Sensex Ends 71 Points Lower; Telecom and Metal Stocks Witness Selling

Thu, 5 Dec Closing

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Indian share markets traded on a volatile note throughout the day and ended marginally lower. Benchmark indices gave up gains after the central bank kept its policy rate unchanged, surprising investors who were expecting at least a 25 basis-point cut.

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

At the closing bell, the BSE Sensex stood lower by 71 points (down 0.2%) and the NSE Nifty closed down by 25 points (down 0.2%).

The BSE Mid Cap index ended the day down 0.3%, while the BSE Small Cap index ended the day up by 0.1%.

Asian share markets ended higher on renewed hopes for the US-China trade talks after reports stated that a deal could be finalised by the end of next week.

The Hang Seng was up by 0.6% and the Shanghai Composite was up by 0.8%. The Nikkei 225 stood higher by 0.7%.

The rupee was trading at 71.43 against the US$.

Speaking of Indian stock markets, Vijay Bhambwani states why he is positive about the markets and the Indian economy for the next 11 months.

As per Vijay, the US election season is set to have a big impact on India. In the video below, he covers what to expect over the next 11 months.

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In news from the banking sector, the Reserve Bank of India (RBI) kept its key lending rate on hold, despite a worrying slowdown in the country that prompted the central bank to sharply reduce its economic growth forecast to 5% for the year through March.

The six-member monetary policy committee (MPC) unanimously voted to hold the key repo rate at 5.15% while the reverse repo rate was also held at 4.90%.

The RBI reiterated that it would maintain an accommodative stance as long as it is necessary to revive economic growth which slowed to 4.5% in the September quarter from 7% a year ago, to stand at its lowest in more than six years.

While acknowledging that growth has weakened further, the MPC noted that removing the impediments to future investments is the need of the hour.

The MPC also felt that it is better to wait for the upcoming budget to get a better clarity on further measures to be undertaken by the government and its impact on growth before easing the policy.

In other news, shares of State Bank of India (SBI) were in focus today after the lender's board approved the proposal to sell 8.25% stake in UTI AMC.

In a filing to exchanges, SBI said that "the executive committee of the central board of directors (ECCB) of the bank at its meeting held today has accorded approval, for divestment of SBI stake in UTI AMC up to 8.25% through IPO".

The bank said it offers to sale up to 1,04,59,949 equity shares subject to approval from the markets regulator and such other concerned authorities and departments.

SBI, Life Insurance Corporation, Punjab National Bank (PNB) and Bank of Baroda own 18.5% stake each in UTI AMC.

UTI AMC is planning to launch an initial public offer (IPO) by the end of this fiscal. The company will raise about Rs 26 billion.

SBI share price ended the day down by 1.4%.

Speaking of PSBs, which banks look the best match post the latest matchmaking of PSU banks?

Needless to say, most investors would also be worried about the level of NPAs and current and savings accounts (CASA) of the merged entities.

Lower NPA ratio and sustenance of high CASA, in the future, could signal the banks' fitness levels to lend more.

But what could go unnoticed is the efficiency potential of the merged entities.

Post-merger, the employee per branch ratio of the consolidated PSU entities could be in the range of 7 to 9 per branch. This would be almost half that of their private sector counterparts like HDFC Bank and Kotak Bank.

India's Top 6 Public Sector Banks Are Getting Fitter

Leaner operations would mean use of technology to support growth.

So, we would not be surprised if the PSU entities leverage technology at a much bigger scale than their private sector peers, in a few years.

Moving on to news from the finance sector, shares of HDFC Asset Management Company (AMC) dipped 5% today after the company said it will use a greenshoe option for sale of additional 0.86% stake via offer for sale (OFS).

Standard Life Investments, the promoter of the company, told exchanges that it has proposed to sell up to 4.75 million equity shares through offer for sale (representing 2.23% of the total paid-up equity share capital) of HDFC AMC, with an option to additionally sell up to 3.85 million equity shares (representing 1.8%).

Standard Life Investments further intimated the exchanges of its intention to exercise the oversubscription option in the offer to the extent of 1.83 million shares (representing 0.86% of the total paid-up share capital) in addition to 4.75 million equity shares forming part of the base offer size.

The stake-sale was conducted on the exchanges yesterday for institutional investors and today for retail investors.

The floor price for the sale has been set at Rs 3,170 per equity share.

The share-sale is being undertaken by the promoter for achieving the minimum public shareholding in the company, as prescribed under market regulator's norm.

HDFC AMC share price ended the day down by 3.8%.

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