Tracking and Cracking The Indian Stock Market: April 2016

Moody’s Investors Service today cautioned that a prolonged worsening in asset quality at PSU banks is the main threat to India’s sovereign credit profile and made a case for the government bearing some of the cost of cleaning up bank balancesheets.
“The main threat to the sovereign credit profile would be via a significant and prolonged worsening in asset quality at state-owned banks, beyond the recognition of bad loans currently under way, that causes contingent liabilities to crystallise on the government’s balancesheet,” it said.
High corporate leverage poses systemic risks if adverse growth and financial conditions pressure borrowers’ repayment capacity, Moody’s said, adding that the capital infusion by the government in PSU banks is likely to be larger than budgeted.
“When the borrowing is largely from the domestic banking system, governments could bear some of the costs of cleaning up bank balancesheets,” it suggested.
As for the elevated level of government debt, Moody’s in its report on Asia-Pacific sovereigns said it acts as a sovereign credit constraint for India and added that India has little fiscal space to stimulate economy if the growth momentum slows.

The rating agency is of the view that it will take a strong economic growth for the overall debt burden to fall. Actions by policymakers are likely to enhance India’s medium-term economic strength and, in turn, the sovereign’s financial strength in coming years.
“On the flip side, India’s government has little fiscal space to stimulate the economy if momentum were to slow. In the absence of robust growth, India’s debt could start to climb, and ultimately put pressure on the government’s ability to fund itself,” it said.
In India, it said, although the level of and growth in debt are modest, non-performing corporate assets put pressure on state-owned bank balance sheets. It forecast India’s debt to GDP ratio to fall to 65.7 per cent in 2016, from 67.5 per cent in 2015, but is still well above the median for Baa-rated sovereigns. This reflects the government’s narrow revenue base.
Moody’s said annual gross financing requirements are in line with Baa-peers: robust private savings, capital controls and bank liquidity requirements enable the government to issue debt with relatively long average maturity and moderate interest rates.
“This set of conditions allows India to sustain a debt burden that is significantly higher than its rating peers,” it noted, adding that India’s budget gap is expected to remain sizable — at around 6 per cent of GDP in 2016, including state deficits.
According to Moody’s, in India, corporate debt stands at 49.9 per cent of GDP and has been broadly stable for the past five years. However, poor profitability and concentration of leverage suggest some risks.
With regard to banking sector risks in Asia, Moody’s feels that these are mainly related to corporate credit profiles since domestic banks tend to be the most important source of funding for businesses.
“The risks to the sovereign balancesheet generally stem from the potential cost of supporting banks that suffer sharp asset quality deterioration as well as the negative budgetary consequences of lower growth in the event of banking system stress,” it said, adding that the government sees a somewhat more modest degree of risk from banks.
Moody’s also pointed to the marked increase in non-performing loans of PSU banks which hold more than 70 per cent of total banking system assets in late 2015.
“We expect further recognition of impaired loans. The fiscal costs of recapitalisations are likely to be larger than the government has budgeted. Significant and extended asset quality or profitability pressures on state-owned banks would hurt the sovereign balancesheet,” it said.
Moody’s said further that retail deposits are the primary source of funding for Indian banks and comfortable compliance with liquidity requirements is an important factor in mitigating risks.
PSU banks are facing balancesheet problems because of mounting bad loans. They have gross non-performing assets of about Rs 3.7 lakh crore as of end December. They are undertaking asset quality review following the Reserve Bank’s diktat, which has led to rise in bad loans and provisioning. RBI has also asked PSU banks to clean up their balancesheets by March 2017.
The government has planned to infuse Rs 70,000 crore in PSBs over four years ending March 2019. Of this, Rs 25,000 crore each will come in 2015-16 and 2016-17 and an infusion of Rs 10,000 crore for each of 2017-18 and 2018-19 fiscals.
In April 2015, Moody’s had upgraded India’s outlook to ‘positive’ from ‘stable’, but retained the credit rating at ‘Baa3’, just a notch above the junk grade. Moody’s had said it would consider a rating upgrade after 12-18 months, depending on improvement in macroeconomic paramet

Friday 22 April 2016

Hang The Bankers : Another Rs 6 lakh crore of bank loans may turn into NPAs (Is Desh Mein Sab Chalta Hai )

Bank loans that aren’t non-performing assets (NPAs) just yet but could turn toxic amount to over Rs 6 lakh crore or close to 9% of total advances, data sourced from the Reserve Bank of India (RBI) show. The total troubled loans of Rs 6,24,119 crore at the end of December 2015 were 9% higher than the Rs 5,73,381 crore at the end of June 2015.

While Rs 3,06,180 crore worth of loans were classified in the SMA-1 category where repayments are overdue between 30 and 60 days, another Rs 3,17,939 crore was in the SMA-2 category where repayments are overdue between 60 and 90 days.

These special mention accounts follow a fiat from the RBI in 2014 asking banks to put in place a mechanism to red-flag troubled loan accounts early in the day so that these could be dealt with speedily. If the loan is not serviced after 90 days, it must be classified as an NPA.

