Sensex Opens Marginally Lower; Banking & Finance Stocks Under Pressure

Wed, 30 Dec 09:30 am | Yash Vora, TM Team

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Asian share markets are trading on a mixed note today as investors cashed in on a recent rally.

The Shanghai Composite is trading up by 0.9% and the Hang Seng is trading up by 1.5%. Japan's Nikkei lost half a per cent after jumping to a 30-year high on Tuesday.

US stock markets pulled back from record highs overnight as uncertainty about whether the US Senate would authorize additional stimulus checks gave investors a reason to take profits. Meanwhile, the United States detected its first-known case of a highly infectious coronavirus variant.

The Dow Jones Industrial Average fell 0.2%, and the Nasdaq dropped 0.4%.

Back home, Indian share markets have opened on a negative note.

Market participants are tracking banking stocks today after the RBI said that with nearly 40% of the outstanding loans under a moratorium, India's banking and non-banking financial sectors may face a sharp deterioration in asset quality, going forward.

The BSE Sensex is trading down by 137 points. Meanwhile, the NSE Nifty is trading lower by 38 points.

HCL Tech is among the top gainers today. SBI, on the other hand, is among the top losers today.

The BSE Mid Cap index has opened down by 0.4%. The BSE Small Cap index is trading down by 0.6%.

Barring FMCG stocks, all sectoral indices are trading on a negative note with stocks in the banking sector and metal sector witnessing most of the selling pressure.

The rupee is trading at 73.33 against the US$.

Gold prices are trading up by 0.2% at Rs 50,113 per 10 grams.

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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", released on Tuesday, said.

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

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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.

Moving on to stock specific news...

HDFC Bank is among the top buzzing stocks today.

The country's largest private sector lender 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.

Chakraborty has a wide experience of over 22 years working in various state as well as central government departments including revenue, finance, home, water resources and education departments and public sector undertakings.

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.

HDFC Bank share price opened the day up by 0.2%.

Note that, HDFC Bank is one that has always adapted to changing times.

HDFC Bank wanted to transform itself from a leader in the physical banking to a leader in online banking. Since then, HDFC Bank has constantly focused on going digital.

In 2004, only 10% of customer transactions were initiated through internet and mobile. The number has gone up to 92% in 2019.

It is a great example of a company which has taken advantage of its scale and embraced disruption rather than fear it.

These are traits that one should look for in picking stocks. They not only withstand the disruption but also gain from it in the long-run.

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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