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Rupee may fall below 80 against US Dollar if 79.60 breached; INR in sync with other EM peers

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By NS Ramaswamy

The much awaited U.S annual rate of consumer price growth in August finally came in on Tuesday at 8.3% (July 8.50%; four decade peak June 9.10%), as a shocker with big increases in consumer spending. The expectations and optimism were at 8.1% paving way for deceleration and continued slowdown. Despite a moderation in soaring energy costs and inflation-driven slowdown in demand for fuel it failed to play the key role in easing inflation. Core CPI (which excludes volatile food and energy prices) rose to 6.3% (July 5.9%) against expectations of 6%. 

The FED’s inflation target rate of 2% is now likely to take much longer time. The September 20th – 21st FOMC which had expectations of a 75 basis point increase is now tipped for 100 basis point increase. Dollar instantly gained strength and surged to its near 20-year peak (7th Sept at 110.785). Markets are now anticipating interest rates by year end to be above 4% (4.00% to 4.25% from 3.75% to 4.00%). The continued job market tightness and the support it brings in demand would pave the way to FED’s decision to keep rates higher for longer.

European markets were initially indicating optimism with a three week high EURUSD at 1.0199 based on the lower expectations of US CPI which improved global sentiments. But the disappointment led to EURUSD retreat to 0.9961 levels (3% fall). Meanwhile last week the Euro gained against the dollar on the European Central Bank (ECB) raising the key deposit rate to 0.75% from zero. Will ECB guidance for further aggressive monetary tightening alone help the euro climb up higher to the dollar?

ECB policymakers (with hawkish commentary) are in a dilemma that for at least two years to come, the key interest rates have to be hiked to 2% or more above target rate. Their attempt would be to curb record high inflation (August inflation at 9.1%), despite a likely recession in the euro zone. However, the impact of higher rates is expected to be cushioned due to the strong labour market. Next policy meeting of the ECB is slated on 27th Oct.

Also read: Why ArcelorMittal, other metal giants are shutting factories amid Europe energy crisis; here’s what lies ahead

Global aggressive rate hikes could dampen demand and cause economic slowdown. Indian rupee is insulated for this event only if we have a premeditated policy response and a strong macro-fundamental to stabilize rupee. However we are vulnerable to the global rate hikes on account of capital outflow depressing rupee further. RBI’s response with domestic rate hikes would have to be in line with the global shocks.

Threat to imported inflation (even if the global prices remain unchanged, a weaker rupee will increase the prices of imported inputs), capital outflow and weakening of rupee are the consequences of these interest rate hikes. India’s export oriented sectors are the front-line recipients of this impact, widening our current account deficit (CAD).

USD INR appeared to have consolidated at 79.30 and indicated lower limit support at 78.70 levels. Taking cue from the latest inflation fears in the U.S and dollar index rebounding, in the short term USDINR seeks a strong resistance at 79.60 with support at 79.30. Breaking this resistance, Rupee could cross the 80 mark and depreciate further before higher resistances at 80.30 to 81.00 is seen in the medium term. So far, the depreciating trend in the Indian rupee is a tad out of sync with other emerging economies’ currencies.

(NS Ramaswamy, Head of Commodities, Ventura Securities. Views expressed are the author’s own.)

Delhi air quality continues to remain in ‘poor’ category, AQI at 249

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The overall air quality remained in the ‘poor’ category with an Air Quality Index (AQI) of 249 recorded on Friday morning in the national capital, according to the System of Air Quality and Weather Forecasting and Research (SAFAR) in India.

As per the latest data provided by SAFAR, the air quality around Delhi University was recorded at 307 in the morning hours, while the IIT area in New Delhi had an AQI of 273. Lodhi Road recorded an AQI of 218, falling into the ‘poor’ category.

Further, according to the data, Noida recorded an AQI of 208 (poor), and Gurugram had an AQI of 352 (very poor).

#WATCH | Overall air quality in the ‘Poor’ category in Delhi todayVisuals from Kartavya Path, India Gate pic.twitter.com/DhT4KYk5Ot

— ANI (@ANI) October 27, 2023

The India Meteorological Department, in a statement on Delhi’s AQI, had forecast predominant surface winds likely from northwest/northeast directions in Delhi with a wind speed of 04-16 kmph, resulting in mainly clear skies and mist in the morning on Friday.

