Indian share markets traded on a positive note throughout the day and ended higher. Gains were largely seen in the IT sector, while PSU stocks and realty stocks witnessed selling pressure.
At the closing bell, the BSE Sensex stood higher by 204 points (up 0.6%) and the NSE Nifty closed higher by 36 points (up 0.3%). The BSE Mid Cap index and the BSE Small Cap index ended the day down by 0.5%.
Asian stock markets closed sharply higher today with shares in Hong Kong leading the region. The Hang Seng is up 1.3% while China's Shanghai Composite is up 1.1% and Japan's Nikkei 225 is up 1%. European markets are mixed today. The CAC 40 is up 0.2% while the DAX gains 0.1%. The FTSE 100 is off 0.1%.
The rupee was trading at 70.63 to the US$ at the time of writing.
In the news from banking sector. According to the fortnightly data released by the Reserve Bank of India (RBI), banks credit flow to commercial sector has gone up by 15.6% on year-on-year basis, registering highest growth since demonetisation.
As per the report, the adjusted non-food bank credit stood at Rs 97.3 trillion as on 9 November 2018 as compared to Rs 84.2 trillion reported in the year-ago fortnight.
Adjusted non-food bank credit consists of non-food bank credit and total non-statutory liquidity ratio (SLR) investments of banks in commercial papers, shares and bonds/debentures and as per the report, the non-food credit surged 15.1% to Rs 90.5 trillion during the reported fortnight, while the total non-SLR investments was up by 22.3% to Rs 6.8 trillion as against Rs 5.6 trillion.
Meanwhile, bank credit was lowest during the November 2016 to March 2017 period, following the government's move to demonetize high-value currency notes on 8 November 2016.
Credit Growth at Lowest Levels in a Decade
An important indicator of business health is credit off-take. Declining credit growth implies a slowdown in business. This means lower fund requirements for businesses. Lower consumption leads to lower demand for a product. It further leads to lower capacity utilization by companies catering to that product. As a result, fund requirements for further expansion are low.
Apart from notebandi, rising NPA levels are also hampering the banks' ability to lend. Banks with significant bad loans on their books are reluctant to lend to even healthy companies. This will adversely impact the growth of the economy going forward.
Moving on to the news from the aviation space, Jet Airways share price witnessed buying interest today following a report that founder Naresh Goyal has agreed to sell his controlling stake and give up operational control of the struggling carrier.
Goyal has, however, laid out certain conditions including retaining a minority stake of below 5% and a board seat on the firm.
The company's financial woes have worsened by rising crude oil prices and intense pricing competition in the domestic aviation industry.
The company has been going through severe financial crush since last year. It has suffered three consecutive quarterly losses and is currently trying hard to make its turnaround plan aimed at reducing operational costs.
As Ankit Shah wrote in one of the edition of The 5 Minute WrapUp...
- Ever since the government started allowing private airlines in the 1990s, the Tatas have harboured ambitions of returning to aviation. They reentered the Indian skies with two joint ventures - Vistara, a joint venture with Singapore Airlines, and another with Air Asia. But these joint ventures account for a small share of the Indian aviation market.
With Jet Airways, the Tatas could enter the big league and become the second largest aviation group in India after budget carrier Indigo (InterGlobe Aviation Ltd).
On the face of it, it seems like the Tatas are the ideal contenders to rescue the troubled airline. The Tatas have the resources to bring the airline back from the deathbed. But will it really turn the fortunes of the airline and make it profitable?
To me, this sounds like a Bollywood love saga wherein the protagonist rescues the damsel in distress, and they pledge to tie the knot and live happily ever after. However, most married men will agree that the real challenges arise post marriage.?
As we've written time and again, the aviation business is one of the toughest nuts to crack. Despite India witnessing rapid passenger growth, the cost structures and high competitive intensity make it very difficult for most airline companies to turn a decent profit.
So, while traders and speculators may rush to trade on the news of a potential takeover by the Tatas and a likely consequent turnaround of the troubled airline, this is certainly not an investment idea for serious, long-term investors seeking safe stocks and a good night's sleep.
It would be interesting to see how this pans out. Meanwhile, we will keep you updated on all the developments from this space.
Jet Airways share price ended the day up by 4.7%.
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