Indian share markets continued to trade below the dotted line in the afternoon session ahead of the September-quarter GDP data, due on Thursday. At the closing bell, the BSE Sensex closed lower by 106 points and the NSE Niftyfinished lower by 29 points. The S&P BSE Mid Cap finished up by 0.1% while S&P BSE Small Cap finished up by 0.3%. Losses were largely seen in software sector, consumer durables sector and PSU sector.
Small caps have comfortably outperformed the Large caps and how. The BSE Small Cap Index has returned 21.7% in FY18 compared to 12.5% by BSE 100 and 11.7% by the Sensex.
Expectedly, valuations of certain Small cap companies have gone through the roof. It is important to understand the highly volatile nature of these stocks. In a downturn, these stocks tend to move in the opposite direction much faster as well.
While there, undoubtedly, lies hidden opportunities in the small cap space, it is important to focus on fundamentals of these stocks. Next, assess if they have the potential to move on to the 'Safe stock' category in the future.
Asian stock markets finished mixed as of the most recent closing prices. The Shanghai Composite gained 0.34%, while the Nikkei 225 & the Hang Seng fell 0.04% and 0.02% respectively. European markets are higher today with shares in France leading the region. The CAC 40 is up 0.43% while London's FTSE 100 is up 0.38% and Germany's DAX is up 0.26%.
Rupee was trading at Rs 64.42 against the US$ in the afternoon session. Oil prices were trading at US$ 57.62 at the time of writing.
In the news from the economy. Credit ratings agency, ICRA in its latest report said that the overall credit provisioning for banks is expected to surge to Rs 2.4-2.6 trillion in the financial year 2018 as compared to Rs 2 trillion in the previous year. This comes mainly on the back of provisioning for Insolvency and Bankruptcy Code (IBC) accounts and ageing of Non-performing assets (NPAs).
Besides, it pointed out that increase in provisioning would lead to higher losses for public sector banks (PSBs) during the year.
The rating agency indicated that during July-September quarter (Q2FY18), bank's provisions jumped to Rs 645 billion, up by 40% on a sequential basis and 30% on a year-on-year basis.
Further, it also said that with the recent amendments in IBC, the likelihood of the higher losses and a further increase in credit provisions appears to be a possibility. It expects that the asset quality pain is likely to continue in the near-term with nearly Rs 1.7 trillion of standard restructured advances.
It also expects that the gross non-performing assets (GNPA) of Rs 8.8-9 trillion or 10-10.2% to peak out by end of FY18 as against GNPAs of Rs 7.65 trillion or 9.5% as on 31 March 2017.
As per the report, PSBs are positioned weakly on their capital ratios with seven PSBs (out of 21) and 12 PSBs below the regulatory minimum capital level required for March 2017 and March 2018 respectively. It stated that with the challenges of meeting capital levels, the PSBs continue to refrain from growing advances, which is reflected in a year-on-year growth of less than 1% in advances of PSBs even as the private sector banks continue to achieve a higher year-on-year growth of 17.2% as on 30 September 2017.
It also expects the scope of a further cut in deposit rates to be limited, even as the cost of deposits will continue to decline upon re-pricing of fixed deposits, which, coupled with competitive pressure, may drive a marginal cut in lending rates.
Moving on to the news from engineering sector. As per an article in a leading financial daily, Bharat Heavy Electricals (BHEL) has won an order for setting up six decentralized sewage treatment plants (STPs) in Raipur, Chhattisgarh.
Reportedly, the order valued at Rs 640 million for the STPs with a cumulative capacity of 25.4 MLD (Million Liters per Day), has been placed by Raipur Development Authority (an Urban Development Authority under the Government of Chhattisgarh).
Further, the project for construction of the decentralized STPs shall be based on Sequential Batch Reactor (SBR) technology.
The company's scope of work in the contract broadly includes construction, testing and commissioning of six numbers STPs with Raw Sewage Pumping Station, Treated Sewage Effluent Pumping System, Bio filter, HT Substations, Transformers and control room building for PLC/SCADA based Automation System along with Operation & maintenance (O&M) for ten years.
BHEL share price ended up by 2.1%.
In another development, Rallis India share price surged 5.5% in today's trade after Franklin Templeton Mutual Fund had on Monday bought 17,81,405 shares or 0.9% stake in Rallis India at Rs. 230 on the BSE.
Meanwhile, our team of Equitymaster analysts have been working on a project to track the smartest minds in value investing. They have compiled a special report on them, called The Superinvestors of India.
Now, because of insights from these interactions, the team has glued their eyes on insider activity and bulk and block deals...
As per them...
- "The three approaches - tracking superinvestor shareholdings, catching these moves early through bulk and block deal disclosures, and keeping tabs on changes in promoter holdings - have unveiled some critical smart money secrets..."
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