Sensex, Nifty Open at Fresh Record Highs; ONGC Jumps 5%

Wed, 25 Nov 09:30 am | Yash Vora, TM Team

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Asian share markets opened with gains and US stock futures pushed higher after Wall Street indices closed at an all-time high, with the Dow Jones Industrial Average topping 30,000 for the first time.

The Nikkei is trading up by 1.6% and the Hang Seng is trading up by 1.1%.

US stocks rallied overnight as the Dow breached the 30,000 level for the first time while the S&P also set a record closing high.

The Dow Jones Industrial Average clocked its fastest 10,000 point run up to cross 30,000 for the first time on Tuesday, giving the stock market a psychological boost at a time when the coronavirus pandemic has damaged the economy.

Back home, Indian share markets have opened the day on a strong note, following positive global cues.

An overnight rally in global equities owing to vaccine optimism and transition to Joe Biden's presidency in the US set the stage for further gains in today's session.

Market participants will be tracking the most recent Federal Open Market Committee meeting, US jobless claims, GDP and personal spending data, due later today.

The BSE Sensex is trading up by 245 points. The NSE Nifty is trading higher by 70 points.

ONGC and ICICI Bank are among the top gainers today.

The BSE Mid Cap index and the BSE Small Cap index have opened the day up by 0.2% and 0.4%, respectively.

Sectoral indices are trading on a positive note with stocks in the banking sector and oil & gas sector witnessing maximum buying interest.

The rupee is trading at 73.97 against the US$.

New: 5 Pandemic-Proof Smallcaps You Should Know About...

Gold prices for the latest contract on MCX are trading down by 0.2% at Rs 48,470 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 stock markets, in her latest video, Co-head of Research at Equitymaster, talks about yet another stock like ITC, that has underperformed in recent months.

She talks about Mahindra & Mahindra (M&M), the ITC of the auto sector. In the video, Tanushree also explains whether M&M has upside from the perspective of growth or value?

Tune in to the video to find out more:

In news from the commodity space, crude oil prices rose about 4% on Tuesday to touch highs not seen since March as a third promising coronavirus vaccine raised hope for fuel demand recovery and US President-elect Joseph Biden began his transition to the White House.

Brent crude settled at US$ 47.86 a barrel, gaining US$ 1.80, or 3.9%. US West Texas Intermediate crude settled at US$ 44.91 a barrel, rising US$ 1.85, or 4.3%. Both benchmarks ended at their highest close since March 5.

Note that the coronavirus pandemic, coupled with the collapse of an OPEC-led output pact sent crude oil prices crashing in March.

After the collapse of that output pact led to a brief Saudi Arabia-Russia price war, the Organization of the Petroleum Exporting Countries and allies agreed a new deal on record production cuts to support prices.

The group known as OPEC+ is expected to roll over those cuts into 2021 after meeting November 30 to December 1.

Speaking of crude oil, in one of his videos, Vijay Bhambwani explains why crude oil prices and natural gas prices are moving in opposite directions.

You can check the same here: Why Are Crude Oil and Natural Gas Prices Moving in Opposite Directions?

Moving on to stock specific news...

Muthoot Finance is among the top buzzing stocks today.

The Reserve Bank of India has rejected Muthoot Finance's proposal to acquire IDBI Asset Management Company on the ground of synergy.

"The activity of sponsoring a mutual fund or owning an asset management company is not in consonance with the activity of an operating NBFC," the regulator told the gold-loan company.

IDBI Bank, which was planning to sell its mutual fund business for Rs 2.2 billion to comply with regulations, will now have to find a new buyer.

IDBI Bank, which is a subsidiary of Life Insurance Corporation, has to divest its share in the AMC since LIC already has a mutual fund unit.

A year ago, Muthoot had entered into a share purchase agreement with IDBI Bank, and IDBI Capital Markets & Securities, IDBI Asset Management and IDBI MF Trustee Company to fully acquire the asset management company.

Muthoot Finance share price has opened the day up by 0.3%.

Apart from the above, market participants are also tracking banking stocks today.

Non-performing loans in the Indian banking sector is likely to witness an uptick and may shoot up to 11% of gross loans in the next 12-18 months, S&P Global Ratings said on Tuesday.

It said forbearance is "masking" problem assets for Indian banks arising from Covid-19 and the financial institutions will likely have trouble maintaining momentum after the proportion of non-performing loans (NPL) to total loans declined consistently so far this year.

In its report titled "The Stress Fractures In Indian Financial Institutions", S&P said with loan repayment moratoriums having ended on August 31, 2020, NPLs in the banking sector will likely shoot up to 10-11% of gross loans in the next 12-18 months, from 8% on June 30, 2020.

According to S&P, the banking system's credit costs will remain elevated at 2.2-2.9% this year and next while 3-8% of loans could get restructured.

Note that earlier this week, the central bank's Internal Working Group (IWG) proposed 12 changes to ownership guidelines and corporate structure for Indian private sector banks.

Here are some of these top changes proposed:

• The group has recommended that large corporate/industrial houses may be permitted to promote banks only after necessary amendments to the Banking Regulations Act, 1949 to deal with connected lending and exposures between the banks and other financial and non-financial group entities.
• The cap on promoters' stake in the long run may be raised from the current levels of 15% to 26% of the paid-up voting equity share capital of the bank. The group, however, suggested a long 15-year transition for this change.

Here's what Tanushree Banerjee, co-head of Research at Equitymaster, has to say about the above recommendations by the RBI for private banks...

• The RBI's new ownership guidelines for corporate structure of Indian private-sector banks seeks to change the central bank's conservative stance on the subject. The RBI's latest recommendation may allow large corporate houses to run banking businesses.
  
  From the conditional nature of the recommendation, it appears that large corporates could acquire NBFCs, which may be allowed to convert into banks.
  
  However, such recommendations were earlier rejected by the central bank on the grounds of 'conflict of interest' with the corporates' other businesses.
  
  Do note that even today 70% of the bad loans in the banking system are in the form of corporate NPAs.
  
  So, while stronger regulations may be necessary to issue banking licenses to large corporates, in the near term the guidelines could bring in liquidity and better valuations for the sector.

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

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!

We are closely tracking this sector and will keep you updated on all the top news 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.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

Indian Share Market Update: Top Gainers and Losers

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