Sensex Opens On A Negative Note; Crude Oil Hits US$80 Per Barrel
Asian shares are trading on a positive note today. The Nikkei 225 is up 0.4% while the Hang Seng is up 0.1%.
Back home, India share markets opened the day on a negative note. The BSE Sensex is trading down by 167 points while the NSE Nifty is trading down by 39 points. The BSE Mid Cap index is trading down by 0.2%, while the BSE Small Cap index has opened the day down by 0.3%.
Sectoral indices have opened the day on a negative note with capital goods stocks and IT stocks witnessing maximum selling pressure.
The rupee is trading at 67.86 to the US$.
Tata Chemicals share price, Bajaj Auto share price, Ashok Leyland share price, and Strides Shasun share price are among the stocks that will be in focus today as these companies are scheduled to report their results for the quarter ended March 2018.
In the news from banking sector, as per an article in the Economic Times, Finance minister Piyush Goyal promised all possible support to the 11 state-run banks that are under the Reserve Bank of India's (RBI) Prompt Corrective Action (PCA) framework. He also expressed confidence that public sector banks will overcome legacy issues very soon.
After meeting chief executives of these 11 PSBs, he said that it will be ensured that the central government gives every possible support to further strengthen the resolve of these banks to come out of PCA framework as quickly as possible.
PCA is the process to ensure that banks do not go bust. Under the process, the RBI has put in place some trigger points to take corrective actions on banks which are weak and troubled.The 11 banks under PCA are Dena Bank, United Bank of India, Allahabad Bank, Corporation Bank, UCO Bank, Bank of India, IDBI Bank, Central Bank of India, Indian Overseas Bank, Oriental Bank of Commerce and Bank of Maharashtra.
Note that PSB's are in the spotlight for their growing bad loan problems and the painful issue of willful defaulters.
Banks, in principle, must be careful about not extending loans to borrowers with poor creditworthiness or payment track record. That too, irrespective of the size of the borrower.
However, the data from State Bank of India shows that when it comes to big corporate borrowers, our banks literally look the other way. The share of large corporates, in total advances of the banking sector, has almost remained unchanged over past three years (at an average of 55%).
However, their contribution to incremental slippages has been huge. At one point, the big corporate borrowers accounted for nearly 90% of total NPAs of the sector.
Therefore, according to us, banks with large corporate books deserve a lower valuation if they can't keep NPAs in check.
In the news from commodity markets, crude oil prices hit US$ 80 per barrel yesterday for the first time since late 2014. This was seen on the back of concerns that Iranian exports could fall because of renewed US sanctions, reducing supply in an already tightening market.
Note that crude oil prices have been witnessing a rising trend of late. Prices have been escalating due to a pick-up in global demand coupled with supply cuts by the Organisation of the Petroleum Exporting Countries (OPEC) and Russia. Even geopolitical tensions between US, Russia, North Korea and Iran have kept prices on the boil.
Steadily Rising Crude Oil Prices
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