Stocks in Asia were mixed as Japan retreated with the yen trading close to a five-month high and as investors keenly awaited the U.S. inflation report after the selloff in global stock and bond markets.
The Singapore-traded SGX Nifty, an early indicator of NSE Nifty 50 Index’s performance in India, rose 0.6 percent to 10,531 as of 6:50 a.m.
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Here’s a quick look at all that could influence equities on Wednesday.
- U.S. stocks advanced while the dollar fell and Treasuries rose as financial markets looked ahead to Wednesday’s inflation report.
- Volatility levels remained elevated even after stocks’ modest recovery of the past few days, showing continued unease after the rout that wiped $2 trillion from U.S. shares last week.
- Consumer-price data due Wednesday could give some clues on where markets are heading, given that pressure on equities has been emanating from the outlook for inflation.
- Hedge funds and other large speculators have boosted bets on Treasury futures to a record, indicating they expect the 2018 bond-market rout will resume in the days ahead.
- An investor at Goldman Sachs Asset Management warned 10-year yields could rise to as high as 3.5 percent in the next six months as the market prices in a steeper pace of Federal Reserve tightening.
- European equities resumed declines on Tuesday as the U.S. market wavered before a closely watched inflation report.
- Japan’s Topix index added 0.2 percent, while the Nikkei 225 Stock Average added 0.2 percent.
- Australia’s S&P/ASX 200 Index fell 0.2 percent. The Kospi index rose 0.7 percent.
- Futures on Hong Kong’s Hang Seng Index advanced 0.5 percent.
- S&P 500 futures rose 0.1 percent.
- The MSCI Asia Pacific Index rose less than 0.1 percent.
Here are some of the key events scheduled for this week:
- 12pm: India Jan. Wholesale Price Inflation YoY; Estimate 3.20 percent (prior 3.58 percent)
- The Bank of Thailand will probably hold its benchmark rate at 1.5 percent on Wednesday, according to economists surveyed. Inflation, already below the target range, is slowing further on the stronger baht.
- Lunar new year celebrations for the Year of the Dog begin, affecting China, Hong Kong, Taiwan, Singapore, Malaysia and Indonesia. Chinese mainland markets are closed Feb. 15-21.
- The U.S. consumer-price index probably increased at a moderate pace in January, economists project. Retail sales in the U.S., also out Wednesday, probably increased for a fifth straight month.
- Earnings season continues in full swing with reports including companies from Bunge to Nestle.
- West Texas Intermediate crude slipped 0.2 percent to $59.05 a barrel.
- Gold rose 0.2 percent to $1,332.21 an ounce, up for a third day.
- Brent crude snapped seven-day losing streak and ended marginally higher at 62.72/ barrel; up 0.2 percent.
- Sugar ended lower at 13.44 cents per pound; down 1.3 percent.
- Steel trades higher for second day
- Aluminium trades lower; down 0.2 percent.
- Zinc trades higher for second day; up 2 percent.
- Copper trades higher for second day; up 1.4 percent.
- Rubber trades lower for second day; down 0.1 percent.
Nifty Earnings To Watch
- Sun Pharmaceuticals
Other Earnings To Watch
- 8K Miles Software Services
- Allahabad Bank
- Apollo Hospitals Enterprise
- Balkrishna Industries
- Cox & Kings
- Dena Bank
- Godrej Industries
- Grasim Industries
- Indo Count Industries
- Infibeam Incorporation
- Jet Airways
- Nestle India
- NLC India
- Repco Home Finance
- Speciality Restaurants
- Sunteck Realty
- Tata Power
- Vivimed Labs
- Welspun Enterprises
Earnings Announced After Monday’s Close
Britannia Industries Q3 (YoY)
- Revenue up 12.5 percent at Rs 25,67.5 crore.
- Net profit up 20 percent at Rs 264 crore.
- EBITDA up 27 percent at Rs 399 crore.
- Margin at 15.5 percent versus 13.8 percent.
Lumax Auto Q3 (YoY)
- Revenue up 26 percent at Rs 277 crore.