Since these are standard accounts, the provisioning requirements are small at just 0.4%. However, envisaging that some of this exposure could become stressed, the central bank had asked lenders to provide more than the mandated amount. After taking a close look at banks’ exposures, the RBI chose to flag some 150 accounts that had either turned toxic or were in danger of getting there. It asked lenders to provide adequately for this “emerging stress” and called for exposures to be classified uniformly across a consortium to ensure any stress was captured evenly.

The central bank wants banks’ balance sheets to reflect the true quality of assets by March 2017. This “clean-up” has begun and resulted in a sharp jump in provisioning for most state-owned lenders in the December quarter. The additional capital that would be needed to be set aside is estimated at around Rs 50,000-70,000 crore and lenders must provide adequately for the 150 accounts by March 2016.

On a rough reckoning, troubled loans at 27 public sector banks stood at R2.67 lakh crore. While State Bank of India’s SMA-2 accounts stood at Rs 60,228 crore, or 5.17% of its total advances, at Punjab National Bank this exposure is approximately 6.31% of its total loan book or R24,824 crore.

Between them, 21 private sector banks have `49,689 crore of troubled exposure. ICICI Bank tops the list with `10,897 crore worth of SMA-2 loans, followed by Axis Bank with `9,549 crore and Yes Bank with `7,066 crore.

The total stressed assets for the banking sector — the sum of restructured loans and NPAs — rose to 11.3% in September 2015 from 11.1% in March, RBI data show. Public sector banks have seen their NPAs rise sharply over the last couple of years as the economy slowed and companies’ cash flows became strained. Gross NPAs at Central Bank of India at the end of Q3FY16 stood at 8.95%, at PNB they were 8.47%, at SBI they were 5.1% and at ICICI Bank they were 4.72%.

In the past, banks have often delayed adequate provisioning by restructuring loans and giving companies easier repayment terms. However, the central bank withdrew the forbearance from April 2015 mandating that “restructured” loans should be provided for at 15%. In FY15 alone banks restructured loans worth `72,000 crore through the corporate debt restructuring cell, on the back of recasts to the tune of `1 lakh crore in FY14.

The central bank had also directed banks to provide credit information regarding their exposures above `5 crore to the Central Repository of Information on Large Credits. As soon as an account is classified under SMA-2, banks have to form a lenders’ committee called the joint lenders’ forum to evaluate the asset and work towards early resolution of stress in the account.

Thursday 21 April 2016

MARKET IDEA FOR 22-4-16

Nifty (7915) we said ‘there exists a strong support to around 7775 and the market seems to be up as long as 7775 holds’ the market opened with gap and achieved our target of 7973 and closed flat for the day…looks like some profit booking has set in and there is a good chance that market may not go in a hurry though it still looks up as long as 7850 holds…

The support for the Nifty is at 7850-7775 and the resistance to the up move is at 7973-8000

Wednesday 20 April 2016

Market Review for 21st April 2016

Nifty (7915) we said ‘there exists a strong support to around 7775 and the market seems to be up as long as 7775 holds’ the market unfolded and closed flat but the analysis remains the same…

The support for the Nifty is at 7775 and the resistance to the up move is at 7973-8000

Monday 18 April 2016

Nirmala Sitharaman critical of Raghuram Rajan’s ‘one-eyed king’ phrase

Union Minister Nirmala Sitharaman was today critical of RBI GovernorRaghuram Rajan’s description of Indian economy as the “one-eyed king in the land of the blind”, saying better words should have been used.

“I may not be happy with his choice of words. I think whatever action is being taken by this government is showing results. FDI is improving, there are clear signs that manufacturing sector is reviving. Inflation, current account deficit is under control,” she told a press conference.

Commerce and Industry Minister Nirmala Sitharaman noted that Raghuram Rajan had said earlier India is on a cusp of revolution.

“If better words were used to say whatever he wanted to say, it would have gone down better,” she said.

With India being often described as ‘the bright spot in the global economy’, Rajan had said in an interview that this was a case of “the one-eyed man being king in the land of the blind.

T for Tsunami ?TCS Future—Can we see 2314-2207—2100 in PANIC ?

Let’s see…………..What happens @ 9:15 and Today evening Result too.

Those who know………..What to Do …Today can earn Millions !!

Oil producers get worst possible outcome, destroy remaining credibility

It was the worst possible outcome for oil producers at their weekend meeting in Doha, with their failure to reach even a weak agreement showing very publicly their divisions and inability to act in their own interests.

Expectations for the meeting had been modest at best, with sources in the producer group predicting an agreement to freeze output. But even this meagre hope was dashed by Saudi Arabia’s insistence Iran join any deal, something the newly sanctions-free Islamic republic wouldn’t countenance.

From a producer point of view, an agreement including Iran that shifted market perceptions on the amount of oil supply available would have been the best outcome.

The acceptable result would have been an agreement that froze production at already near record levels, with an accord that Iran would join in once it had reached its pre-sanctions level of exports.

