Sensex Trades Marginally Lower; Dow Futures Up by 13 Points

Fri, 27 Nov 12:30 pm

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Share markets in India are presently trading marginally lower.

The BSE Sensex is trading down by 44 points, down 0.1% at 44,216 levels.

Meanwhile, the NSE Nifty is trading flat.

Tata Motors and Bajaj Auto are among the top gainers today. HDFC Life and Power Grid Corporation are among the top losers today.

The BSE Mid Cap index is trading up by 2%.

The BSE Small Cap index is trading up by 1.6%

On the sectoral front, stocks from the real estate sector are witnessing most of the buying interest.

On the other hand, stocks from the IT sector are witnessing most of the selling pressure.

US stock futures are trading higher today, indicating a positive opening for Wall Street indices.

Nasdaq Futures are trading up by 36 points (up 0.3%) while Dow Futures are trading up by 13 points (up 0.04%).

The rupee is trading at 73.81 against the US$.

Gold prices are trading flat at Rs 48,534 per 10 grams.

In global markets, gold prices edged 0.3% lower today as progress in the Covid-19 vaccine development and US President-elect Joe Biden's transition to the White House bolstered risk sentiment.

Amid a weak global trend, gold prices in India also edged lower. On MCX, gold futures dipped marginally to Rs 48,501 per 10 grams. In the previous session, gold prices had slipped 0.1%.

Note that in the last five days, gold prices in India have dropped nearly Rs 1,700 per 10 grams, in line with a similar fall in global prices.

To know more about gold, check out our article on how to invest in gold here: How to Invest in Gold?

Moving on to stock specific news...

Among the buzzing stocks today is Mahindra & Mahindra.

On November 26, Mahindra and Mahindra (M&M) announced the sale of its vehicle service business, Mahindra First Choice Services to TVS Automobile Solutions (TASL), part of Chennai based TVS Group, in a share swap deal. As part of the engagement, M&M will take 2.8% stake in TASL and will invest approximately Rs 350 million.

The Mumbai based conglomerate has been restructuring its loss-making businesses and exiting the auto after-market business seems to be a part of the same strategy.

M&M owned both First Choice Services and Auto Digitech through its subsidiary Mahindra Holdings.

The deal will be effective once ratified by the Competition Commission of India (CCI).

TVS Automobile Solutions operates a multi brand after-market vehicle service business under the 'myTVS' brand. It has also created a digital platform and ecosystem for over 2,500 garages especially across south India.

With Mahindra First Choice Services, the company will have an opportunity to create a pan India digital footprint. As of now 'myTVS' was mostly confined to the south Indian states.

M&M is planning to exit businesses that have not performed over the last decade. The company recently announced that it will not invest in any further in its Korean vehicle manufacturers, SsangYong.

We will keep you updated on all the news from this space. Stay tuned.

At the time of writing, Mahindra & Mahindra share price was trading up by 0.3% on the BSE.

Speaking of the stock markets, India's #1 trader, Vijay Bhambwani shares two very important updates, in his latest video for Fast Profits Daily.

In the video below, Vijay talks about the investment case for gold, now that gold prices have started to fall. He also introduces Fast Profits Daily's newest team member who will be joining him on the channel hereon.

Tune in here to find out more:

Moving on to news from the banking sector...

Indiabulls Housing Finance Moves Court Challenging LVB-DBS Merger

Indiabulls Housing Finance, one of the major shareholders of the Lakshmi Vilas Bank (LVB) has moved the Bombay High Court (HC) seeking legal intervention in the merger of the bank with Singapore-based DBS Bank. The petition urges the court to protect the interest of the equity holders.

According to the final scheme of amalgamation, the entire equity paid-up capital of LVB shareholders will be written off and the shares will cease to trade and get de-listed from the exchanges with effect from November 27.

Indiabulls has close to 5% stake in the bank. Besides Indiabulls, a clutch of other shareholders including one of the founders, KR Pradeep, too has moved courts. Pradeep has filed his petition in the Bombay HC.

Other investors who have moved court include Kare Electronics & Development Private and Pranava Electronics Private.

Other major shareholders in LVB include Prolific Finvest Private (3.4%), Srei Infrastructure Finance (3.3%), MN Dastur and Co. (1.9%), Capri Global Holdings (1.8%), Capri Global Advisory Services (2%), Boyance Infrastructure (1.4%) and Trinity Alternative Investment Managers (1.6%).

As per the scheme for the amalgamation, all the branches of LVB will function as branches of DBS Bank India with effect from November 27. Customers, including depositors of LVB, will be able to operate their accounts as customers of DBS Bank India.

Consequently, the moratorium on the Lakshmi Vilas Bank will cease to be operative from that date.

DBS Bank India is making necessary arrangements to ensure that service, as usual, is provided to the customers of the LVB.

How this pans out remains to be seen. Meanwhile, stay tuned for all the updates from this space.

Note that LVB is the third bank to be placed under moratorium since September last year after the co-operative bank PMC in 2019 and Yes Bank this March.

Back in May 2019, we wrote an article around how we avoided a 60% loss in Lakshmi Vilas Bank.

Here's an excerpt from the article:

• "LVB had an interesting story.
  
  The bank had a new management team in place. The bank was shedding its old image to bring out a new look.
  
  The new management had a clear vision and set several goals. These included deposit and loan growth targets, CASA (current account saving account) ratio targets, a focus on retail loans, and the reduction in cost-to-income ratio.
  
  So far so good.
  
  But the bank had its own legacy issues. These were rising bad loans, a weak balance sheet with a poor capital adequacy ratio (CAR).
  
  The falling CAR was a concern.
  
  The CAR is the ratio of a bank's capital in relation to its risk-weighted assets and current liabilities. The RBI has set the minimum CAR at 9% for all banks.
  
  A ratio below 9% indicates the bank does not have enough capital to expand its operations. It ensures that banks don't expand their business without having adequate capital.
  
  On one hand, LVB had bad loan issues and on the other, it badly needed capital to shore up its CAR."

If you look at the shareholding pattern of LVB during the 2-year time frame between May 2017 to May 2019, retail investors increased by 15% while the number of shares owned by them increased by 24%.

A typical example of retail investors catching a falling knife!

To know more, you can read about it in one of the latest editions of Profit Hunter: Lesson for Investors from the Lakshmi Vilas Bank Fiasco.

Speaking of the banking sector, note that the sector was one of the worst affected sectors when Covid-19 struck.

Banking stocks were severely punished. No investor wanted to touch them even with a 10-ft pole.

However, the sentiment has changed now as investors are chasing banking stocks like never before.

Have a look at the monthly returns of major sectors for the month of March and October 2020 in the chart below:

Banks were among the major losers with a cut of 34% in the month of March. Cut to October they are the biggest gainers for the month with 11% returns!

What could be the reason behind such a change in sentiment?

Many analysts believe banks are moving up because the uncertainty regarding the moratorium is clearing now.

But Senior Analyst at Equitymaster, Apurva Sheth believes the writing was on the wall...or rather on the charts.

If you're interested in knowing how he used charts to predict this move, you can read about it in one of the latest editions of Profit Hunter: Banks are booming in a Covid World

And 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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