- Net profit up 225 percent at Rs 13 crore.
- EBITDA up 65 percent at Rs 28 crore.
- Margin at 10.1 percent versus 7.7 percent.
J Kumar Infra Q3 (YoY)
- Revenue up 24 percent at Rs 457 crore.
- Net profit up 24.5 percent at Rs 33 crore.
- EBITDA up 24.8 percent at Rs 78 crore.
- Margin at 17.1 percent versus 16.9 percent.
GSK Consumer Q3 (YoY)
- Revenue up 20 percent at Rs 1035 crore.
- Net profit up 20.6 percent at Rs 164 crore.
- EBITDA up 21.4 percent at Rs 204 crore.
- Margin at 19.7 percent versus 19.5 percent.
Dollar Industries Q3 (YoY)
- Revenue up 40 percent at Rs 233 crore.
- Net profit up 200 percent at Rs 18 crore.
- EBITDA up 118 percent at Rs 37 crore.
- Margin at 15.9 percent versus 10.2 percent.
NHPC Q3 (YoY)
- Revenue up 14 percent at Rs 1498 crore.
- Net profit up 220 percent at Rs 688 crore.
- EBITDA up 25.5 percent at Rs 784.5 crore.
- Margin at 52.4 percent versus 47.7 percent.
Mirc Electronics Q3 (YoY)
- Revenue down 4 percent at Rs 131 crore.
- Net profit of Rs 3 crore versus net loss of Rs 24.55 crore.
- EBITDA at Rs 8 crore versus loss of Rs 1 crore.
- Margin at 6.1 percent versus -0.7 percent.
Shaily Engineering Plastics Q3 (YoY)
- Revenue up 44 percent at Rs 79 crore.
- Net profit up 200 percent at Rs 6 crore.
- EBITDA up 86 percent at Rs 13 crore.
- Margin at 16.5 percent versus 12.7 percent.
Tide Water Oil Q3 (YoY)
- Revenue up 21 percent at Rs 292 crore.
- Net profit up 26 percent at Rs 29 crore.
- EBITDA up 27 percent at Rs 33 crore.
- Margin at 11.3 percent versus 10.7 percent.
Rupa & Co Q3 (YoY)
- Revenue at Rs 278 crore versus Rs 206 crore.
- Net profit at Rs 24 crore versus Rs 17 crore.
- EBITDA up 26 percent at Rs 41.5 crore.
- Margin at 14.9 percent versus 16 percent.
Minda Corp Q3 (YoY)
- Revenue up 25 percent at Rs 636 crore.
- Net profit up 81 percent at Rs 38 crore.
- EBITDA up 43 percent at Rs 71 crore.
- Margin at 11.2 percent versus 9.7 percent.
Indian Hotels Q3 (YoY)
- Revenue up 6 percent at Rs 1,197 crore.
- Net profit up 16 percent at Rs 108 crore.
- EBITDA up 5 percent at Rs 280 crore.
- Margin at 23.4 percent versus 23.6 percent.
GIC Re Q3 (YoY)
- Gross premium up 8 percent at Rs 8,870 crore.
- Net premium down 2 percent at Rs 7477 crore.
- Net profit of Rs 673 crore versus net loss of Rs 401 crore.
Mukta Arts Q3 (YoY)
- Revenue up 17 percent at Rs 28 crore.
- Net loss of Rs 3 crore versus net loss of Rs 2.5 crore.
- EBITDA unchanged at Rs 0.4 crore.
- Margin at 1.4 percent versus 1.7 percent.
CG Power and Industrial Solutions Q3 (YoY)
- Revenue up 15 percent at Rs 1,516 crore.
- Net loss at Rs 28 crore versus loss of Rs 25 crore.
- EBITDA unchanged at Rs 127 crore.
- Margin at 8.4 percent versus 9.6 percent.
GAIL Q3 (QoQ)
- Revenue up 16 percent at Rs 14,414 crore.
- Net profit down 4 percent at Rs 1262 crore.
