Key benchmark indices extended gains in mid-morning trade. At 11:15 IST, the barometer index, the S&P BSE Sensex, was up 76.09 points or 0.27% at 27,879.33. The Nifty 50 index was currently up 17.20 points or 0.2% at 8,558.40. The Sensex rose 80.07 points or 0.28% at the day’s high of 27,883.31 in mid-morning trade, its highest level since 21 July 2016. The barometer index lost 66.73 points or 0.24% at the day’s low of 27,736.51 at the onset of trading session. The Nifty rose 21.15 points or 0.24% at the day’s high of 8,562.35 in mid-morning trade, its highest level since 21 July 2016. The index lost 24 points or 0.28% at the day’s low of 8,517.20 at the onset of trading session.The broad market depicted strength. There were more than two gainers against every loser on BSE. 1,539 shares rose and 669 shares declined. A total of 124 shares were unchanged. The BSE Mid-Cap index was currently up 0.79%. The BSE Small-Cap index was currently up 0.98%. Both these indices outperformed the Sensex.
It remains to be seen if the Goods and Services Tax (GST) constitutional amendment bill is passed in the parliament during the ongoing monsoon session. According to reports, the Goods and Services Tax (GST) constitutional amendment bill has been listed for discussion in the Rajya Sabha in this week. The GST bill, which has been approved by the Lok Sabha is pending in the Rajya Sabha because of opposition to the bill in its current form by the Congress party. A constitutional amendment bill requires at least 50% attendance and support of two-third of those present and voting in the house. For the GST bill to become a law, the bill also needs to be approved by half the state assemblies after its passage in the parliament. GST, touted as the single biggest indirect taxation reforms since independence, will simplify and harmonise the indirect tax regime in the country. The GST seeks to create a seamless national market in the country by replacing plethora of state taxes and central taxes by one tax. The month-long monsoon session of the parliament will conclude on 12 August 2016
In overseas stock markets, Asian stocks witnessed a mixed trend. In Japan, the Nikkei 225 Average was currently trading near the flat line. Investors are hoping for a big stimulus announcement from the Bank of Japan (BOJ) at the conclusion of a two-day monetary policy review from the Japanese central bank on 28-29 July 2016.
US stocks eked out small gains during the previous trading session on Friday, 22 July 2016, after an upbeat manufacturing report. Markit’s preliminary reading of its manufacturing purchasing managers index came in at 52.9 for July 2016 a final reading of 51.3 for June 2016, as production and employment strengthened. Payrolls rose at the fastest pace in a year.
The Federal Open Market Committee (FOMC) is widely expected to keep the benchmark fed funds rates unchanged after the conclusion of two-day monetary policy meeting on 26-27 July 2016. Market participant will scrutinize the Fed statement to gauge the outlook on US monetary policy. The Fed has kept the benchmark fed funds rate unchanged after raising it for the first time in nearly a decade in December 2015.
Stocksof public sector banks edged higher. Punjab National Bank (up 4.37%), Bank of India (up 2.78%), Indian Bank (up 2.65%), Union Bank of India (up 2.37%), State Bank of India (up 1.36%), IDBI Bank (up 1.32%) and United Bank of India (up 1.53%) rose.
Bank of Baroda (BoB) was up 1.49%. The state-run bank during market hours today, 25 July 2016, announced that the Reserve Bank of India (RBI) has imposed a penalty of Rs 5 crore on the bank. Pursuant to the internal audit of BoB, the central bank and investigative agencies in October 2015 were advised by BoB of certain irregularities observed. The RBI carried out the investigation and noted the deficiencies which were reflective of weaknesses and failures in internal control mechanisms in respect of certain AML provisions such as monitoring of transactions, timely reporting to FIU, and assigning of UCIC to customers. BoB said it has fully cooperated with the RBI during the process, leading to the conclusion of its findings. BoB said it has implemented a comprehensive corrective action plan, to strengthen internal controls and to ensure that such incidents do not recur.
Stocks of private sector banks witnessed a mixed trend. IndusInd Bank (up 0.57%) and ICICI Bank (up 0.28%) edged higher. Kotak Mahindra Bank (down 1.1%) and Yes Bank (down 0.75%) edged lower.
Index heavyweight HDFC Bank was down 0.01% at Rs 1,231.30. The stock hit a high of Rs 1,235.95 and a low of Rs 1,225.25 so far during the day.
