Stocks
Nifty, Sensex may struggle to head higher – Wednesday closing report
We had mentioned that Nifty, Sensex momentum continue to be up in Tuesday’s closing report. The major indices of the Indian stock markets ended flat on Wednesday after listless trading. The trends of the major indices in the course of Wednesday’s trading are given in the table below:
 
 
Profit booking, coupled with disappointing macro-economic inflation data and lower crude oil prices, subdued the Indian equity markets on Wednesday. Consequently, the key indices closed the day's trade on a flat note, as heavy selling pressure was witnessed in automobile, consumer durables and capital goods stocks. The NSE Nifty market breadth was skewed in favour of the bears -- with 17 advances and 34 declines.
 
Initially the benchmark indices opened on a higher note, in-sync with their Asian peers. However, equity markets soon ceded their initial gains, as profit booking hampered the upward trajectory. Besides, lower crude oil prices, weak rupee and disappointing inflation figures for June eroded investors' confidence. Nevertheless, healthy progress of monsoon season, expectations of robust quarterly results, recapitalisation of state-run banks supported prices at the lower levels. Profit booking ahead of key event risks and disappointing inflation figures dragged the Indian equity markets lower. However, good progress of monsoon season, expectations of healthy quarterly results, more economic reforms supported prices at the lower levels. Nifty traded on a flat note due to profit booking at higher levels. Banking and pharma sector stocks traded with mixed sentiments on profit booking.
 
The Cabinet on Wednesday approved 15% divestment of the government's stake in National Buildings Construction Corporation Limited (NBCC) aiming to collect approximately Rs1,706 crore. “The Cabinet Committee on Economic Affairs, chaired by Prime Minister Narendra Modi, has approved the disinvestment of 15% paid up equity of NBCC out of government’s 90% shareholding,” the Union Finance Ministry said in a statement. The balance 10% of the equity is held by the public. “It would result in estimated receipts of approximately Rs1,706 crore to the government. However, the actual realisation amount will depend upon the market conditions and the investor interest prevailing at the time of actual disinvestment,” the statement said. The government aims to generate Rs56,500 crore through disinvestment in PSEs this financial year. During 2015-16, the government could manage to meet less than half the budget estimates at Rs25,312 crore as against the target of Rs69,500 crore. "The disinvestment would broadbase NBCC's shareholding and enhance the disinvestment receipts for making them available to the government for utilisation as per disinvestment policy," the statement added. NBCC India shares closed at Rs229.80, down 10.72% on the BSE.
 
The top gainers and top losers of the major indices are given in the table below:
 
 
The closing values of the major Asian indices are given in the table below:
 

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Fund crunch will limit PSB growth at 9%, slowest in past two decades
Limited availability of growth capital for public sector banks (PSBs) could pull down their loan growth trajectories to a CAGR of 9% over FY16-FY19, says India Ratings and Research (Ind-Ra). 
 
This growth is the bare minimum needed to generate sufficient spreads that can absorb our expected operating and credit costs over this period, the ratings agency says. 
 
Ind-Ra says, "The growth is likely to be lower at 8.1% over FY16-FY19 for mid-sized PSBs with a few banks witnessing a loan book decline. Even for this growth, Ind-Ra estimates the average Tier-1 capital needed during FY17-FY19 to be around 22% of FYE16 CET (36% for mid-sized PSBs). This estimate is over and above the capital committed under Indradhanush programme."
 
While Ind-Ra says its expectation of limited credit demand beyond the refinancing requirements of levered corporates appears to be largely in line with the estimated credit supply for FY17, a sustained moderation in PSBs' credit growth is likely to start impacting the nominal gross domestic product pick-up for FY18-FY19.
 
The ratings agency expects non-performing loan (NPL) aging to keep credit costs for PSBs at elevated levels of 170-180 basis points (bp) in FY17 compared with 280bp in FY16, continuing the pressure on profitability and consequently, some PSBs would continue to report losses in FY17. 
 
