PNB Scam Halts The Market Recovery

Market This Week

The benchmark indices, as well as broader market, opened the week sharply higher on Monday as Sensex climbed over 320 points and Nifty climbed almost 100 points in a day while Nifty midcap and smallcap outperformed benchmark indices ahead of the inflation data. On Wednesday, the market opened positive but remained volatile throughout the day as Sensex fell almost 150 points while Nifty closed exactly on 10,500 level due to sharp fall in PSU bank Index which lost almost 5% on Rs.11,300 crore worth of fraud in PNB Mumbai branch and revision of NPA rules by RBI. On Thursday market showed strong recovery as Sensex gained maximum 350 points while Nifty crossed 10,600 levels but closed below 10,550 due to selling pressure in Nifty midcap and PSU banks which lost over 1%. On last trading day of the week, the market traded positive as Sensex gained over 150 points and Nifty traded near 10,600 levels due to positive global cues but turned negative in afternoon trade.

This week the broader market outperform benchmark indices as Nifty midcap and smallcap extended last week rally despite some profit booking on PSU banks. PSU Bank Index was the biggest loser of the week due to news of Rs.11,300 crore worth of fraud in PNB Mumbai branch and revision of NPA rules by RBI. This week global cues remained positive on the back of better Inflation data.

Movers & Shakers

The Hyderabad based construction & engineering company NCC LTD. posted a profit of Rs.100.36 crore for the third quarter ended December 31, 2017, up 72%, against a profit of Rs.58.27 crore for the corresponding quarter of last year thanks to healthy operational performance. Revenue from operations fell 2.8 percent to Rs.1,851 crore while operating profit jumped 46.4 percent to Rs.255.1 crore and margin expanded 470 basis points to 13.8 percent, YoY. The companys share rallied 12-15%.

The share of Punjab National Bank (PNB) crashed almost 25% throughout the week after the state-run lender reported fraudulent transactions worth Rs.11,300 crore at a Mumbai branch through Letter of Understanding (LoU). The fraud involved Jeweller Nirav Modi, his wife, brother and Gitanjali Gems Chairman Mehul C. Choksi. The PNB management held a media briefing, where it gave the assurance that the bank would not allow any unethical practice and all the culprits would be brought to book. On Thursday RBI directed PNB to pay entire Rs. 11,300 crore owed to counterparty banks in the alleged fraud involving jeweller Nirav Modi.

Key Market Drivers

The Indian government's direct tax kitty swelled to Rs.6.95 lakh crore during the April-January period of the current fiscal, a growth of 19.3% over the year-ago period. The government's direct tax kitty swelled to Rs.6.95 lakh crore during the April-January period of the current fiscal, a growth of 19.3% over the year-ago period. The net collections for Corporate Income Tax (CIT) showed a growth of 19.2% and for Personal Income Tax (PIT) at 18.6%. Refunds amounting to Rs.1.26 lakh crore have been issued during the 10-month period of the current fiscal.

India's consumer price index (CPI) or retail inflation eased stood at 5.07% in the month of January 2018, lower from 5.21% in December 2017. Industrial activity saw a robust growth for the second consecutive month in December, with the Index of Industrial Production growing 7.07%. The rise follows strong growth in the manufacturing, capital goods, and consumer non-durables sectors, according to official data released on Monday.

Reserve Bank of India (RBI) scrapped corporate debt restructuring (CDR), strategic debt restructuring (SDR), sustainable structuring of stressed assets (S4A) and joint lenders forum (JLF) schemes to restructure defaulted loans. On Monday, the central bank removed a host of norms such as SDR and S4A and made the process time-bound. The new rules stipulate that starting 1 March, lenders must implement a resolution plan within 180 days for accounts of at least Rs.2,000 crore.

Event Watch

Tripura Election will be held on 18th Feb. 2018.

Q3 Quarterly results will be presented next week for the companies like Ambuja Cements, Merck Ltd., Mahindra CIE Automotive Ltd., Atlas Cycles Ltd.

Stocks To Watch

8K Miles Software Ltd. is on the upside while Gitanjali gems is on the downside.