Axis Bank edged lower after the private sector bank reported weak Q1 June 2016 results. The stock was down 2.06% to Rs 526.45. Axis Bank’s net profit fell 21.37% to Rs 1555.53 crore on 13.22% growth in total income to Rs 13852.18 crore in Q1 June 2016 over Q1 June 2015. The fall in net profit was due to a sharp surge in provisions and contingencies. Provisions and contingencies jumped 88.73% to Rs 2117.17 crore in Q1 June 2016 over Q1 June 2015. On a sequential basis, provisions and contingencies surged 81.21%. The bank’s net interest income rose 11.36% to Rs 4516.92 crore in Q1 June 2016 over Q1 June 2015. The net interest margin (NIM) declined to 3.79% in Q1 June 2016 from 3.81% in Q1 June 2015. Axis Bank’s management reiterated in a post result conference call that NIM is expected to remain above 3.6% as per the guidance given before.
The core operating profit rose 3.27% to Rs 3558.19 crore in Q1 June 2016 over Q1 June 2015. The figure of core operating profit is arrived at after deducing trading income from operating profit.
On absolute basis, Axis Bank’s gross non-performing assets (NPA) edged higher to Rs 9553.17 crore as on 30 June 2016 from Rs 6087.51 crore on 31 March 2016 and Rs 4251.18 crore as on 30 June 2015. The ratio of gross NPA to gross customer assets edged higher to 2.54% as on 30 June 2016 from 1.67% as on 31 March 2016 and 1.38% as on 30 June 2015. The ratio of net NPA to net customer assets edged higher to 1.08% as on 30 June 2016 from 0.7% as on 31 March 2016 and 0.48% as on 30 June 2015.
Axis Bank attributed increase gross and net NPA to slippages from its watch list loans. As on 30 June 2016, loans outstanding on the bank’s watch list reduced 10% over the previous quarter and stood at Rs 20295 crore. The reduction in the watch list primarily represents slippages to NPAs amounting to Rs 2680 crore, which comprises 92% of the total corporate credit slippages. The bank’s provision coverage ratio declined to 69% as on 30 June 2016 from 72% as on 31 March 2016.
The cumulative value of net restructured assets as on 30 June 2016 stood at Rs 7363 crore, constituting 1.99% of net customer assets, compared to Rs 8072 crore, constituting 2.25% of net customer assets as on 31 March 2016.
The bank’s advances grew 21% year-on-year (YOY) to Rs 3.44 lakh crore as on 30 June 2016. Retail advances grew 24% YOY and stood at Rs 1.43 lakh crore, constituting 41% of the net advances of the bank. Corporate credit grew 21% YOY and stood at Rs 1.58 lakh crore, constituting 46% of net advances. SME advances grew 13% YOY and stood at Rs 43611 crore as on 30 June 2016. Axis Bank said that the bank remains well capitalized to pursue growth opportunities. The bank expects credit growth to be around 18-20% in FY 2017. The bank expects SME growth to be better in FY 2017 compared to FY 2016. The guidance for credit cost is 125-150 basis points for FY 2017. The guidance on credit growth and credit cost was given by the management in a post result conference call.
Cement stocks edged higher. Shree Cement (up 0.59%) rose. UltraTech Cement (down 0.42%) edged lower.
ACC was up 0.15%. The company is scheduled to announce its Q2 June 2016 results tomorrow, 26 July 2016.Ambuja Cements was up 0.23%. The company is scheduled to announce its Q2 June 2016 results tomorrow, 26 July 2016.Grasim Industries was down 0.12%. Grasim has exposure to cement sector through its holding in UltraTech Cement.Rallis India advanced 4.9% to Rs 219.40 after consolidated net profit surged 310.9% to Rs 174.20 crore on 45.4% rise in total income to Rs 610.31 crore in Q1 June 2016 over Q1 June 2015. The profit was boosted by an exceptional item of Rs 158 crore in Q1 June 2016 comprising profit on assignment of leasehold rights to a plot of land in the MIDC area, Turbhe, Navi Mumbai to Ikea India. The profit is net of costs including a premium levied under the repealed Urban Land (Ceiling and Regulation) Act 1976, which was paid under protest. The result was announced after market hours on Friday, 22 July 2016.