depakote Extended-Release Tablets, 250 mg and 500 mg, of AbbVie Inc.

Lupin's Divalproex Sodium ER Tablets USP, 250 mg and 500 mg are indicated for acute treatment of manic or mixed episodes associated with bipolar disorder, with or without psychotic features

The tablets had annual sales of approximately US$ 159 million in the US (IQVIA MAT June 2019).

Lupin share price opened the day down by 0.5%.

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

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