RBI's Banking Sector Review, Vedanta's Debt Retirement, and Buzzing Stocks Today

Thu, 31 Dec Pre-Open

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Extending gains to the sixth straight day, Indian share markets ended higher yesterday.

Benchmark indices witnessed volatile trades during the day but regained momentum during closing hours amid buying in auto and metal stocks.

At the closing bell yesterday, the BSE Sensex stood higher by 133 points (up 0.3%).

The NSE Nifty stood higher by 49 points (up 0.4%).

UltraTech Cement and Grasim Industries were among the top gainers. IndusInd Bank, on the other hand, was among the top losers.

The BSE Mid Cap index ended up by 0.5%. The BSE Small Cap index ended higher by 0.4%.

Sectoral indices ended on a mixed note with stocks in the auto sector and metal sector witnessing buying interest.

Telecom stocks, on the other hand, witnessed selling pressure.

Gold prices were trading down by 0.2% at Rs 49,950 per 10 grams at the time of closing stock market hours yesterday.

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

Speaking of stock markets, in his latest video Rahul Shah talks about his preferred portfolio for 2021 and beyond.

Rahul shares his portfolio strategy and the important principles one need to keep in mind to build a market beating portfolio.

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Top Stocks in Focus Today

HDFC Bank will be among the top buzzing stocks today.

The country's largest private sector lender HDFC Bank has cleared the name of Atanu Chakraborty for the post of new part-time chairperson of the bank and has sent the recommendation to the Reserve Bank of India (RBI) for its approval.

Chakraborty is a former economic affairs secretary of the Government of India and is a veteran IAS officer.

The tenure of the existing part-time chairperson of the bank, Shyamala Gopinath, will end on January 1, 2021.

Note that HDFC Bank has seen major changes at the top this year. Aditya Puri, the managing director of the bank for the last 26 years, retired in October. Sashidhar Jagdishan took over his place. Along with this, there have been a series of changes at the top level.

Shares of battery-makers will be in focus today after reports stated that the American clean-energy and electric-vehicle (EV) company Tesla will begin its operations in India in 2021.

This development is expected to give a boost to the EV segment, which may result in a jump in demand for batteries.

Shares of companies such as Exide Industries, Amara Raja Batteries, and Eveready Industries India will be in focus on the back of the above news.

RBI's Banking Sector Review: System May Face Sharp Deterioration in Asset Quality

In news from the banking sector, the banking and non-banking financial sectors in India showed resilience in 2019-20, but with nearly 40% of the outstanding loans under a moratorium, the system may face a sharp deterioration in asset quality, the Reserve Bank of India's (RBI's) annual publication titled "Trend and Progress of Banking in India", said.

The report evaluated the banking sector's performance in 2019-20 and touched upon some views for the coming days.

In the year under review, asset quality, capital positions, and profitability strengthened. The gross non-performing assets (GNPA) ratio moderated from its peak in March 2018 to reach 7.5% by the end of September 2020.

The improvement was driven by lower slippages, which declined to 0.74% in September 2020, and the resolution of a few large accounts through the Insolvency and Bankruptcy Code (IBC).

Fresh slippages remained the highest among public-sector banks.

The report added that banks will have to adapt and adjust to the rapidly evolving economic landscape due to these challenges and also the entry of niche players and emerging financial technologies, going forward.

With a substantial increase in provisioning, the net NPA ratio of banks moderated to 2.8% by the end of March 2020, and further declined to 2.2% by the end of September 2020.

The reduction in NPAs during the year was largely driven by write-offs, as banks wrote off NPAs that required full provisioning.

Lending to industry and agriculture by private and public-sector banks declined.

There was robust credit growth in rural areas. The share of rural credit in the total has been hovering between 8 and 9%, but its growth surpassed that of other categories in 2019-20, after a gap of four years.

The share of public-sector banks in rural credit has fallen in favour of private banks, the report said.

Of the 22 private banks, only three attracted higher foreign shareholdings during 2019-20.

There was significant moderation in NBFCs' financial performance after double-digit balance sheet growth in the previous three years. The impact was particularly pronounced for non-deposit-taking NBFCs but deposit-taking NBFCs fared well.

However, green shoots are visible now in the NBFC segment as loans and advances are rebounding.

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

Promoters of Vedanta Raise US$ 1.4 Billion to Retire Debt

Promoters of Vedanta have pledged their holding in the company to raise US$ 1.4 billion for repaying the debt that was coming up for maturity.

In a stock exchange filing, Vedanta said its promoters raised US$ 1 bn debt by issuing equivalent notes to Citicorp International.

Separately, a unit of Vedanta Resources will issue US$ 400 million in notes to an entity under Oaktree Capital Group.

The notes in both cases will be partly secured by shares in Mumbai-listed unit Vedanta.

The funds raised from Citicorp "will be used to fund the tender offer for any and all of Vedanta Resources Limited's (VRL) outstanding US$ 900 million 8.3% bonds due 2021," the company said in the filing.

The remaining proceeds of the US$ 1 bn fundraise shall be used to service the debt of promoter group firms, "VRL, Twinstar or Welter and/or for the acquisition of equity shares of Indian subsidiary/(ies) of VRL by Twinstar/Welter if decided and in accordance with applicable law," it said.

The US$ 400 mn raised from OCM Verde XI Investment, the entity under Oaktree Capital, will be used for the acquisition of up to 11.5% shares in Vedanta by Vedanta Holdings Mauritius II and payment of any fees, costs and expenses in connection with the transactions contemplated.

London-based Vedanta Resources (VRL) last week raised its stake in Vedanta to 55.1% from 50.1% by buying from open market shares worth Rs 29.5 bn at a price of Rs 159.9 per share. It made the purchase through block deals.

The move came weeks after the firm's failed attempt to delist Vedanta from Indian stock exchanges. The delisting failed due to an insufficient number of shares being offered in the buyback proposal of VRL.

We will keep you posted on more updates from this space. Stay tuned.

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

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