Skip to main content

Modi Booster

Modi booster gives stock investors Rs 2 lakh crore in a day; banks contribute half

Within minutes, India’s largest lender SBI and four other top PSU lenders in terms of market capitalisation added nearly Rs 70,000 crore to stock investors’ wealth.
The Modi government’s booster dose for domestic banks and the infrastructure sector gave stocks a big lift on Wednesday, helping the benchmark Sensex its highest daily gain in five months in absolute terms, while the Nifty logged the best show in five months. Both the indices scaled new lifetime peaks – Sensex at 33,042.50 and Nifty at 10,295.35. 

The rally made stock investors richer by Rs 2 lakh crore as BSE’s total marketcapitalisation rose from Rs 1,39,83,014.84 crore to Rs 1,41,79,644.23 crore. Public sector banks alone contributed half of this gain. After a long depression, the Modi government gave investors of PSU bank stocks a day in the sun. 

The Rs 2.11 lakh crore bank recapitalisation scheme that the Union Cabinet cleared on Tuesday sent the PSU bank stocks soaring on Wednesday.

Within minutes, India’s largest lenderSBI and four other top PSU lenders in terms of market capitalisation added nearly Rs 70,000 crore to stock investors’ wealth. Later on, those five stocks rallied further to add Rs 1 lakh crore to their m-cap. 

Shares of PNB jumped 46.20 per cent, while those of SBI, Bank of Baroda andBank of India soared 27.58 per cent, 31.47 per cent and 33.96 per cent, respectively. Canara Bank zoomed 38.05 per cent. Others, too, followed suit. 

Banking counters were seeing plentiful of shorts creations over the past few weeks, and the government bonanza kicked off a rush to cover these positions, which led to the big jump. 



“We are not seeing material net buying per se. We could see portfolio repositioning away from private banks and NBFCs towards state-owned banks a bit, because SOE banks are under-owned in general. Having said that, what we are seeing today is also possibly the technical part. A lot of investors were looking at hedging their long exposures on the private banks through shorts on SOE banks,” said Gautam Chhaochharia, Head of India Research of UBS. 

With a 25 per cent jump, SBI alone added Rs 60,597 crore to its market capitalisation at Rs 2.80 lakh crore. The stock settled 27.58 per cent higher at Rs 325. 

Among other big PSU players, Bank of Baroda added Rs 10,380 crore to the investor kitty. PNB with a 50 per cent jump was the biggest gainer in the league. The stock rose 46.20 per cent to Rs 202, commanding an m-cap of Rs 42,963 crore, up Rs 13,576 crore from Tuesday’s close. Canara Bank and Bank of India added Rs 7,209 crore and Rs 5,650 crore, respectively, to their m-cap.

“We are positively surprised by the quantum of bank recapitalisation and it matches our estimates of capital requirements for PSU banks for both non-performing asset ( NPA) provisioning and some growth. Assuming that the entire infusion is equity in nature, there would be significant dilution for minority investors. But as current prices are higher than FY17 adjusted book values for most PSU banks, this recap packages should drive a re-rating in PSU banks,” Nomura India said in a note. 

Overall, these five PSBs added Rs 97,413 crore to investor wealth, as their combined market-cap rose to Rs 4.15 lakh crore from Rs 3.17 lakh crore. 

Nomura sees PNB to be the biggest beneficiary of the announcement as its adjusted book multiples on FY17 basis were higher than that of BOI or Union Bank. Besides, PNB is more sensitive to capital availability than SBI or BOB. 

Brokerage Motilal Oswal Securities believes of the total allocation of Rs 2.1 lakh crore, Rs 75,000-80,000 crore will be utilised to meet Basel III capital requirements and support business growth. It expects the rest Rs 1.3 lakh crore to be used for higher provisions. 

“Banks which are short on capital and have higher quantum of bad loans will stand to benefit more. We reiterate our buy ratings on PNB, SBI and BoB,” the brokerage said

Comments

Popular posts from this blog

Bill Gates says coding is easy check out

Billgates In 1975, Gates and Allen launched Microsoft, which became the world's largest  PC  software company. During his career at Microsoft, Gates held the positions of  chairman ,  CEO and  chief software architect , while also being the largest individual  shareholder  until May 2014. Gates stepped down as chief executive officer of Microsoft in January 2000, but he remained as chairman and created the position of chief software architect for himself. In June 2006, Gates announced that he would be transitioning from full-time work at Microsoft to part-time work and full-time work at the  Bill & Melinda Gates Foundation . He gradually transferred his duties to  Ray Ozzie  and  Craig Mundie . He stepped down as chairman of Microsoft in February 2014 and assumed a new post as technology adviser to support the newly appointed CEO  Satya Nadella .

The biggest deal in health care industry

What the CVS-Aetna deal means for the future of health care When drug company chief executive Heather Bresch was hauled in front of Congress last year to defend the high price of lifesaving EpiPens, she drew skeptical lawmakers' attention to a large poster board that blamed the skyrocketing price tag on a coterie of drug supply chain middlemen. Of EpiPen's $608 list price, her company, Mylan, received only $274, Bresch said. "What the patient is paying is not . . . coming back to Mylan," Bresch said. "And when we were speaking earlier of the people, the middlemen in the system, that's either the pharmacy benefit managers, retailers, wholesalers, insurers." That supply chain — rarely seen by most consumers — is the center of attention in the corporate world after CVS Health announced a $69 billion deal to buy Aetna, the nation's third-largest insurer. Familiar as a corner drugstore, CVS Health actually makes most of its money from one of t

H-1B extension is now more difficult trump tightened walls again

Trump admin makes it more difficult for H-1B visa extension USCIS said the previous memorandum of April 23, 2004 appeared to place this burden on this federal agency. In a new directive, the Trump administration has made it more difficult for the renewal of non-immigrant visas such as H-1B and L1, popular among Indian IT professionals, saying that the burden of proof lies on the applicant even when an extension is sought.  Rescinding its more than 13-year-old policy, the  US Citizenship and Immigration Services  (  USCIS ) said that the burden of proof in establishing eligibility is, at all times, on the petitioner.  USCIS said the previous memorandum of April 23, 2004 appeared to place this burden on this federal agency.  "This memorandum makes it clear that the burden of proof remains on the petitioner, even where an extension of non- immigrant status is sought," USCIS said in its latest memorandum issued on October 23.   Under the previous policy, i