Sensex Hits Record High, Bad Loans at State-Run Banks, and Buzzing Stocks Today

Tue, 29 Dec Pre-Open

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Indian share markets scaled fresh peaks yesterday amid positive global cues after US President Donald Trump signed into law a US$ 2.3 trillion pandemic aid and spending package.

Moreover, the United Kingdom's historic trade deal with the European Union also aided investor sentiment.

At the closing bell yesterday, the BSE Sensex stood higher by 380 points (up 0.8%).

The NSE Nifty closed higher by 124 points (up 0.9%).

Titan and SBI were among the top gainers.

The BSE Mid Cap index and the BSE Small Cap index ended up by 0.8% and 1.5%, respectively.

All sectoral indices ended in green. Gains were largely seen in the realty sector and banking sector.

Gold prices were trading up by 0.3% at Rs 50,230 per 10 grams at the time of closing stock market hours yesterday.

Global gold rates jumped 1% as the metal's appeal as an inflation hedge was boosted by news that US President Donald Trump had signed a long-awaited coronavirus relief aid bill.

Tracking firm international prices, domestic gold prices also surged.

Speaking of gold, Ajit Dayal, founder of the Quantum group, shares his views on gold in the latest episode of Investor Hour Podcast.

In the podcast, Ajit also talks about the Covid-19 situation around the world, specific investment opportunities as well as his personal asset allocation strategy.

Tune in here to find out more:

You can also check Ajit's latest article on the best way to start a strong Indian economic recovery here: How India's Economy Can Grow at 10% p.a.

Top Stocks in Focus Today

Among the buzzing stocks today will be Coal India.

State-owned Coal India (CIL) said its board has given in-principle approval for venturing into the aluminium value chain (mining-refining-smelting) and solar power value chain (ingot-wafer-cell-module and generation).

The board also approved creating special purpose vehicles (SPVs), subject to obtaining concurrence from Niti Aayog and after the completion of feasibility studies and business analysis.

CIL will set up three specific-purpose vehicles (SPVs) - a Rs 455 billion integrated solar wafer manufacturing facility, a Rs 380 billion green-field aluminium project, and a Rs 234 billion aluminium smelting unit with state-run National Aluminium Company (NALCO).

From the banking sector, state-run Punjab National Bank (PNB) will also be in focus today.

Punjab National Bank has put up for sale three stressed accounts, including Birsa Institute of Technology (Trust), with total outstanding dues of nearly Rs 345 million.

The three accounts are Mangalam Oil Industries with outstanding dues of Rs 107.7 million, Alliance Fibres (Rs 183.1 million) and Birsa Institute of Technology (Trust) (Rs 54.1 million).

The final date to receive interest from interested bidders is December 29, 2020 and the bids will be opened on January 6, 2021.

Market participants will also track Tata Motors share price as the United Kingdom (UK) and the European Union negotiators finalized their historic post-Brexit trade agreement.

The European Union so far has been a single market for the Tata Motors-owned Jaguar Land Rover (JLR) but this is set to change after the UK's exit from the European Union. Post the deal, JLR can now continue to export and import between the UK and the EU without any restriction and additional overheads.

JLR accounts for over 80% of Tata Motors revenues.

Government to Assist State-Run Lenders in Disposing Bad Loans

The government may set up an asset management firm to assist state-run lenders in disposing of their bad loans, leaving them to focus on core banking.

The proposed firm will not be a full-fledged bad bank. Instead, it will act as a conduit between distressed funds, asset reconstruction firms and lenders.

Unlike a bad bank, it won't take up the impaired loan portfolio on its books and then find ways to settle it.

According to the RBI's Financial Stability report of July 2020, the gross NPA ratio of state-owned banks, which was at 11.3% in March 2020, may increase to 15.2% by March 2021.

Earlier this month, Economics Affairs secretary had said the government was looking at various options to improve health of the banking sector, which includes setting up of a bad bank.

In their customary pre-budget meeting with Finance Minister Nirmala Sitharaman, industry associations had also sought for the setting up of a bad bank to tackle rising bad loans.

How the above development pans out remain to be seen. Meanwhile, we will keep you updated on the latest developments from this space.

NIIT Share Price Hits 52-Week High after Board Approves Buyback Proposal

In news from the IT sector, shares of NIIT rose 5% to hit a fresh 52-week high of Rs 209.90 yesterday after the company last week said its board has approved an up to Rs 2.4 billion buyback proposal at Rs 240 per equity share.

The buyback price of Rs 240 per share is at a 20% premium to Thursday's closing price.

NIIT share price ended higher for the fourth straight day yesterday, gaining as much as 21% during the period after the company on December 21 announced that its board will meet on December 24 to consider a proposal for buyback of equity shares of the company.

The buyback is subject to shareholders' approval by passing a special resolution through postal ballot.

The promoters hold 34.27% stake in NIIT. Foreign portfolio investors have 22.16% holding, followed by individual shareholders (21.81%), mutual funds (8.03%) and corporate bodies (6.8%), data as per the company's pre-buyback shareholding pattern showed.

Speaking of buybacks, as a shareholder in cash rich companies, you should not only be wary of expensive buybacks. But if possible use it to your advantage to rake in some cash.

As per Rahul Shah, co-head of Research, investors should not assume buybacks are always good. Here's an excerpt of what he wrote in one of the editions of The 5 Minute Wrapup:

• The reason behind the buyback must be investigated. At the end of the day, an increase in earnings should be more a function of the inherent robustness of the business, as that's what will help it continue to grow at a healthy pace.

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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