What was delivered instead was confirmation that the Saudis are prepared to take more pain in order not to deliver their regional rivals Iran any windfall gains from higher prices and exports.

The meeting in Qatar on Sunday effectively pushed a reset button on the crude markets, putting the situation back to where the market was before hopes of producer discipline were first raised.

What happens now is that the market will have to continue along its previous path of re-balancing, without any assistance from the Organization of the Petroleum Exporting Countries (OPEC) or erstwhile ally Russia.

Brent crude fell nearly 7 percent in early trade in Asia on Monday, before partly recovering to be down around 4 percent.

The potential is for crude to fall further in coming sessions as long positions built up in the expectation of some sort of producer agreement are liquidated in the face of the reality of no deal.

It’s likely that recriminations will follow for some time among the oil producers, with the Russians and Venezuelans said to be annoyed at what they see as the Saudi scuppering of a deal that had almost been locked in.

FUTURE DEAL UNDERMINED

This will make it harder for any future agreement, with the OPEC meeting on June 2 the next chance for the grouping to reach some sort of agreement.

For the time being, OPEC’s credibility is shot, and won’t be restored by even a future agreement as it will take actual, verifiable action to convince a now sceptical market.

However, as the events in Doha showed, the Saudis are unlikely to agree to anything in the absence of Iranian participation, and that is also equally unlikely.

While the Mexican standoff between the OPEC rivals continues, the oil market will have to continue re-balancing through other paths.

What re-balancing has been achieved so far hasn’t really involved OPEC or Russia, with those countries pumping at, or close to, record levels in recent months.

Rather, supply from other producers has gradually fallen, such as Canadian oil sands and U.S. shale.

This process is likely to continue to prove fairly slow, meaning that crude markets are probably in for an extended period of more than adequate supply.

Of course, demand is the other side of the equation, and here again the process is fairly gradual, although more constructive, especially if China’s economy is regaining some momentum as suggested by recent data, and India’s fuel demand continues to motor along.

But for now, the market will take the collapse of any producer discipline, coupled with the obvious tensions between the Saudi and Iranian/Russian camps as a sign that oil is once again in bearish territory.

Tuesday 5 April 2016

RBI Governor takes a dig at authors of Eco Survey

Reserve Bank of India (RBI) governor Raghuram Rajan on Tuesday said that the suggestion in the Economic Survey for 2015-16 to the effect that the central bank should use its capital and recapitalise public sector banks (PSBs) was not a good one, reports fe Bureau in Mumbai. “Whoever wrote that piece does not understand monetary policy economics or the monetary balance sheet of banks,” the governor said, pointing out that the RBI’s balance sheet was different from that of the banks.

Rajan clarified that he did not intend to criticise the government but only the author of the report.

“The author of the piece has not understood monetary economics that well and I would be happy to teach them,” he quipped.

Rajan explained that, say, the RBI monetises close to Rs 2 lakh crore, it could add Rs 2 lakh crore to the size of the balance sheet. “However, if we give half of it to the government, that means there is only Rs 1 lakh crore left to buy government bonds,” the governor said, adding that the bonds will have to be sold in the market.

“So what we are saying is given those constraints, any extra money we give to the government will basically reduce our ability to buy government bonds directly,” Rajan said.

According to the Economic Survey 2015-16, to address the economy’s critical short-term challenge of public sector banks (PSBs) and some large corporates having highly stressed balance sheets, the Reserve Bank of India (RBI) could redeploy the capital at its disposal for recapitalising the PSBs.

Noting that the RBI is an outlier among the community of central banks with a high shareholder equity-asset ratio of 32%, the survey’s authors recommended that without compromising on its need to keep buffer capital to cope with eventualities like perils to its forex reserves from the rupee’s volatility, the RBI could reallocate a portion of its capital to the shareholder banks.

It had also said that the RBI is next only to Norway’s central bank in holding a high portion of equity (capital, retained earnings and contingencies) with itself — around Rs 8 lakh crore now, including unrealised gains.

To Cross 7810 level…………U Now need MIRACLE !!

Saturday 2 April 2016

Market Review for 4th April 2016

Nifty (7713) we said ‘technically 7800 is still possible as long as 7700 holds but my concern is the banks’ and its banks that hold the key and PSU banks in particular

The support for the Nifty is at 7700-7650 and the resistance to the up move is at 7784-7952

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Tracking and Cracking The Indian Stock Market

Thursday 28 April 2016

DAILY PICKS

NF-As Expected Not crossed 7993 & Crashed Vertically.Will it Slide to kiss 7766-7737 ?

Tuesday 26 April 2016

BANK NIFTY & AXIS BANK

Bank Nifty-Major Hurdles at 17145-17379 (Big Trap Game )AXIS BANK-Will it kiss 469-463-448 ?

Nifty Future-All Eyes on 7993 :Will it cross 8300-8400 First or Will Break 7800 ?

Poor asset quality of PSU banks a risk to India’s sovereign rating: Moody’s