Following the asset quality review (AQR) by the Reserve Bank of India (RBI) during first half of FY16, a sizeable proportion of NPLs, including slippages from FY15, is likely to shift to the next classification bucket over FY17-FY18, attracting higher provisioning. The quantum of fresh slippages from the large corporate exposure may come down during FY17-FY18, the ratings agency feels.
 
Ind-Ra says it expects un-provided non-fund-based exposures of large stressed accounts to continue to pose a threat to profitability for FY17-FY18. "However, the AQR exercise has ensured recognition of impaired loans and higher provisioning for cyclical sectors in deep stress, such as iron and steel, and a large proportion of stressed corporates that are yet to be provided for now belong to the infrastructure sector. Hence, stress resolution with a going concern approach,  such as the Scheme for Sustainable Structuring of Stressed Assets (S4A) may prove to be effective," it added.
 
Ind-Ra's support floor for PSBs remains unchanged as the agency expects, even under severe stress scenario, the potential equity requirement or the bailout cost, to avoid approaching the point of non-viability triggers, to be manageable at Rs8,500 crore to Rs10,000 crore. This, the agency says, however, could change if the government of India changes its support stance. 
 
The agency believes that the chances of additional tier 1 (AT1) coupon deferral remain high for banks with depleted reserves. It says, "Elevated credit costs are likely to keep profits subdued which would put PSBs with low, or in some cases non-existent, revenue reserves under pressure. However, we believes that the ability to service AT1 bonds varies widely within PSBs with a few banks benefitting from having built significant retained earnings over the years and a few with their stronger standalone profiles."
 
Ind-Ra estimated that at this projected growth PSBs still require a Tier-1 capital of Rs1.2 lakh crore over FY17-FY19 including Rs40,000 crore in common equity tier 1 and Rs71,000 crore in AT1 bonds. The need for a pickup in AT1 market remains critical to managing the capital availability through the Basel-III transition. A mere Rs18,000 crore of AT1 bonds have been issued so far, with insurance and pension funds, which have the requisite liability profile and risk appetite to invest in these instruments, keeping away on account of regulatory hurdles and inadequate price discovery. 
 
Ind-Ra believes that barring a few large PSBs, most banks are looking to consolidate their balance sheets, reduce risk-weighted assets, and preserve capital.
 
 

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Cabinet approves 15% stake sale in NBCC
The Cabinet here on Wednesday approved 15% divestment of the government's stake in National Buildings Construction Corporation Limited (NBCC) aiming to collect approximately Rs1,706 crore.
 
“The Cabinet Committee on Economic Affairs, chaired by Prime Minister Narendra Modi, has approved the disinvestment of 15% paid up equity of NBCC out of government’s 90% shareholding,” the Union Finance Ministry said in a statement.
 
The balance 10% of the equity is held by the public.
 
“It would result in estimated receipts of approximately Rs1,706 crore to the government. However, the actual realisation amount will depend upon the market conditions and the investor interest prevailing at the time of actual disinvestment,” the statement said.
 
The government aims to generate Rs56,500 crore through disinvestment in PSEs this financial year.
 
During 2015-16, the government could manage to meet less than half the budget estimates at Rs25,312 crore as against the target of Rs69,500 crore. 
 
"The disinvestment would broadbase NBCC's shareholding and enhance the disinvestment receipts for making them available to the government for utilisation as per disinvestment policy," the statement added.
 
It has also been decided to allot additional shares to the eligible and willing NBCC employees at a discount of 5% to the issue, it said.
 
NBCC was incorporated on 5 November 1960 as a wholly owned government enterprise with the objective of becoming a leading company in the field of construction, engineering and project management consultancy services.
 
The NBCC IPO (initial public offer) was launched in March, 2012, when the government divested 10% paid up equity capital of NBCC out of its 100% shareholding and got the company listed on the stock exchanges. 
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

 

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