Sensex Ends Marginally Higher; Yes Bank Rallies 23%

Thu, 31 Oct Closing

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Extending gains for the fifth straight session, Indian share markets traded on a positive note throughout the day and ended marginally higher.

The BSE Sensex climbed as much as 300 points intraday and scaled new record highs. The index surpassed its previous peak of 40,312 touched on June 4 this year. Nifty also rose above the 11,900-levels.

Positive global cues, expectations of tax realignments on equities, and strategic stake sale in many PSU companies lifted investor sentiment.

Sectoral indices ended on a mixed note with stocks in the telecom sector and IT sector witnessing buying interest, while metal stocks and energy stocks witnessed selling pressure.

At the closing bell, the BSE Sensex stood higher by 77 points and the NSE Nifty closed up by 37 points.

The BSE MidCap index ended the day up by 1.1%, while the BSE SmallCap index ended up by 1%.

Asian stock markets finished on a mixed note. As of the most recent closing prices, the Hang Seng was up 0.9% and the Shanghai Composite stood lower by 0.4%. The Nikkei 225 was up 0.4%.

The rupee is trading at 71.00 against the US$.

Speaking of the volatility witnessed in Indian share market lately, if you look at the stock market returns over the years, you will see that the markets have never moved in a linear fashion.

What do I mean by that?

It has never been a one-way street - only up or down.

Here's what Radhika Pandit wrote about this in a recent edition of The 5 Minute WrapUp...

• If you would have bought stocks when either the Sensex or the Smallcap index was in a downturn, you would have made big returns once the cycle turned and the bulls took over.
  
  Sarvajeet and I believe we are seeing a similar situation currently.
  
  The economic slowdown does not herald the end of the world or for that matter the end of India. It's a phase and like all phases - This too shall pass.

So, the real question is - Are you taking advantage of these price declines to buy quality stocks?

Also, amid the volatility witnessed in stock markets lately, Tanushree Banerjee, in the video below, talks about the Rebirth of India phenomenon and how 3 specific trends are racing ahead even in these gloomy times.

Tune in to find out more...

In the news from the banking sector, Dhanlaxmi Bank share price was in focus today as the lender posted good set of numbers for the quarter ended September 2019 results.

The lender reported 81.6% year-on-year (YoY) jump in its Q2FY20 net profit at Rs 221 million against Rs 121 million in the same quarter last year.

The net interest income (NII) of the company rose 15.1% at Rs 1,006 million versus Rs 874 million.

The company's gross NPA was down at 7.06%, while net NPA was down at 1.65% on a quarter-on-quarter (QoQ) basis.

In absolute terms, the gross NPA fell to Rs 4.76 billion from Rs 4.96 billion QoQ, while net NPA was down at Rs 1,053 million versus Rs 1,452 million, QoQ.

The loan growth of the bank for the quarter stood at 7.2% YoY.

In other news, United Bank of India (UBI) share price was also in focus today as the state-owned lender reported a net profit of Rs 1.2 billion in the quarter ended September 30, on the back of substantially lower dud loans, leading to lower provisioning requirement. The bank had posted a net loss of Rs 8.8 billion in the July-September period of 2018-19.

The lender's total income rose to Rs 30.1 billion in the September 2019 quarter, compared with Rs 26 billion earned in the corresponding period of the previous financial year.

In the quarter under review, the lender reported slippages of around Rs 10 billion, out of which Rs 8 billion was from corporate accounts.

UBI brought down its net non-performing assets (NPAs) to 7.88% as on September 30, from 14.36% by the end of September 2018.

Gross NPAs or bad loans reduced to 15.51% of the gross advances by the end of September, compared with 22.69% in the year-ago period.

The lender said that it is awaiting resolutions to the tune of Rs 60 billion in the NCLT, out of which Rs 16 billion is from exposure to power and steel sectors alone.

On the proposed amalgamation between Punjab National Bank, Oriental Bank of Commerce and UBI, the management of the bank said that the process is progressing smoothly so far, and the bank is giving prime attention to HR issues.

Speaking of quarterly results and corporate profits, economic growth (GDP) and corporate profit growth hardly go hand in hand.

Over the past few years, the share of corporate profits to GDP has steadily declined.

This is evident in the chart below:

Rebound in Corporate Profits May Not Immediately Reflect in GDP

As per Tanushree Banerjee, the revival of capex cycle may cause corporate profits to soar much faster than the GDP growth. Investors who stay focused on macro numbers may miss this bus.

Moving on, Yes Bank share price witnessed strong buying interest today after it said it has received a binding offer for a stake purchase in the bank from a global investor.

Shares of Yes Bank surged as much as 35% to Rs 76.65, on back of the above news.

The bank said that it would like to inform that it has now received a binding offer from a global investor for an investment of US$ 1.2 billion in the bank through fresh issuance of equity shares.

The bank added it continues to be in advanced discussions with other global and domestic investors.

Reports state that Yes Bank's board is likely to consider the investment proposal from SPGP Holdings and other proposals along with quarterly results on November 1.

Note that the bank has been trying to raise capital to fight off the liquidity issues.

In an earlier release, it had said it received strong interest from multiple foreign as well as domestic private equity and strategic investors for the capital raise and remains firmly on course to raising growth capital subject to necessary approvals.

In early October, a media report had claimed that Microsoft was among three investors, which were in talks for a stake in Yes Bank. However, the bank had denied the reports.

The private lender clarified that it continues to explore various means of raising capital and funds through the issuance of securities to a diverse set of investors, in order to meet its business regulatory requirements.

How the above developments pan out remains to be seen. Meanwhile, we will keep you updated on the latest developments from this space.

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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