After opening the day in green, share markets in India continued the momentum throughout the day and ended the day in green. Sectoral indices were mixed, with stocks in the IT sector and stocks in the banking sector leading the gains.
At the closing bell, the BSE Sensex stood higher by 293 points (up 0.8%) and the NSE Nifty closed up by 97 points (up 0.9%). The BSE Mid Cap index ended the day up 0.5%, while the BSE Small Cap index ended the day up by 0.6%.
Asian stock markets finished in green. As of the most recent closing prices, the Hang Seng was up by 0.2% and the Shanghai Composite was up by 1.4%. The Nikkei 225 was flat%. Meanwhile, European markets too were trading in green. The FTSE 100 was up by 0.5%, The DAX, was up by 0.1% while the CAC 40 was up by 0.2%.
The rupee was trading at Rs 67.15 against the US$ in the afternoon session. Oil prices were trading at US$ 70.44 at the time of writing.
In news from stocks in the banking sector. State Bank of India (SBI) has decided to take a tough stand against big loan defaulters.
Rajnish Kumar, the SBI chairman said that banks will force insolvent companies into liquidation if potential bidders try to suppress prices under the bankruptcy process.
The Reserve Bank of India (RBI) was empowered through an ordinance in May last year to direct banks to initiate insolvency proceedings against borrowers for resolution of stressed assets. The regulator shortlisted 12 companies with a total debt of over Rs 2 trillion in June for bankruptcy proceedings, about 25% of all non-performing bank loans. They included Essar Steel, Bhushan Steel, Lanco Infratech, ABG Shipyard, Bhushan Power and Alok Industries.
The RBI then issued another list of 28 defaulters for debt resolution.
The current law allows a maximum 270 days for resolution - an initial 180 days and 90 days of extra time on top of that. The resolution process for these debt-ridden companies are at various stages, with bids having been submitted for some of them.
Big Borrowers Turning into Big Offenders
Buffett's and Peter Lynch's principle of not watering weeds fits in perfectly well with the businesses of banking as well. Banks, in principle, must be careful about not extending loans to borrowers with poor creditworthiness or payment track record. That too, irrespective of the size of the borrower.
However, the data from State Bank of India shows that when it comes to big corporate borrowers, our banks literally look the other way. The share of large corporates, in total advances of the banking sector, has almost remained unchanged over past three years (at an average of 55%).
However, their contribution to incremental slippages has been huge. At one point, the big corporate borrowers accounted for nearly 90% of total NPAs of the sector.
Therefore, according to us, banks with large corporate books (be it PSUs or private sector) deserve a lower valuation if they can't keep NPAs in check.
Moving on to news from stocks in the oil and gas sector. ONGC share price was among the top gainers today. The state-owned energy major was in focus today after it reported at 6.3% rise in natural gas production for the year.
ONGC produced 484 billion cubic meters (bcm) of gas in 2017-18 as against 22.088 bcm in 2016-17, he said. This is the highest gas output by Oil and Natural Gas Corp in five years and the growth rate is higher than the global average of 3-4% cent year-on-year. This puts ONGC on track to double its output by 2022.
ONGC has stepped up on bringing newer fields into production after Prime Minister Narendra Modi set a stiff target of reducing oil import dependence by 10% by 2022. India currently imports over 80% of its oil needs.
The overall gas production, which includes production from the joint ventures, registered a growth of 5.8% at 24.6 bcm, as against 23.2 bcm in the previous year. The growth in output was largely contributed by C-26 Cluster fields, Daman and Vasai East fields in the western offshore as well as sub-sea well S2AB in the eastern offshore, he said.
From the onshore fields, there has been an increase in production particularly from Ramnad area in Cauvery Asset. There has also been a considerable increase in associated gas production from Ankleshwar and Assam Assets.
The company is targeting gas production of 24.41 bcm during the current financial year and incur an investment of around Rs 70 billion.
ONGC share price ended the day up by 3.3%.
And here's a note from Profit Hunter
GAIL is the top gainer in the Nifty 50 Index - up 4%. Let's have a look at its chart.
The stock bottomed out at 146 in August 2015 and traded in a strong uptrend tracking the rising trendline (blue line). At a high of 300 in March 2017, it found a strong resistance there. Historically, the January 2011 and November 2014 peaks acted as a resistance at the 300 level.
The bulls struggled a bit at the 300 level, but they finally managed to break the level and the stock made a new life-time high of 390 in December 2017. The stock has been correcting since then.
In March 2018, the stock bounced up from the 300 support level (previous resistance now support). The uptrend line (blue line) also acted as a support for the stock. Today, it rallied up 4% with healthy volumes and broke above the falling trendline (red line).
So does this indicate that the stock will soon achieve its new life-time high? Let's keep a close watch on it.
Gail Soared 4% for the Day
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