Sensex Opens Higher; ONGC Jumps 8%

Fri, 11 Dec 09:30 am

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Asian stock markets are trading mixed as investors weighed prospects for a stimulus deal in Washington against disappointing US jobs data.

The Nikkei is trading down by 0.7% and the Hang Seng is trading up by 0.3%.

US stock markets closed marginally lower on Thursday, rebounding from early lows, as investors looked for signs of progress in fiscal stimulus talks to support the economy after labor market data showed a jump in jobless claims.

The Dow Jones Industrial Average ended down by 0.2% while the Nasdaq advanced 0.5%.

Back home, Indian share markets have opened on a positive note, following the trend on SGX Nifty.

Market participants will monitor the industrial production and inflation data, scheduled to be released later today.

The BSE Sensex is trading up by 211 points. The NSE Nifty is trading higher by 62 points.

ONGC and NTPC are among the top gainers today.

Both, the BSE Mid Cap index and the BSE Small Cap index have opened the day up by 0.7%.

Barring IT stocks, all sectoral indices are trading on a positive note with stocks in the oil & gas sector and metal sector witnessing maximum buying interest.

The rupee is trading at 73.65 against the US$.

Gold prices are trading up by 0.2% at Rs 49,158 per 10 grams.

To know more about gold, you can check out our detailed article on investing in gold here: How to Invest in Gold?

Speaking of the precious yellow metal, in his latest video, India's #1 trader, Vijay Bhambwani shares his view on gold and silver for the coming year.

In the video, Vijay explains the reasons behind staying positive on these assets.

Tune in here to find out more:

In news from the energy sector, Indian Oil Corporation (IOC) is among the top buzzing stocks today.

State-owned IOC on Thursday said the crude oil throughput out of its refineries rose to 100% in November 2020, as consumption of all petroleum products has almost reached pre-Covid levels.

On a sequential basis, this figure stood at 88% in October.

The company said that as the Indian economy prepares to bounce back, Indian Oil has gradually raised the throughput of its refineries to the maximum capacity in six months from about 55% of rated capacity at the beginning of May 2020.

Besides, the company said that demand for LPG has gone up by approximately 1.4% to 1.09 MMT as compared to the corresponding period last year.

Furthermore, the company said that jet fuel (ATF) registered a growth of 4% as compared to October 2020 but was still 45% less when compared on a year-on-year basis.

IOC share price has opened the day up by 2.1%.

In news from the finance sector, the Reserve Bank of India (RBI) has proposed a rule that non-banking lenders achieve key balance sheet health thresholds before they distribute their earnings to shareholders.

In a draft proposal, the RBI has linked the extent of dividend a non-banking financial company (NBFC) can pay to its shareholders with its capital adequacy ratio and net non-performing asset (NPA) ratio.

Even the best-performing large NBFCs cannot have a dividend payout ratio of above 50%, if the draft norms turn into actual regulation.

What's more is that the NBFCs will need to have over 15% capital adequacy ratio to even qualify to pay dividends. The move has implications for all NBFCs, especially the large ones.

Reports state that big NBFCs such as HDFC and Bajaj Finance are unlikely to get hit, others may have to either raise capital or bring down their bad loan stockpile. LIC Housing Finance may have to raise capital to fortify its ratio, while Mahindra and Mahindra Financial Services may have to bring down its bad loan stockpile.

Shares of PFC and REC fell as much as 10% yesterday on the back of above news.

We will keep you updated on the latest developments from this space. Stay tuned.

Moving on to news from the banking sector, the RBI has barred Kotak Mahindra Bank from paying dividend on perpetual non-cumulative preference shares (PNCPS) worth Rs 5 billion that it sold in 2018 to comply with a regulatory ceiling on promoter shareholding.

The regulator first ordered banks and certain categories of non-banks on 4 December not to pay dividends from their profits in FY20 to conserve capital but clarified on Thursday that it applied to PNCPS as well in a letter to Kotak Mahindra Bank.

The clarification is a blow for preference shareholders of banks as the securities fetch a fixed dividend, and are seen as quasi-debt.

In August 2018, Kotak Mahindra Bank sold 1 billion PNCPS to domestic institutions and firms at Rs 5 each, to comply with a regulatory requirement of reducing promoter stake to 19.7% from 30%. However, RBI rejected this as these shares don't have voting rights and won't result in dilution of control.

Signet Chemical Corp. Pvt. held 8%, Aditya Birla Finance 7%, ICICI Lombard General Insurance 6.6% and Bajaj Allianz General Insurance Co. held 6% of its preference shares.

In March, the bank had declared an interim dividend of 8.1% on these shares, totaling Rs 405 million, excluding dividend distribution tax.

Kotak Mahindra Bank share price has opened the day up by 0.3%.

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

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

However, sentiment have 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 major losers with a cut of 34% in the month of March. Cut to October, they are the biggest gainers for the month with more than 11% returns!

If you're interested in knowing what could be the reason behind such a change in sentiment, you can read about it in one of the editions of Profit Hunter: Banks are booming in a Covid World

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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