According to foreign brokerage Jefferies, while weak GDP poses risk to credit growth, banks can see steady growth as they leverage on deposit franchise and borrower-friendliness of loans over bonds.
The Indian equity markets on Wednesday broke their four session winning streak by ending the day in the red on profit booking a day ahead of the monthly expiry and weak global cues. The benchmark Sensex declined by 561.45 points, or 1.58%, to close at 34,868.98. The 50-share index Nifty declined by 165.7 points, or 1.58%, to close at 10,305.3.
The stocks globally tanked after Dow Jones Mini futures slipped into the negative territory as investors on Wall Street started re-focusing on the rise of novel coronavirus cases. The Dow Jones mini futures were down by 217 points at the time of press. The European stock markets in Germany, France and the United Kingdom were down between 1.58% to 2.11%. The exiting of lockdowns by countries globally has led to a surge in novel coronavirus cases. Many states in the US have seen a rise in Covid-19 cases which is making the investors and subsequently, the stock markets wary. In stark contrast, the bourses in Asia made gains with benchmarks in China, Taiwan, and South Korea rising between 0.3% to 1.62%. However, the Hang Seng index which is Hong Kong’s benchmark declined by 0.5%.
Deepak Jasani, head of retail research, HDFC Securities, said, “Indian benchmark indices corrected sharply on Wednesday after making a new near term high in the morning session. Profit taking, weak European markets and key technical retracement resistance resulted in the sell-off.”
The Indian benchmarks, which started the day with a strong session with Nifty touching a new high of 10,553, but the rally fizzled out towards the last two hours of trade with negative global cues leading to the benchmark Nifty closing at the day’s low point. The sell-off in the market was led by the financial stocks with Nifty Bank declining as much as 3.76% in the day’s trading session. The biggest losers on Nifty Bank were ICICI Bank, IndusInd Bank, Bandhan Bank, Federal Bank, and State Bank of India, down by 7.12%, 6.64%, 5.66%, 4.96%, and 4.13%, respectively.
Stock price of Bank of Baroda rose by 2.28% after the street lauded its results.
According to foreign brokerage Jefferies, while weak GDP poses risk to credit growth, banks can see steady growth as they leverage on deposit franchise and borrower-friendliness of loans over bonds. “The latter is 26% of system credit, but could lose attractiveness due to rigidity on servicing and volatility in inflows for their subscribers. We expect bond markets to see 10% fall in AUMs in FY21 and some growth next year. Larger private banks and SBI will benefit most from share gains,” said Jefferies in its report.
Foreign portfolio investors (FPIs) have remained buyers in the Indian equities in June after selling stocks all throughout March to May. On Wednesday, FPIs bought stocks worth $232.4 million, provisional data shows whereas domestic institutional investors sold stocks worth $200.6 million. The inflows through FPIs stood at $2.8 billion in total. According to a report by Kotak Institutional Equities, ‘flows’ and ‘liquidity’ will not have any relevance for prices or fair values of stocks. “Stock prices move on changes in expectations of the future and the several variables that determine prices (same holds for value) which can be reduced to future cash flows,earnings and cost of capital,equity in a simple DCF framework,” said the brokerage.
The biggest losers on Nifty were ICICI Bank, IndusInd Bank, Powergrid Corporation, Hindalco, and Zee Entertainment, down by 7.12%, 6.64%, 5.09%, 4.58%, and 4.37%, respectively. The biggest gainers on Nifty were Asian Paints, ITC, Eicher Motors, Hero MotoCorp, and GAIL, up by 3.81%, 3.36%, 3.12%, 2.94%, and 2.92%, respectively. All sectoral indices barring Nifty FMCG closed in the negative with Nifty Private Bank, Nifty Bank, Nifty Financial Service, Nifty Media, and Nifty Pharma correcting the most. The Nifty Midcap and Nifty Smallcap were down by 1.41% and 1.8%, respectively.