- EBITDA down 5 percent at Rs 1970 crore.
- Margin at 13.7 percent versus 16.7 percent.
Motherson Sumi Q3 (YoY)
- Revenue up 35.9 percent at Rs 14,398 crore.
- Net profit down 12.4 percent at Rs 364.5 crore.
- EBITDA up 14.9 percent at Rs 1259.6 crore.
- EBITDA margin at 8.7 percent versus 10.4 percent.
Bank of India Q3 (YoY)
- Net Interest Income down 12.6 percent at Rs 2,501 crore.
- Net loss of Rs 2341 crore versus net profit of Rs 102 crore.
- Provisions for NPA up 134 percent at Rs 4373 crore.
- GNPA at 16.93 percent versus 12.62 percent (QoQ).
- NPA at 10.29 percent versus 6.47 percent (QoQ).
Hathway Cables Q3 (YoY)
- Revenue down 58.6 percent at Rs 139 crore.
- Net profit of Rs 24 crore versus net loss of Rs -44.4 crore.
- EBITDA down 5.5 percent at Rs 60.5 crore.
- Margin at 43.5 percent versus 19 percent.
Mangalam Cement Q3 (YoY)
- Revenue up 25 percent at Rs 292 crore.
- Net profit down 53 percent at Rs 2.7 crore.
- EBITDA down 64 percent at Rs 8 crore.
- Margin at 2.7 percent versus 9.4 percent.
Triveni Engineering Q3 (YoY)
- Revenue up 12 percent at Rs 773 crore.
- Net profit down 21 percent at Rs 60 crore.
- EBITDA down 27 percent at Rs 94 crore.
- Margin at 12.2 percent versus 18.6 percent.
Corporation Bank Q3 (YoY)
- Net Interest Income up 3 percent at Rs 1,264 crore.
- Net loss of Rs 1240.5 crore versus net profit of Rs 159 crore.
- Provisions for NPA down 2 percent at Rs 2,495 crore.
- GNPA at 15.92 percent versus 15.28 percent (QoQ).
- Net NPA at 10.73 percent versus 10.24 percent (QoQ).
PFC Q3 (YoY)
- Net Interest Income down 38 percent at Rs 1,835.5 crore.
- Net profit down 18 percent at Rs 1,604 crore.
UFO Moviez Q3 (YoY)
- Revenue down 7 percent at Rs 139 crore.
- Net profit down 12 percent at Rs 12 crore.
- EBITDA down 19.5 percent at Rs 35.4 crore.
- Margin at 25.5 percent versus 29.3 percent.
Finolex Industries Q3 (YoY)
- Revenue up 25.5 percent at Rs 723 crore.
- Net profit down 3.5 percent at Rs 69.5 crore.
- EBITDA down 12 percent at Rs 114 crore.
- Margin at 15.8 percent versus 22.4 percent.
JK Tyre Q3 (YoY)
- Revenue up 15.5 percent at Rs 2,123 crore.
- Net profit down 87 percent at Rs 11 crore.
- EBITDA down 16 percent at Rs 213 crore.
- Margin at 10 percent versus 13.8 percent.
Motherson Sumi Q3 (YoY)
- Revenue up 35.9 percent at Rs 14,398 crore.
- Net Profit down 12.4 percent at Rs 364.5 crore.
- EBITDA up 14.9 percent at Rs 1,259.6 crore.
- EBITDA Margin at 8.7 percent versus 10.4 percent.
Gufic Biosciences Q3 (YoY)
- Revenue up 29.2 percent at Rs 88.4 crore.
- Net Profit up 87.1 percent at Rs 5.8 crore.
- EBITDA up 73.5 percent at Rs 11.8 crore.
- EBITDA Margin at 13.3 percent versus 9.9 percent.
Man Infra Q3 (YoY)
- Revenue up 20.3 percent at Rs 165.3 crore.
- Net Profit up 14 percent at Rs 10.6 crore.
- EBITDA up 123.9 percent at Rs 48.8 crore.
- EBITDA Margin at 29.5 percent versus 15.9 percent.
