IPO Markets in 2019, NPAs at Banking Sector, and Top Cues in Focus Today

Mon, 30 Dec Pre-Open

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Indian share markets moved sharply higher on Friday, buoyed by strong global markets. Positive developments on the US-China trade deal front and fund infusion in some PSU banks by the government boosted sentiment.

At the closing bell on Friday, the BSE Sensex stood higher by 411 points (up 1%) and the NSE Nifty closed higher by 119 points (up 1%).

The BSE Mid Cap index ended up by 0.9%, while the BSE Small Cap index ended up by 0.8%.

Gains were largely seen in the realty sector, banking sector and energy sector.

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Top Stocks in Focus Today

From the banking sector, shares of public sector banks (PSBs) will be in focus today on the back of expectation that the banks would benefit from lower yields on government bonds.

Punjab & Sind Bank, Bank of Baroda and Punjab National Bank (PNB), Canara Bank, Union Bank of India, State Bank of India (SBI) and Indian Bank were witnessing buying interest on Friday on the back of above news.

On Thursday last week, the Reserve Bank of India (RBI), in a notification, said that it will purchase 10-year bonds worth Rs 100 billion, while simultaneously sell four bonds maturing in 2020 for up to the same amount on Monday, December 30 in the open market.

Stocks from the IT sector will also be in focus today as a report said IT outsourcing contracts of more than US$ 1 billion currently executed by Indian companies are at risk of termination because Boeing has halted the production of its flagship Boeing 737 Max jets with effect from January.

According to the report, firms such as TCS, HCL Technologies, Infosys, Cyient, and L&T Technology have direct exposure to Boeing or its suppliers' ecosystem, which comprises engine manufacturers, body suppliers, and avionics providers.

Fundraising Through IPOs Fell by 60% in 2019

Reflecting the woes of the broader Indian economy, fundraising through initial public offerings fell by 60% in 2019 over the previous year.

According to data collated by Prime Database, 16 IPOs in 2019 raised Rs 123.6 billion as compared to 24 IPOs in 2018 that raised Rs 309.6 billion.

That the economy is in bad shape, India's GDP growth rate fell to over-six-year low of 4.5% in July-September 2019 is clear from the fact that 47 companies that received approvals to raise Rs 510 billion via IPOs allowed them to lapse.

But driven by offer-for-sale and qualified institutional placements, the street saw 28% growth in overall fundraising at Rs 811.7 billion in 2019.

The year 2017 saw 36 IPOs mopping up Rs 671.5 billion, while 2016 saw 26 issues collecting Rs 264.9 billion and Rs 136.1 billion being raised in 2015 through 15 issues and 2014 being the worst at Rs 12 billion from five IPOs. At Rs 28.5 billion, the largest IPO in 2019 was that of Sterling and Wilson Solar Ltd.

Seven IPOs were subscribed more than 10 times, IRCTC Ltd. (109), Ujjivan Small Finance Bank Ltd. (100), CSB Bank Ltd. (48), Affle (India) Ltd. (48) times, Polycab India Ltd. (36), Neogen Chemicals Ltd. (29) and Indiamart Intermesh Ltd. (20).

It would be interesting to see how this trend pans out in 2020.

As per the reports, the IPO pipeline for 2020, however, looks strong.

21 firms have received the market regulator's approval to raise as much as Rs 187 billion via initial share sales. Another 13 are awaiting approval to raise a further Rs 180 billion.

Ankit Shah is keeping a close watch and is going to pick all the profitable IPOs for his readers at Insider. Stay tuned.

NPAs of Banking Sector Likely to Improve

Rating agency ICRA said overall net non-performing assets (NPAs) of the banking sector are likely to improve to 3.2-3.3% by the end this fiscal from 3.7% in September 2019, aided by better recoveries and declining slippages.

In a report, the rating agency said that bank credit is expected to expand at a muted 6.5-7% in FY19-20. This will be the lowest in 58 years, mainly on account of lower working capital requirements by companies and risk aversion among lenders.

According to ICRA, even in a high-growth scenario, wherein the second half of FY20 sees the incremental bank credit rise to Rs 6.5-7 trillion, there will still be a 40-45% year-on-year (YoY) decline.

According to ICRA's assessment of 37 scheduled commercial banks, the YoY credit growth was 7.9% as of September 2019. While credit growth in public sector banks was 4.4%, private banks registered 15% growth in the same period.

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

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

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