Also Read:Smog shrouds Delhi as air quality dips to ‘very poor’ category, AQI at 306

Earlier on Thursday, the air quality stood at 256 in Delhi, deteriorating from the ‘moderate’ to ‘poor’ category, according to data from SAFAR.

As stubble burning continues in parts of Punjab and Haryana, air quality in the national capital has worsened in the past few days. According to data, over 2,500 cases of stubble burning have been reported this year so far.

Also Read:Ban stubble burning, firecrackers: Delhi environment minister’s recommendations for NCR to tackle pollution

Meanwhile, the second phase of the Graded Response Action Plan (GRAP) was implemented in Delhi on Tuesday to reduce the effects of increased pollution.

The Air Quality Index is a tool for effective communication of air quality status to people in terms that are easy to understand. There are six AQI categories, namely good, satisfactory, moderately polluted, poor, very poor, and severe.

(With Inputs from ANI)

Rupee falls to fresh lifetime low, slips below 81 for the first time amid strong dollar, high bond yield

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The Indian rupee depreciated further on Friday as it slipped past the 81 mark for the first time ever. Rupee opened at a fresh record low of 81.09 against the US dollar, and slipped further to 81.13, a fresh lifetime low. Volatility and uncertainty have risen as the market comes to grips with a policy regime that is reducing liquidity after a decade of abundance. The strength in US dollar is putting pressure on emerging market currencies including rupee. The domestic currency may face resilience around 81 in anticipation of RBI’s intervention. However, the direction will depend on broad-based dollar movement.

The 10-year bond yield was trading at 7.383% — a level last seen on 25 July, up 7 bps from its previous close of 7.383% The US 10-year treasury yield soared 18 basis points to 3.7% on Thursday, its highest in a decade as traders weighed the risk of recession. Meanwhile, Asian currencies were trading mixed on Friday. China Offshore fell 0.3%, China renminbi 0.27%, Taiwan dollar fell 0.5%. The Philippines peso was up 0.3%, South Korean won gained 0.27%, and the Japanese yen 0.2%.

USDINR resistance at 81.25-81.40, support at 80.12

Spot USDINR now has resistance in the area of 81.25 to 81.40 while the previous top 80.12 is likely to act as support. Asian stocks headed for a sixth weekly decline following another day of losses for US shares and surging Treasury yields that underscore expectations for tighter monetary policy and a slowing global economy, said Dilip Parmar, Research Analyst, HDFC Securities.

Rupee fell 90 paise in the previous session. RBI has been making continuous efforts to limit the losses in the rupee. However, the absence of RBI was felt yesterday as the rupee independently followed the global factors towards achieving its fair value. One of the reasons that RBI couldn’t rescue the fall in the currency was inadequate liquidity in the banking system which is currently in deficit, according to Amit Pabari, MD, CR Forex Advisors.

Also Read: Reliance New Energy to acquire 20% stake in solar tech company Caelux Corp to produce low cost solar modules

Rupee likely to depreciate further, may fall to 82

“RBI’s intervention in the spot market could make the case worst for the banking system liquidity amid short-term interest rates going higher. It will be interesting to watch RBI monetary policy next week as it comes up with some tools to smoothen the liquidity and talks about the current run in the currency and falling reserves. Historically, whenever a big figure in rupee has been taken out, a move of 2.5 rupees an average has been seen within one month of breakout. Overall, with RBI’s absence, the rupee is going to test new lows in the short term and we expect the currency to weaken up to 81.80 and 82.00 levels in the near term,” Pabari added.

The Eight Former Indian Navy Officers in Qatar: A Complex Scenario

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The case of the eight former Indian Navy officers working in Qatar has garnered significant attention and raised various questions. These officers, namely Captain Navtej Singh Gill, Captain Saurabh Vasisht, Commander Purenendu Tiwari, Captain Birendra Kumar Verma, Commander Sugunakar Pakala, Commander Sanjeev Gupta, Commander Amit Nagpal, and Sailor Ragesh, found themselves at the centre of a complex and sensitive situation when they were detained in Qatar. Their arrests were not only a shock to the Indian government but also stirred concerns about the state of India-Qatar relations.

Background:

The story begins with these eight veterans working at Dahra Global Technologies and Consultancy Services, a defence services provider company owned by an Omani national, a retired squadron leader of the Royal Omani Air Force. The company’s website, which has since been taken down following media reports of the arrests in October 2022, once stated that it provided training, logistics, and maintenance services to the Qatari Emiri Naval Force (QENF).

