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Informist, Tuesday, Dec. 3, 2024

By Anjana Therese Antony

MUMBAI – Hopes that the Reserve Bank of India may adopt measures to improve liquidity in the banking system at its monetary policy meeting this week pushed shares of banks and financial services companies higher Tuesday. Analysts said they expect the RBI to cut the cash reserve ratio to improve liquidity in the system, because the central bank cannot cut its policy rate, given that inflation is ruling well above its 4% target.

"We are liking two sectors: banking and cement. Banking looks good from a risk-reward perspective," Pankaj Pandey, head of research at ICICI Securities, said. While some moderation is seen in credit growth, analysts expect the metric to improve in the coming months. "System loan growth is now largely tracking our FY25F loan growth estimate of 13% yoy (year-on-year), and we expect it to grow in-line with deposit growth," Nomura Global Markets said in its research report. According to the RBI's sectoral credit growth data, system credit growth moderated to 12.8% on year in October, compared with 14.4% growth in September, with growth moderating across segments, the report said.

Analysts also find the valuation of the banking sector comfortable, particularly after the recent correction. Shares of Axis Bank and State Bank of India were the top banking stocks in the Nifty 50 and closed higher by over 2% each. The Nifty PSU Bank snapped a two-day losing run and closed higher, with 11 of the 12 constituents in the green.

Gains in banking and financial services stocks contributed to nearly 0.3% rise in the Nifty 50 which closed 0.8% higher at 24457.15 points Tuesday. The Sensex ended 0.7% higher at 80845.75 points. The near-term support for the 50-stock index is seen at 24300-24280 points and resistance at 24530-24620 points, a technical and derivatives analyst at a domestic broking firm said.

The fall in the fear gauge, India VIX, also hints at an easing of the near-term nervousness in the market. The volatility gauge closed 2.2% lower at 14.3725. It has fallen more than 6% in the last seven days. 

Worries have also eased as the selling by foreign institutional investors has reduced in recent sessions. "FII selling was triggered by the tactical shift of money to China post the mega stimulus and overall selling pressure due to rising bond yields in the US," Sharekhan said in its investment strategy report. FIIs net offloaded shares worth more than $13 billion in October and November, while domestic institutional investors continued to support the market and cushioned the downside.

Shares of cement companies rose after reports said Jefferies is bullish on the sector. The broking firm said demand recovery is likely to continue, supported by the government's capital expenditure and a positive price outlook. These stocks had fallen on account of the slowdown in infrastructure-related activities and government spending due to the general election. Shares of Ambuja Cements closed 5.2% higher to be the top gainer in the sector after Informist, quoting sources, reported that the company would raise cement prices. Among other gainers were UltraTech Cement, ACC, and Dalmia Bharat, which closed 1.8-2.7% higher.

Among specific stocks, Granules India closed 10.2% lower at INR 534.15 on the National Stock Exchange after the company said the US Food and Drug Administration issued an 'official action indicated' tag for its facility at Gagillapur in Hyderabad. In September, the drug regulator had issued six observations to this unit following an inspection.

Graphite electrode-related companies HEG and Graphite India surged after reports that China had imposed stricter review of its graphite exports to the US. Reports also said the country had banned graphite dual-use commodities germanium and gallium in principle, leading to a potential supply scare.

Zee Entertainment Enterprises rose for the third consecutive session after its shareholders voted against appointing Punit Goenka as director, raising hopes that there would be a change in management. The stock closed nearly 6% higher at INR 138.17.

* Of the Nifty 50 stocks, 41 rose and 9 fell

* Of the Sensex stocks, 25 rose and 5 fell

* On the NSE, 2,047 stocks rose, 772 fell, and 76 were unchanged

* On the BSE, 2,739 stocks rose, 1,220 fell, and 108 were unchanged

* Nifty PSU Bank: up 2.6%; Nifty Media: up 2.5%; Nifty FMCG: down 0.4%

BSE                                               NSE

Sensex: 80845.75, up 597.67 points or 0.7%        Nifty 50: 24457.15, up 181.10 points or 0.8%

End

Edited by Rajeev Pai

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