Markets back to winning ways; bank stocks rally

Banking stocks helped lift the markets higher on Tuesday, after yet another volatile trading session. While the Nifty rose 78.35 points (0.53%) to close at 14,814.75, the Sensex climbed 280.15 points (0.56%) to close at 50,051.44. The Nifty Bank rose 1.73% after the Supreme Court lifted the stay granted on classification of non-performing assets (NPAs) by banks.

Banking stocks were seeing a correction in the last few trading sessions on account of a broad-based sell-off that the markets witnessed. However, investor sentiment towards bank shares improved after the SC lifted the stay order on the classification of NPAs by banks. The court, however, declined other pleas in the case, including waiver of all interest and extension of loan moratorium.

Sanjeev Hota, head of research – Sharekhan by BNP Paribas, said, “Overall the verdict is positive for the banks. The SC lifted the stay order on the GNPA classification of banks. This has given banks clarity on their assets classifications framework, though there will be increase in NPA in the March quarter, owing to additional relief on interest on interest waiver. However, all the banks have already provided for the same, so impact will be negligible. With this verdict the long standing overhang is now out of the window with no further extension of relief to any sectors.”
The top gainers on the Nifty Bank were Bandhan Bank, IDFC First Bank, Bank of Baroda, HDFC Bank, as well as PNB up by 3.57%, 3.2%, 2.9%, 2.48%, and 2.37%, respectively.

The biggest gainers on the Nifty were Shree Cement, Ultratech Cement, Divi’s Laboratories, HDFC Bank, and IndusInd Bank, up by 5.36%, 2.56%, 2.5%, 2.48%, and 2.35%, respectively. The biggest losers on the Nifty were Hindalco Industries, ONGC, Powergrid Corporation, GAIL and ITC, down by 2.34%, 2.05%, 2.04%, 1.83%, and 1.75%, respectively.

Even though the markets rallied during Tuesday’s trading session, concerns still remain over the sharp rise in Covid-19 cases and the rise in bond yields across the globe. Many brokerages believe that both rising Covid-19 cases and bond yields pose a risk to the market’s expectations of strong economic recovery in fiscal year 2022 as well as strong earnings growth in the next fiscal year.

Kotak Institutional Equities, in its report, said, “The sharp increase in the number of active Covid-19 cases over the past few weeks and continued high inflation may undermine the key pillars of the equity market — market’s expectations of strong economic recovery in FY2022, robust earnings growth in FY2022 and modest increase in bond yields at best. The market outlook will depend on the ‘race’ between bond and earnings yield.”

Foreign portfolio investors remained sellers in the Indian markets on Tuesday, they offloaded shares worth $104.9 million, provisional data shows.

Markets abroad in Europe and Asia were reacting to the global risk-off sentiment and declined during Tuesday’s trade. Markets in Germany, France, and the UK, declined by 0.09% to 0.19%. Asian markets in China, South Korea, and Hong Kong were down between 0.93% and 1.34%.