Stocks
Nifty, Sensex may try to rally – Weekly closing report
Nifty is on a short-term support level. If it does not go below this week’s low, Nifty may rally to 7850 or higher subject to dips
 
 The S&P BSE Sensex closed the week that ended on 17th October at 26,109 (down 189 points or 0.72%), while the NSE's CNX Nifty ended at 7,780 (down 80 points or 1.02%). Last week, we had mentioned that the move on Nifty may remain weak and it may go below 7,800 in the absence of triggers. From here if Nifty manages to hold above this week’s low, it may rally to 7,850 or higher subject to dips.
 
 Except for the sudden upsurge little before 2.00pm the Nifty witnessed a gradual up move after a weak opening on Monday. Nifty closed at 7,884 (up 24 points or 0.31%). Market awaited the combined consumer price indices (CPI) for urban and rural India for September 2014. IMF meetings in Washington last weekend showed differing opinions over how much more stimulus the euro-area economy needs from the European Central Bank.
 
 The gain of Monday was almost reversed on Tuesday. Nifty closed at 7,864 (down 20 points or 0.26%). Data released by the union government after trading hours on Monday showed the annual rate of inflation based on the combined consumer price indices (CPI) for urban and rural India eased to 6.46% in September 2014, from 7.73% in August 2014. The rate of inflation based on the combined consumer food price indices (CFPI) for urban and rural India eased to 7.67% in September 2014, from 9.35% in August 2014. Core CPI inflation, which excludes food and energy prices, eased to 5.9% in September 2014, from 6.82% in August 2014. September 2014 quarter result of Reliance Industries showed that although the bottom line recorded  increase on year on year basis, the sales fell for the relevant period.
 
 The Wholesale Price Index (WPI) data was released on Tuesday. The continuing decline in food prices, including vegetables, pulled down the September wholesale price inflation to a five-year low of 2.38%.
 On Wednesday, stock exchanges were closed on account of assembly elections.
 
 On Thursday, market moved in the negative for most of the session trading closer to Tuesday’s closing except for major pull down nearing the end of the session. Nifty closed at 7,748 (down 116 points or 1.47%).
 
While India's merchandise export rose 2.7%, the merchandise imports surged at more than two-and-half year pace of 26% resulting in the trade deficit to more than double to $14.25 billion in September 2014 from $6.12 billion in September 2013, while also galloped from $10.84 billion in August 2014.
 
 Market now awaits the results of the assembly elections in Maharashtra and Haryana. The counting of votes for elections in both these states takes place on Sunday and the results will be out on the same day.
 
 On Friday by the end of the morning session Nifty regained its strength and marched higher. However in the last few minutes of trading it gave up some intra- day gains. Nifty closed at 7,780 (up 32 points or 0.41%).
For the week, among the other indices on the NSE, the top two performers were PSU Bank (3%) and Bank (3%) while the worst two performers were Realty (10%) and IT (5%).
 
Out of the 27 main sectors tracked by Moneylife, top five and the bottom five sectors for this week were:
 
 

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Nifty, Sensex may enjoy short bounce – Friday closing report
If Friday’s low hold, Nifty may rally higher on Monday
 
The Indian market which was trading directionless for almost the entire morning session suddenly caught up strength around 11.30 am and marched higher for rest of the session. However, during the last few minutes of the session, the indices fell from the day’s high giving up almost half of the intraday gains. We had mentioned Thursday that NSE's CNX Nifty can dip a bit more and stabilise at the current level. However, any rally from here will be short-lived.
 
S&P BSE Sensex opened at 25,950 while Nifty opened at 7,734. Sensex moved from the low of  25,911 to the high of 26,249 and closed at 26,109 (up 109 points or 0.42%) while CNX Nifty moved from the 7,724 to 7,819 and closed at 7,780 (up 32 points or 0.41%). NSE recorded a volume of 75.75 crore shares. India VIX fell 0.20% to close at 16.4000.
 
Reserve Bank of India (RBI) Governor Raghuram Rajan said in an interaction with students of the Indian School of Business on Thursday that “We really need a financial resolution authority so that we can close financial institutions in trouble, without necessarily merging those and taking the losses. We need to clean institutions…while resurrecting those functioning well. FRA will be the entity that will do it.”
 
Emami (6.04%) was the top gainer in ‘A’ group on the BSE. The stock hit its 52-week high today. Its September 2014 quarter shareholding pattern saw an increase in the FIIs holding to 17.23% from 16.77% in June 2014 quarter and the DIIs holding increased from 1.33% to 1.43% in the relevant period.
 
CMC (14.40%) was the top loser in ‘A’ group on the BSE. After market hours on Thursday it posted its September 2014 quarter result. It posted a net profit after tax of Rs52.12 crore for the quarter ended September 2014 as compared to Rs 47.76 crore for the quarter ended September 2013. Revenue increased from Rs 284.51 crore for the September 2013 quarter to Rs 315.43 crore for September 2014 quarter.
 
