The Bombay Stock Exchange, right, stands on Dalal street in Mumbai. (Photographer: Adeel Halim/Bloomberg)

Final Hour Rally in Lenders Bolsters India Equity Benchmark

(Bloomberg) -- Financial companies drove India stocks higher on first day of the year after soured debt ratios at the lenders narrowed.

The S&P BSE Sensex climbed 0.5 percent to 36,254.57 in Mumbai on Tuesday after ending 2018 as Asia’s best performing major market in local currency terms. It had fallen as much as 0.5 percent earlier in the session. The broader NSE Nifty 50 Index rose 0.4 percent.

The ratio of bad loans with country’s banks fell for the first time since 2015, with the central bank predicting the number may drop further. The industry’s gross bad-loan ratio is expected to fall to 10.3 percent by March from 10.8 percent in September, the Reserve Bank of India said in its Financial Stability Report on Monday.

The Numbers

  • Fifteen of 19 sub-indexes compiled by BSE Ltd. advanced led by a gauge of realty companies
  • Housing Development Finance Corp. and HDFC Bank Ltd. gave the biggest boosts to the benchmark index
  • Uco Bank Ltd. climbed to its highest level in nine months after the government announced capital infusion in the lender
  • Bank of Maharashtra and Central Bank of India also gained after government announced funding of 45 billion rupees and 16.8 billion rupees, respectively
  • Aviation stocks including Jet Airways and SpiceJet surged after a cut in fuel prices

Strategist View

  • “Bank stocks are likely to do well as investors expect the bad loan situation to improve while lower inflation and crude may pave for lower interest rates,” said Jitendra Panda, managing director at Peerless Securities Ltd. in Kolkata.
  • “Government’s focus now will be on winning back the elections and investors will closely watch how it strikes a balance between the need to spend while maintaining fiscal discipline,” said A. K. Prabhakar, head of research at IDBI Capital Market Services Ltd.
  • JM Financial analysts, in a note this week said they expect a 20 basis points fiscal slippage for the federal administration on account of unaccounted expenditure (increase in crop support price, under-provided fuel subsidy, net supplementary grant), and revenue shortfall.

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