Indian Overseas Bank Q3 (YoY)
- NII down 10.9 percent at Rs 1189.6 crore.
- Net Loss at Rs 971.2 crore versus net loss of Rs 554.4 crore.
- GNPA at 21.95 percent versus 22.73 percent (QoQ).
Vascon Engineers Q3 (YoY)
- Revenue up 84.8 percent at Rs 93.5 crore.
- Net Profit up 16x at Rs 24.6 crore.
- EBITDA profit at Rs 6.5 crore versus net loss of Rs 2.2 crore.
- EBITDA Margin at 7 percent versus -4.3 percent.
Godfrey Phillips Q3 (YoY)
- Revenue up 31.7 percent at Rs 581.9 crore.
- Net Profit up 61.5 percent at Rs 62 crore.
- EBITDA up 32.8 percent at Rs 91.6 crore.
- EBITDA Margin at 15.7 percent versus 15.6 percent.
Minda Industries Q3 (YoY)
- Revenue up 14.8 percent at Rs 1,056 crore.
- Net Profit up 26 percent at Rs 56.7 crore.
- EBITDA up 17.8 percent at Rs 126.2 crore.
- EBITDA Margin at 56.7 percent versus 45 percent.
Nesco Q3 (YoY)
- Revenue down 11.2 percent at Rs 80.6 crore.
- Net Profit down 22.1 percent at Rs 43.8 crore.
- EBITDA down 11.1 percent at Rs 58.5 crore.
- EBITDA Margin at 72.6 percent versus 72.5 percent.
Welspun India Q3 (YoY)
- Revenue down 6.9 percent at Rs 1398 crore.
- Net Profit down 48.2 percent at Rs 77.4 crore.
- EBITDA down 27.1 percent at Rs 252.4 crore.
- EBITDA Margin at 18.1 percent versus 23.1 percent.
Kolte Patil Q3 (YoY)
- Revenue up 27.2 percent at Rs 288.3 crore.
- Net Profit up 54.7 percent at Rs 28 crore.
- EBITDA up 22.8 percent at Rs 68.5 crore.
- EBTDA Margin at 23.8 percent versus 24.6 percent.
RPP Infra Q3 (YoY)
- Revenue up 75 percent at Rs 137 crore.
- Net loss of Rs 9.3 crore versus profit of Rs 4 crore.
- EBITDA up 77.5 percent at Rs 18.1 crore.
- EBTDA Margin at 13.2 percent versus 13 percent.
Dilip Buildcon Q3 (YoY)
- Revenue up 39.8 percent at Rs 1942.1 crore.
- Net Profit up 51.7 percent at Rs 164 crore.
- EBITDA up 24.2 percent at Rs 344.7 crore.
- EBTDA Margin at 17.7 percent versus 20 percent.
Prabhat Dairy Q3 (YoY)
- Revenue down 1 percent at Rs 403.9 crore.
- Net Profit down 56.1 percent at Rs 14.8 crore versus Rs 33.75 crore (exceptional in base quarter).
- EBITDA down 1.3 percent at Rs 37.4 crore.
- EBTDA Margin at 9.3 percent versus 9.3 percent.
Aarti Drugs Q3 (YoY)
- Revenue up 15.8 percent at Rs 335.4 crore.
- Net Profit up 30.2 percent at Rs 23.3 crore.
- EBITDA up 28 percent at Rs 53.9 crore.
- EBTDA Margin at 16.1 percent versus 14.5 percent.
NBCC Q3 (YoY)
- Revenue down 11.3 percent at Rs 1511.5 crore.
- Net Profit up 6.1 percent at Rs 68.3 crore.
- EBITDA down 1.3 percent at Rs 75 crore versus Rs 75.9 crore.
- EBITDA Margin at 5 percent versus 4.5 percent.
Astral Poly Q3 (YoY)
- Revenue up 17.5 percent at Rs 528.5 crore.
- Net Profit up 42.5 percent at Rs 46.3 crore.
- EBITDA up 15.9 percent at Rs 73.6 crore.
