The News International Team
02:30pm Moody’s on domestic banks
International rating agency Moody’s today retained its negative outlook on the domestic banking system, citing high leverage in the corporate sector that may prevent any meaningful recovery in asset quality.
“Our outlook for the country’s banking system remains negative, as it has been since November 2011. The negative outlook reflects our view that high leverage in the corporate sector could prevent any meaningful recovery in asset quality, notwithstanding a moderate rebound in economic growth,” the agency Moody’s Investors Service said in a note issued from Singapore.
The report further said continuing poor asset quality, wherein the NPAs levels are set to touch 4.5 percent of the system, will require continued provisioning and strengthened
capital buffers. After provisions, profitability of public sector banks will generate insufficient internal capital for loan growth, the report added.
The negative outlook pertains mainly to the public sector banks as they represent more than 70 percent of total banking system assets. These banks have experienced higher growth rates in non-performing and restructured loans, as well as greater weakening in profits, than their private sector peers, Moody’s said.
The report says while these trends are unlikely to improve for public sector banks, in contrast, private sector banks have stronger margins, reserves, and capital levels, which serve as buffers against conditions that remain challenging.
On growth, which inched up to surprising 5.7 percent in the first quarter of the current fiscal after logging in sub-5 percent growth in the past two fiscals, Moody’s said GDP will
pick up moderately this fiscal, but remains constrained by the high interest rates due to inflation.
02:00pm Market Check
Equity benchmarks maintained morning gains supported by auto, metals, FMCG, oil and technology stocks. The Sensex rose 144.26 points to 27025.08 and the Nifty climbed 39.55 points to 8067.15.
About 1527 shares have advanced, 1297 shares declined, and 108 shares are unchanged.
Hindalco Industries, DLF, JSPL and Tata Steel topped the buying list, up 4-5 percent followed by Tata Motors, M&M and Bajaj Auto with 2-3 percent.
However, Dr Reddy’s Labs reported a weak Q2 earnings as profit fell 16 percent year-on-year to Rs 574 crore while Grasim Industries reported pressure in its viscose staple fibre business, standalone profit dropped 28 percent to Rs 299 crore while Oriental Bank of Commerce shares lost 5 percent as bad loans increased in second quarter.
Global markets remained in fourth gear as investors are convinced that Fed will stay the course and end the third round of bond buying but also wait a “considerable time “ before hiking short term rates. Hong Kong closed up almost 300 points while European markets were trading with almost 1 percent gains.
Meanwhile, the NDA government today submitted a list comprising 627 names of Indians having accounts in foreign banks to the Supreme Court.