Sensex Opens Marginally Up; Yes Bank Plunges Over 5%

Wed, 11 Dec 09:30 am

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Asian stock markets are higher today as Japanese and Hong Kong shares show gains. The Nikkei 225 is up 0.2% while the Hang Seng is up 0.2%. The Shanghai Composite is trading up by 0.1%. Wall Street's main stock indices ended slightly lower on Tuesday, though not far from record highs.

Back home, India share markets opened marginally up. The BSE Sensex is trading up by 84 points while the NSE Nifty is trading up by 18 points. Both, the BSE Mid Cap index and BSE Small Cap index opened flat.

Sectoral indices have opened the day on a mixed note with automobiles stocks and healthcare stocks witnessing buying interest. Telecom and IT stocks are trading in red.

The rupee is currently trading at 70.85 against the US$.

The Indian rupee opened higher at 70.89 per dollar on Wednesday versus previous close 70.92.

On December 10, the rupee ended 12 paise higher at 70.92 against the US dollar amid softening crude oil prices and weakening of the greenback vis-a-vis major global currencies.

Oil prices fell on Wednesday after industry data showed a surprise build in crude oil inventory in the United States and as investors waited for news on whether a fresh round of US tariffs on Chinese goods would take effect on Sunday.

Speaking of currencies, Vijay Bhambwani, editor of Weekly Cash Alerts, tells you the main reasons why not to trade commodities and currencies the same way you would trade equities. Here's an excerpt of what he wrote...

• Currencies are traded in pairs and the most liquid is the USDINR. Currencies are traded in four decimal points just as bonds are. The international derivative trader's association has indicated that forex may be traded in 6 decimals in the coming few years.
  
  It takes months sometimes for the currency pair to pass the next round figure, say from 70 to 71.
  
  Can you really trade commodities and currencies alike or for that matter, equities and currencies alike? Definitely not!

To know more, you can read Vijay's entire article here: Is Trading in Equities, Commodities, and Currencies the Same?

Moving on to the news from the banking sector. As per an article in a leading financial daily, Yes Bank is considering a US$500 million investment offer from London-based Citax Holdings and Citax Investment Group, in what would be a vital financial lifeline for the cash-starved private lender.

A final decision on the investment, which is proposed to be made through a preferential allotment, will be taken at the bank's next board meeting.

Yes Bank had said on 29 November after a board meeting that several investors had shown interest in buying its shares worth a total US$2 billion through a preferential allotment.

The potential investors included the family office of Canada-based Erwin Singh Braich and Hong Kong-based SPGP Holdings (as part of the US$1.2 billion binding offer) as well as the US$500 million offer from Citax Holdings, through non-binding agreements.

None of the potential investments have materialized so far.

The disclosure of the potential investors' list sparked a sell-off in Yes Bank shares. The fall came on the back of research reports by brokerages, which questioned the credibility of the potential investors.

On Tuesday, Yes Bank plunged over 10% to close at Rs 50.6 apiece on the BSE. Over the past year, Yes Bank has lost about 70% of its market value.

Yes Bank has been desperately seeking capital to stay compliant with the Reserve Bank of India's (RBI) norms as well as buffer its losses against bad loans and remain afloat.

Also, Yes Bank had said several other investors including billionaire investor Rakesh Jhunjhunwala's wife Rekha Jhunjhunwala's family office were in talks to invest at least US$25 million.

Yes Bank has been struggling to find a suitable investor to bail it out and has therefore extended the binding term sheet till 31 December.

Now, how this pans out going forward remains to be seen. Meanwhile, we will keep you updated on developments from this space.

Yes Bank share price opened the day down by 4.7%.

Speaking of the banking sector, note that 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.

As can be seen in the chart below, here's how the correction looked like for some banking stocks as of October 15th...

Falling Knives in the Banking Sector

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 volatile market is the first step towards correcting one's investing process.

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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