Sensex Trades on a Volatile Note; ICICI Bank Hits Record High

Wed, 4 Dec 12:30 pm

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Share markets in India are presently trading on a volatile note, amid a selloff in global markets. After weeks of optimism that the US and China are close to a partial agreement, Donald Trump on Tuesday said he could be happy to wait until after next year's elections.

Sectoral indices are trading on a mixed note with stocks in the healthcare sector and IT sector witnessing buying interest, while capital goods stocks and energy stocks are witnessing selling pressure.

The BSE Sensex is trading down by 28 points, while the NSE Nifty is trading down by 7 points. The BSE Mid Cap index is trading up by 0.2%, while the BSE Small Cap index is trading down by 0.1%.

The rupee is trading at Rs 71.76 against the US$.

In news from the finance sector, shares of HDFC Asset Management Company fell as much as 3% in early trade today after one of the promoters, Standard Life Investments, offered to offload 2.3% stake in the fund house.

In a regulatory filing to exchanges, Standard Life proposed to sell up to 4.75 million equity shares of the total issued and paid-up equity share capital of HDFC AMC, with an option to sell additional 3.85 million shares, through offer-for-sale mechanism.

The floor price has been set at Rs 3,170 per equity share. The stake-sale will be conducted on the BSE and NSE today for institutional investors and on December 5 for retail investors.

Reportedly, the stake sale is being undertaken by the promoter for achieving the minimum public shareholding in the company as prescribed under markets regulator's norm.

The company operates as a joint venture between HDFC and Standard Life Investments.

HDFC AMC share price is presently trading down by 1.3%.

Moving on to news from the banking sector, as per an article in The Economic Times, 23 individuals comprising senior bankers, directors and account holders of Punjab & Maharashtra Co-operative (PMC) Bank had allegedly withdrawn around Rs 700 million, days before the Reserve Bank of India (RBI) imposed a clampdown on the lender.

Officials at the Economic Offence Wing (EOW) of the Mumbai Police said these individuals withdrew the money between September 7 and September 19.

On September 21, the bank's managing director, Joy Thomas, wrote to the RBI about alleged violations of regulations and irregularities in its dealings and two days later, the central bank put restrictions on the bank, including a Rs 1,000 cap on withdrawals.

The limit has since been increased in phases, to Rs 50,000 now.

Grant Thornton, which conducted a forensic audit of the bank, has pegged the alleged fraud at Rs 66.7 billion in its draft report, the EOW officials said.

The amount was earlier estimated to be Rs 43.6 billion. The audit has also found alleged misappropriation of Rs 50 million by bank employees.

The city police yesterday arrested three more directors of the bank. So far, 12 people including two promoters of real estate firm HDIL, three auditors and seven former directors have been arrested in the case.

Note that the recent PMC bank fiasco has put small savers in the limelight yet again. These banks have poor lending practices. Depositors have had to pay the price time and again.

In the short run, this has an adverse effect on microfinance lending as well. Micro finance institutions (MFIs) are skeptical about lending to even genuine borrowers in an uncertain environment.

But this is actually a blessing in disguise for MFIs with strong business practices.

After all, last mile connectivity in lending is still a huge opportunity.

Huge Opportunity in Last Mile Lending in India

Here's what Tanushree Banerjee wrote about this in one of the editions of The 5 Minute WrapUp...

• The average ticket size of a microfinance borrower in India is around Rs 38,000 which is much lower than the global average (Rs 65,000).
  
  The sector itself has grown at an average annual rate of 27% for the last 4 years.
  
  Still states like Uttar Pradesh, Bihar, and Madhya Pradesh with a large rural population are highly under-penetrated even today.

A private bank that is part of Tanushree's 7 stocks to buy list has already taken a step in this direction.

It will be a big beneficiary when the microfinance boom plays out in India.

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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