Hero MotoCorp (3.05%) is among the top two gainers in Sensex 30 pack. It posted a net profit of Rs 763.37 crore for the quarter ended September 2014 as compared to Rs 481.41 crore for the quarter ended September 2013. Revenue increased from Rs 5,726.21 crore for the quarter ended September 2013 to Rs 6,915.34 crore for the quarter ended September 2014.
 
TCS has obtained its board's approval to merge its public listed subsidiary CMC with itself. As per the scheme of arrangement, shareholders of CMC will receive 79 equity shares of Re1 each of TCS for every 100 equity shares of Rs10 each of CMC held by them. After posting fall in the net profit for September 2014 quarter over September 2013 quarter. The stock was the top loser (8.73%) in Sensex 30 stock.
 
US indices closed  Thursday flat.
 
St. Louis Federal Reserve Bank President James Bullard said policy makers should consider delaying the end of bond purchases to halt the decline in inflation expectations.
 
The National Association of Home Builders (NAHB)/Wells Fargo housing market index fell unexpectedly last month, official data showed on Thursday. In a report, NAHB said that NAHB Housing Market Index fell to 54, from 59 in the preceding month.
 
Except for Shanghai Composite (0.65%), Nikkei 225 (1.40%), Seoul Composite (0.95%) and Taiwan Weighted (1.40%) all the other Asian indices closed in the green. Jakarta Composite (1.56%) was the top gainer.
 
European indices were trading in the green. US Futures too were trading higher.
 
German Chancellor Angela Merkel told lawmakers in Berlin yesterday, that existing economic aid had been underused and now wasn't the moment to ease up on the fiscal discipline she credits with bringing stability to the continent. 

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SBI Chief Tries to Shift the Blame on NPAs
Blames lax regulations for high NPAs when the real cause is widespread corruption in public sector banks
 
The State Bank of India (SBI) chairperson Arundhati Bhattacharya, in an interview with Financial Times, has called for shake up in the regulatory system, as if SBI and its chairman is an outside to the same system.
 
In the interview, the SBI chief admitted that rates of bad and restructured assets will keep rising for “at least a couple more quarters”, despite having already hit roughly 10% of loans. 
 
But remarkably for the first time for a chairman of a government-owned bank, she has argued that India needs tougher rules for defaulters, as well as “a proper bankruptcy law to help get orderly resolution of [bad] assets”. “What we need is a little more teeth,” she was quoted while calling for firmer regulations to target indebted tycoons. 
 
There are three things to note about this new, sudden demand for teeth. 
 
1. No chairman of state-run lender has ever raised his or her voice about poor regulations that is failing to curb the ever-rising non-performing assets (NPAs).
 
2. SBI and other banks have never targeted defaulting corporate borrowers with determination to recover monies. Indian borrowers have always felt safe borrowing from the public sector banks knowing fully well that chairmen of these banks have no accountability. 
 
3. In fact, successive bank chairperson have passed the buck to the next person and retired with full benefits, even as defaults continued to hit the government-owned banks at every economic downturn.
 
4. The demand for “more teeth” is coming from the State Bank of India but not private sector banks because these banks have negligible bad debts.
 
5. This merely proves that it is not the recovery laws but lax credit appraisal and totally compromised top management is responsible for abnormally high bad debts in government banks.
 
Indeed, the same corrupt nexus between public sector banks and it's defaulting borrowers was responsible for band loans reaching 13% of advances in 2001-2002. In response, the government had created Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI), 2002 designed to help in the recoveries of bad loans. One of the key provisions of the Act is for banks to be able to auction the assets of defaulting borrowers. This law was supposed to wholly aid banks. 
 
Unfortunately, if the bank officials are corrupt and have lent money without adequate collateral, what auctions will they do? This is why spectacular defaults such as Deccan Chronicle and Kingfisher Airlines have led to no action against defaulters, despite the SARFAESI Act. In addition, SBI has been the biggest lender to Kingfisher. Have you heard of any action against any SBI official, including previous chairman, for what is obviously gross negligence in assessing Kingfisher’s creditworthiness and for not ensuring that the bank’s interests are covered?
 
In May, the All India Bank Employees' Association (AIBEA), while revealing wilful defaults worth Rs70,300 crore in 400 loan accounts in public sector banks (PSBs), has demanded a detailed probe in to the loan sanctioning and loans turning into bad assets. 
 
This is bad lending of epidemic proportions. If banks were not confident of the laws that would land them in this huge soup of bad loans, whom did they point this out to and why did they lend? No, these bad loans have only one root: corruption, something that Ms Bhattacharya does not want to talk about.
 
According to the bank employee's union, over the past seven years, there were fresh bad loans worth Rs4.95 lakh crore only in government banks, while during the same period, these lenders wrote off bad debts worth Rs1.4 lakh crore. Gross non-performing assets (NPAs) and bad loans in the PSBs have increased to Rs1.64 lakh crore as on 31 March 2013 from Rs39,000 crore as on 31 March 2008.
 
