Developments in the Banking Sector, Global Stock Market Drivers, and Top Cues in Focus Today

Tue, 31 Dec Pre-Open

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On Monday, Indian share markets traded on a volatile note throughout the day and ended flat.

The BSE Sensex closed lower by 17 points to end the day at 41,558. ICICI Bank and TCS were among the top losers.

While the broader NSE Nifty ended up by 15 points to end at 12,261.

Among BSE sectoral indices, IT stocks fell the most, followed by banking stocks and finance stocks.

Top Stocks in Action Today

SBI share price will be in focus today as the lender has announced a 25 basis points cut in its external benchmark rate. According to SBI's press release, the revised effective benchmark lending rate (EBR) of 7.8% (down from 8.05%) will come into effect from January 1, 2020.

New home buyers will get loans at an interest rate starting from 7.9% a year (previously at 8.15%). So far this year, SBI has cut one-year MCLR on loans by 65 bps.

HDFC Bank share price will also be in focus today as the private lender has emerged as the largest lender to MSMEs in Punjab.

Its loan book in the state has touched Rs 89.2 billion as of September 30, 2019 and is now the largest bank for Micro Small and Medium Enterprises in the state with a market share of over 16%.

Market participants will also track NCC share price.

NCC has received approval for the merger of two wholly owned subsidiaries of the company i.e., Aster Rail and Vaidehi Avenues with the company. The Board of Directors of the company at its meeting held on December 28, 2019 approved the same.

Prince Pipes makes a Weak Debut

Shares of Prince Pipes and Fittings will be in focus today after they made a tepid debut on the stock markets yesterday.

The stock was listed at Rs 157.55, down 11.5% from its issue price of Rs 178 on the BSE.

The initial public offering (IPO) of the company that makes polymer pipes and fittings was open for subscription from 18 to 20 December with a price band of Rs 177-178 per equity share.

The offer was subscribed 2.21 times. The offer received bids for 43.7 million shares against the total offer size of 19.7 million shares, as per the NSE data.

The Mumbai-based firm aimed to raise Rs 5 billion via the IPO, of which fresh issue was worth Rs 2.5 billion. The remaining portion would be promoters selling their stake partially.

The company is planning to use Rs 1.8 billion of the net proceeds towards setting up a new plant at Sangareddy in Telangana.

The remaining funds would be used for repayment of certain outstanding loans and upgrading equipment at its manufacturing facilities.

RBI's Financial Stability Report

According to Reserve Bank of India's Financial Stability report, the aggregate growth in banking sector's gross loans and advances slowed from 13.2% in March 2019 to 8.7% in September 2019.

The report stated that given the weakening economic growth, the underlying credit buoyancy and its nuances are of relevance, it is evident that there has been an across-the-board dip between March and June 2019.

Credit growth during the period was driven by private sector banks. Private sector banks registered double digit credit growth of 16.5%, while that of the public sector banks (PSBs) was 4.8%.

The capital adequacy ratio of banks improved significantly to 15.1% in September 2019 after the recapitalisation of PSBs by the government.

The asset quality of agriculture and services sectors, as measured by their GNPA ratios, deteriorated in September 2019 as compared to March 2019.

The central bank also warned that there remains an inherent risk of "froth"-conditions that precede a market bubble building up in the system due to excess liquidity.

Citing factors such as an increase in slippages and declining credit growth, the central bank in its biannual commentary said bad loans of SCBs as a percentage of total loans is expected to increase to 9.9% by September 2020 from 9.3% in September 2019.

Global Stock Market Updates

Asian share markets rose to an 18-month high on Monday as Chinese equities gained.

Crude oil prices touched three-month highs on a combination of US crude inventory drawdowns, trade optimism and unrest in the Middle East.

Tensions in the Middle East have flared up as the United States carried out air strikes on Sunday against the Kataib Hezbollah militia group, while protesters in Iraq on Saturday briefly forced the closure of its southern Nassiriya oilfield.

Crude oil prices were also supported by declining US crude stocks, which fell by 5.5 million barrels in the week to December 20, far exceeding a 1.7-million-barrel drop forecast in a Reuters poll.

Meanwhile, Gold prices rose to their highest in more than two months on Monday as the dollar dipped and US military strikes in the Middle East supported safe haven buying.

Gold prices have risen nearly 18% this year and are on track for their best year since 2010, mainly due to a 17-month-long Sino-US tariff war and its impact on global economic growth.

As per the economic schedule released by Vijay Bhambwani, here are the important events due later today:

• China - Manufacturing & Composite PMI (Dec)
• India - Fiscal Deficit, RBI Credit Policy Review
• USA - Consumer Confidence Dec

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

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