- EBITDA Margin at 13.9 percent versus 14.1 percent.
Jaypee Infra Q3 (YoY)
- Revenue down 81.1 percent at Rs 59.9 crore.
- Net loss at Rs 361.3 crore versus loss of Rs 41.4 crore.
- EBITDA loss of Rs 126.4 crore versus profit of Rs 135.3 crore.
Chambal Fertilisers Q3 (YoY)
- Revenue down 2.2 percent at Rs 2,330.1 crore.
- Net Profit up 14.5 percent at Rs 149.1 crore.
- EBITDA up 44.8 percent at Rs 296.4 crore.
- EBITDA Margin at 12.7 percent versus 8.6 percent.
MTNL Q3 (YoY)
- Revenue down 16 percent at Rs 580.1 crore.
- Net loss at Rs 639 crore versus loss of Rs 820 crore.
- EBITDA loss at Rs 286.8 crore versus loss of Rs 310.7 crore.
Automotive Axles Q3 (YoY)
- Revenue up 28.8 percent at Rs 407.9 crore.
- Net Profit up 106.5 percent at Rs 22.3 crore.
- EBITDA up 72.2 percent at Rs 43.9 crore.
- EBITDA Margin at 10.8 percent versus 8 percent.
Clariant Chemicals Q3 (YoY)
- Revenue up 4.7 percent at Rs 262.7 crore versus Rs 251 crore.
- Net Profit at Rs 16.8 crore versus loss of 86 lakhs.
- EBITDA up 149.1 percent at Rs 13.2 crore versus Rs 5.3 crore.
- EBITDA Margin at 5 percent versus 2.1 percent.
V MART Q3 (YoY)
- Revenue up 12.6 percent at Rs 368 crore.
- Net Profit up 27.4 percent at Rs 36.7 crore.
- EBITDA up 30.5 percent at Rs 64.1 crore.
- EBITDA Margin at 17.4 percent versus 15 percent.
Punjab & Sind Bank Q3 (YoY)
- NII up 17.3 percent at Rs 600 crore.
- Net loss at Rs 258.3 crore versus profit of Rs 77.5 crore.
- GNPA at 10.95 percent versus 11.25 percent (QoQ).
GMR Infrastructure Q3 (YoY)
- Revenue down 17.5 percent to Rs 2,072 crore.
- EBITDA down 29 percent to Rs 481 crore.
- EBITDA Margins at 23.2 percent versus 27 percent.
- Net Loss at Rs 566 crore versus Net Profit at Rs 643 crore.
Allcargo Logistics Q3 (YoY)
- Revenue up 5 percent to Rs 1,480 crore.
- EBITDA down 6 percent to Rs 93 crore.
- EBITDA Margins at 6.3 percent versus 7 percent.
- Net profit down 29 percent to Rs 35 crore.
DLF Q3 (YoY)
- Revenue down 18 percent to Rs 1,694 crore.
- EBITDA down 27 percent to Rs 701 crore.
- EBITDA Margins at 41.4 percent versus 46.5 percent.
- Net profit at Rs 4,091 crore versus Rs 98 crore.
- Exceptional gain of Rs 8,569 crore from selling of shares of DLF Cyber City Developers Group.
Stocks To Watch
- RBI issues revised framework for stressed asset resolution.
- SAIL: Invites Bids For Strategic Disinvestment Of Its Alloy Steels Plant
- Idea Cellular raises Rs 3,250 crore through preferential allotment to promoters.
- Bank of Baroda to exit South Africa amid probe over Gupta ties.
- Mangalam Cement to set up a 11 MW waste heat recovery plant at Rajasthan.
- Rolta signs pact to deal to restructure U.S. dollar bonds due 2018, 2019.
- Fortis Healthcare seeks extension till Feb. 28 to announce Q2, Q3 results.
- Indoco Remedies’ Goa plant gets 8 observations under form 483 from U.S. FDA.
- Piramal Enterprises to transfer assets to unit Piramal Finance for Rs 1,910 crore.