While the unions were demanding stern action against bank defaulters, not a single bank chairman supported it. Moneylife had asked the SBI chief three questions based on her FT interview. The questions were, did not SBI know that the laws were weak; did banks ever tell the RBI or the Finance Ministry about the problems and is SBI saying that the RBI has failed to act like responsible regulator?
 
Her office replied: "(the) Chairman in her interview had merely emphasized the need for tougher resolution mechanism to put a check on wilful defaulters. Additionally, she also said banks should work in tandem and more closely in consortiums, while lending only to projects that have government regulatory clearances in hand." It also said, "...to draw a link between the 3 questions that you have posed and the relevant interview is far-fetched."
 
The bank employee unions have been demanding fix responsibility on banks’ top brass for the loans that have turned bad, allow banks to share information on NPAs and wilful defaulters under the Right to Information (RTI) Act, and declare wilful loan default as a criminal offence. 
 

The fact is despite stringent credit appraisal process and committees to sanction loans, borrowers have siphoned off money from the banking system in connivance with bankers. Once this reaches large proportions that affect the functioning of the banks, the ministry of finance quietly steps in and washes the sins of the banks by recapitalizing them, even as chairman after chairman go scot free.

 

There is a reason for this perpetual lack of accountability of senior bank officials. Some chairmen are handpicked by ministry and finance minister for their ability to be pliant and sanction dirty loans. The Reserve Bank merely rubber-stamps this selection process. Who will go after the chairman when the MoF is involved and the RBI is hand-off? This is the root of bad loans in India, not lax regulations that Ms Bhattacharya tries to blame.

 

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COMMENTS

Yerram Raju Behara

3 years ago

Strange really is the demand for stringent regulations to curb the menace of growing NPAs. In fact, both the representatives of the RBI and GoI (Finance Ministry) sit on the public sector Banks' Boards. Most proposals that have now touched the gates of NPAs are sanctioned by the Board and NPAs are reviewed at quarterly meetings. What are these nominated Directors doing on the Board? There should be accountability for dereliction of duty of these nominated directors if they have not opened their mouths except for taking the snacks and tea or fatty lunches at the Board meetings. It is high time that the regulatory arbitrage is curbed. Regulations are clear. Neither the Bank Chairmen nor the Directors cared for remedying the situation except crying in public over what the four fingers point out against them.

Sunil Pratap

3 years ago

It is really no Corporate accountability at it's worst in all the PSU Banks. They need tougher actions internally to deal with NPA's.

Sunil Pratap

3 years ago

It is really no Corporate accountability at it's worst in all the PSU Banks. They need tougher actions internally to deal with NPA's.

Sunil Pratap

3 years ago

It is really no Corporate accountability at it's worst in all the PSU Banks. They need tougher actions internally to deal with NPA's.

TIHARwale

3 years ago

By the month end Public Sector Banks are expected to come out with half yearly results. Information is that all PSBs are going to report double digit MPA figures. All big ticket loans above Rs 3 Crores need to inspected physically by Controlling office and every month Zonal Offices have Credit Monitoring Review Dept, so inspite of all this all tHese years if NPA was not much because Branch Heads used to tamper with reporting figures with full backing of Controlling offices. Ever since Raghuram Rajan became head RBI is seeking system generated information so all the rot is coming out. So today SBI Chief has come out in open. Other PSB heads also will come out shortly because they are also holding huge NPAs. Rather thanks to corrupt Management and Union the ordinary staff is waiting for a wage revision for now almost 2 years thanks to massive NPAs they may not get even 2% per annum raise thro wage revision. Officers cannot escape their ignorance of credit monitoring or corrupt practices. As regards to Clerical staff less said better who are lambs who follow Union leaders because Unions encourage rowdyism and Branch heads are helpless and are forced to buy industrial peace by allowing credit facilities to persons with whom they have unhealthy dealings.

SuchindranathAiyerS

3 years ago

The truth is the first casualty of the Indian Republic i.e. the Quota-Corruption Raj run by the Neta-Babu-Cop-Milard-Crony Kleptocracy!

Ananthanrayanan Ranganathan

3 years ago

The SBI Chairperson's solution for reining in NPAs by asking for more 'teeth' in regulations is to say the least comical.

It is tantamount to saying there is a law to hang a thief if caught, therefore keep your doors open so that if a thief enters you may hang him!

What is required is more dedication from the lending officers to the Banks they serve. They must ask themselves if they will sanction a facility to a Customer if the money is coming from their pockets

Ravindra Shetye

3 years ago

Unlessrging.the Govt takes quick action on the few who are already caught there will not be much effect of the Modi wave. The CORRUPT only learn from examples. And the examples of CORRUPTs, especially BANKERS loosing their ASSETS and GOING BEHIND the BARS are created, the new CORRUPTs will keep on eme

Ravindra Shetye

3 years ago

Unlessrging.the Govt takes quick action on the few who are already caught there will not be much effect of the Modi wave. The CORRUPT only learn from examples. And the examples of CORRUPTs, especially BANKERS loosing their ASSETS and GOING BEHIND the BARS are created, the new CORRUPTs will keep on eme

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