The banking sector, which has seen the NPAs more than doubling to Rs 7.33 lakh crore in June 2017 from Rs 2.75 lakh crore in March 2015.
Hyderabad: A day after the government has announced a Rs 2.11 lakh crore recapitalisation plan, the stock markets have responded positively with Sensex gaining over 435 points to end 33,042. 5 points while the broader NSE has 87.65 points to end the day at 12,295 points.
The banking sector, which has seen the NPAs more than doubling to Rs 7.33 lakh crore in June 2017 from Rs 2.75 lakh crore in March 2015, has seen some share prices rising significantly.
Punjab National Bank gained 46.2% on Wednesday to Rs 201.9, up Rs 63.8, from the previous close of Rs 138.1. PNB added Rs 12,789.68 crore to Rs 42,963.68 crore in market valuation.
Among others, Canara Bank gained 38%, Union Bank (34%), Bank of India (33.9%), Bank of Baroda soared 31.4%, State of Bank of India (27.5%), Oriental Bank (27.1%) Allahabad Bank (22.7%), Indian Bank (21.4%), IDBI (20%), UCO Bank (19.7%), Andhra Bank (18.9%), Syndicate Bank (17.3%) and Bank of Maharashtra gained 16%.
Private lenders such as ICICI Bank rose sharply by 14.69 per cent and AXIS Bank gained 4.61 per cent. Led by the gains in these stocks, the BSE bank index rose by 4.71 per cent to end at 28,329.12.
Infrastructure, construction and allied segments too gained from 5.6% to 10%.
As banking and financials have a lion’s share of the indexes of both BSE and NSE, there could be a big boost in the index performance going forward, said Bala Prabala, Research Head, PCS Securities.
“Recapitlaisation is a booster for the ailing banking sector and a slowing economy. With this, the public sector banks can now meet the capital adequacy ratio and lend aggressively. Bharatmala project with massive outlays could lead to employment generation,” said Bala adding that the building material, construction, infrastructure, commercial vehicles, earth moving equipment and capital goods will see the demand rising.
Non-agriculture credit offtake could take off on a solid ground resulting in a faster GDP growth and create new jobs. As a corollary, the consumption led themes, both discretionary and staples, will benefit, though with a small lag effect. “New investors can wait for stability and pick up the big names in government banks and also in the sectors mentioned above,” he said.
“PSU banking has seen the highest rally in NAV of 25% in a single day. Investors are ready to invest more in equity. However, heed should be paid to asset allocation,” he said MS Shabbir, managing director of Hyderabad-based SenSage Financial Services.
The stimulus package should be seen together with the Government plans for developing 80,000 km road network. “It needs to be seen how the credit offtake will rise as several companies seem to be focused on optimising their existing capacities before going for new projects,” said Jagannadham Thunuguntla, head of fundamental research, Karvy Stock Broking.
Focus of fund managers will move away from oil and gas and telecom to banking sector. “Capital market is expanding and booming, which sooner or later get converted into a bubble. Volatility is certain,” said Shabbir of SenSage.
NCC Limited’s company’s share price gained 6.36% to end at Rs 107.9 from the previous close of Rs 101.45.
“The proposed road network will run through economic corridors as well as remote border and coastal areas. This is a welcome sign for infrastructure and construction companies as very robust order inflows can be expected from the roads sector,” said YD Murthy, Executive Vice President-Finance.
Source by telanganatoday..