- CG Power to sell Hungary business (excluding switchgear business) for 38 million euros. Deal expected to be completed by Mar. 31.
- IOL Chemicals and Pharma starts production of anti-diabetes drug Metformin.
- Precision Camshafts receives multiple orders worth Rs 275 crore.
- JSW Steel commences mining operations in Tunga with a capacity of 0.3 MTPA.
- Max Life emerges as frontrunner to buy IDBI Federal Life: Mint newspaper.
- PVR opens five screen multiplex in Hyderabad.
- Vascon Engineers approved raising of funds up to Rs 100 crore.
- Fortis Healthcare signs agreement to buy entire assets of RHT Health Trust
- Apollo Tyres to acquire up to 40% in KT Telematic Solutions Private Limited for Rs 9 crore.
- NBCC to seek shareholder approval for stock split from Rs 2 to Re 1.
- Oriental Bank of Commerce approved preferential allotment to GoI worth Rs 3571 crore.
- Punjab & Sind Bank approved preferential allotment worth Rs 785cr to GoI and Rs 1,215 crore via FPO/Rights/QIP etc.
- Religare: Merlin Marketing sold 10 lakh shares or 0.6 percent equity at Rs 52.35 each.
- Electrosteel Steels: SCIIL Steel Cast Iron Investments(Cyprus) Ltd sold 1.36 crore shares or 0.6 percent equity at Rs 3.44 each.
- Nandan Denims: LTS Investment Fund bought 2.46 lakh shares or 0.5 percent equity at Rs 146.43 each.
- Pabrai Investment bought 64.18 lakh shares or 2.7 percent equity at Rs 594 each.
- Abdullah Ali Balsharaf sold 32.50 lakh shares or 1.4 percent equity at Rs 594 each.
- Omar Ali Obaid Balsaraf sold 32.50 lakh shares or 1.4 percent equity at Rs 594 each.
- Aarti Drugs, SJVN, buyback period from Feb. 14 to Feb. 28.
- Gayatri Projects circuit filter revised to 20 percent and shifted to B group.
- Aster DM Healthcare continues on Day 2. The issue is subscribed 0.26 times on Monday. (Here’s an all you need to know)
Top Gainers And Losers
- Nifty February futures trade at 10,543, premium of 3.4 points from 14.8 points.
- February series: Nifty open interest up 5 percent; Bank Nifty open interest unchanged.
- India VIX ended at 17.8, down 7 percent.
- Max open interest for February series at 11,100 call strike (open interest at 56.9 lakh, down 1 percent).
- Max open interest for February series at 10,000 put (open interest at 54.7 lakh, down 5 percent).
- In ban: Balrampur Chini, Dish TV, GMR Infra, HDIL, JP Associates.
- New in ban: Dish TV, JP Associates.
- Out of ban: Jain Irrigation.
Only intraday positions can be taken in stocks which are in F&O ban. There is a penalty in case of a rollover of these intraday positions.
- Nifty PCR at 1.10 at 1.09.
- Nifty Bank PCR at 0.98 at 0.96.
Stocks Seeing High Open Interest Change
Citi on GAIL (India)
- Maintained ‘Neutral’ with price target of Rs 510
- December quarter’soperating income and net profit were below estimates.
- Gas transmission volumes surprise positively.
- LPG shines again, petchem remains muted.
- Next step for GAIL’s is unified tariff proposal.
- Given riskier business profile, prefer IGL, GSPL, PLNG, GGAS in gas space.
IDBI Capital on GAIL (India)
- Downgraded to ‘Accumulate’ from ‘Buy’; raised price target to Rs 514 from Rs 510
- Weak set of numbers in October-December period led by higher cost and one-off provisions.
- Volume across segment beats expectation except petchem division.
- Strong volume growth across segment was offset by lower margins.
- Pricing pressure in petchem is visible; Gas volume would continue to rise.
- Downgrade the stock due to limited upside.
BoFAML on Britannia
- Maintained ‘Buy’ with price target of Rs 5,500
- December quarter was a solid quarter. Operating income and net profit were ahead of estimates with double digit volume growth.
- International business growth lagged due to geopolitical tension.
- Multiple drivers to sustain growth; Expect strong execution.
- Strong growth to back premium valuation.
- Expect earnings per share to grow at a compounded rate of 18 percent over the financial years through March 2020 backed by market share gains.
UBS on Britannia
- Maintained ‘Buy’ with price target of Rs 5,550.
- Double digit volume growth is a positive surprise.
- Stable raw material prices help improvement in profitability.
- Potential of new initiatives not priced in.
- Volume growth momentum to accelerate further in second half of the next financial year.
- Benefits announced in Union Budget 2018 to aid volume growth.
Macquarie on Sobha
- Maintained ‘Outperform’; raised price target to Rs 646 from Rs 603.
- Q3FY18 results were in line with estimates.
- Demonstrated strong operating performance.
- Quarterly presales at all-time high; New launches to aid momentum.
- Operating cashflows remain positive; Debt under control.
- New launches planned in key markets; Expect presales to remain strong.
Morgan Stanley on Sobha
- Maintained ‘Overweight’ with price target of Rs 605.
- December quarter results beat estimates.
- New launch momentum to pick up.
- Expect 5-7 new launches over next 2-3 quarters.
- Expect contractual business to scale up in the next financial year.
- Disciplined balance sheet and reasonable valuation drive Overweight rating.
Macquarie on Bank of India
- Maintained ‘Underperform’; cut price target to Rs 87 from Rs 98.
- Reported an alarming results in the previous quarter.
- Quarterly loss is purely from ageing provisions, hard divergences and investment provisions.
- BOI has receivables from other banks and not from corporates.
- Expect some provision reversals against NCLT accounts ahead.
Deutsche Bank on Bank of India
- Maintained ‘Sell’; cut price target to Rs 110 from Rs 120
- No respite on asset quality in December quarter; Core business weakens further.
- NPLs rise sharply due to divergence; Some recoveries expected in current quarter
- Expect revenue drivers to remain weak and return on equities at 3-5 percent over the next financial year.
- Expect treasury contribution to fade away, NIMs at less than 2 percent and nil loan growth.
Brokerages On New Stressed Asset Framework
BOB Capital Markets
- This is a short term negative for the corporate lenders, as it would sharply increase NPA provisions and constrain profitability.
- Over the long term, this would be seen as positive for the sector as banks' balance sheets become cleaner and more transparent.
Motilal Oswal View
- This can be seen as a precursor to the IFRS implementation.
- Previous schemes had only led to accumulation of troubled assets.
- Corporate banks with higher quantum of stressed/restructured assets (PNB, BOI, ICICIBC, UNBK, SBIN) may see higher proportion of their bad loans drifting towards IBC process chances of upgrade/recovery remains low.
- Continue to like SBI, ICICI Bank and Bank of Baroda amongst corporate banks.
- It's a step in the right direction and prepares banks for IFRS.
- New restructuring scheme will further catalyse NPL cleanup – a positive.
- New scheme could imply higher slippages and provisioning for the current and next fiscal.
- New guidelines to benefit players who are active and looking to get aggressive in asset reconstruction business – Edelweiss and Kotak.
- Evergreening of loans may no longer be an option with requirement of weekly reporting in case of accounts above Rs 500 crore.
- Revised framework to lead to accelerated and early recognition of NPAs in the banking system.
- Revised framework would require higher provisioning expense.
- Negative from a banking sector earnings perspective in the near to medium term.
- Rise in bond yields along with higher provisioning will keep earnings muted, especially for PSU banks.
- Recently allocated capital should largely be consumed for cleansing of balance sheets and growth capital remaining a constraint.
- Within private banks, corporate focused lenders would see higher impact.
- RBI is also preparing banks for early NPA recognition & provisioning requirement under Ind-AS scenario ahead.
- Requirement of vetting of the resolution plan through credit rating agencies for independent credit evaluation (ICE) of residual debt is positive for listed credit rating companies.