Commander Purnendu Tiwari (retd), who served as the Managing Director of the company, was honoured with the Pravasi Bharatiya Samman award in 2019 for his contributions to strengthening the bilateral relationship between India and Qatar. This recognition marked a significant achievement as he was the only person from the Indian armed forces to receive this prestigious award. His contributions were acknowledged in Doha by then Indian Ambassador P Kumaran, along with a former head of the Qatar defence forces’ International Military Cooperation. This event took place at the Indian Cultural Centre, and it was attended by Captain Kapil Kaushik, the defence attaché at the Embassy of India at the time.

The Dahra website also featured certificates from Kumaran and his successor, Ambassador Deepak Mittal, commending the company’s efforts in promoting good relations between the two countries. Most of the detained individuals had been working at Dahra for four to six years when they were taken into custody.

The Arrests and Legal Process since 2022:

The eight former Indian Navy officers were taken into custody by the Qatari State Security Bureau, the country’s intelligence agency. The Indian Embassy in Qatar only became aware of these arrests in mid-September, and it was not until September 30 that the detainees were allowed brief telephonic contact with their family members. The first official consular access, granted by the Indian embassy, was provided on October 3, over a month after their initial detention. Subsequently, they were allowed weekly phone calls to connect with their families. A second consular access was granted at the end of December.

The charges against these individuals have not been disclosed, but their prolonged solitary confinement has led to speculation that they may be detained in connection with a security-related offense. The lack of information and transparency in this case has not only concerned their families and the Indian government but has also left observers questioning why New Delhi has not been able to engage with the Qatari leadership in a more direct and candid manner.

India-Qatar Relations:

This apparent lack of communication is surprising given the historically friendly relations between India and Qatar. These relations have continued to flourish over the years. The visit of Prime Minister Manmohan Singh to Qatar in November 2008 marked a turning point, becoming the first by an Indian Prime Minister. Subsequently, the Qatari Emir, Sheikh Tamim Bin Hamad Al Thani, visited India in 2015, and Prime Minister Narendra Modi reciprocated with his visit to Qatar in 2016. Indian External Affairs Minister Dr. S. Jaishankar has visited Qatar multiple times. This growing rapport signifies the importance of the bilateral relationship between these two nations.

The economic aspect of their relationship is noteworthy, as in 2021, India ranked among the top four export destinations for Qatar. Additionally, India is among the top three sources of Qatar’s imports. The bilateral trade between the two countries is valued at US$15 billion, with a significant portion of it attributed to liquefied natural gas (LNG) and liquefied petroleum gas (LPG) exports from Qatar, worth over U$13 billion.

Defence cooperation is also a pivotal element of the India-Qatar partnership. The India-Qatar Defence Cooperation Agreement, signed during Prime Minister Manmohan Singh’s visit in 2008, was extended for another five years in 2018, marking a critical development. The agreement included provisions for the training of the QENF by India and mutual visits, underlining the significance of defence cooperation in the relationship.

Indian Naval and Coast Guard ships have made regular visits to Qatar, and QENF delegates participated in maritime exercises in India. The two nations had also planned to celebrate the 50th anniversary of the establishment of diplomatic relations in 2023.

Challenges in the Relationship:

Despite the generally positive trajectory of India-Qatar relations, recent challenges have emerged. One notable challenge arose in June after BJP spokesperson Nupur Sharma’s remarks against the Prophet on a TV show. Qatar was the first country to object to these remarks and demanded a public apology from India, which created tension in the relationship. The Indian Ambassador was summoned, and a lunch hosted by the Emir was cancelled, further complicating matters. India’s swift action in sacking Sharma to contain the situation ultimately mitigated the fallout.

The imprisonment of the eight former Navy officers marks another significant challenge in the relationship. The fact that New Delhi was caught off guard by these arrests in a country where around 800,000 Indians live and work raises concerns about the depth of communication and cooperation between the two nations. Indians constitute the largest expatriate community in Qatar, making this situation all the more significant.

To the Indian expatriate community and the wider world, New Delhi’s perceived inability to resolve this issue promptly sends a message that all may not be well in the India-Qatar relationship. It also leads to questions about whether this issue and the difficulty in resolving it are connected to the previous blasphemy controversy.

The Way Forward:

Efforts have been made to address the situation. In late October, Prime Minister Narendra Modi spoke with the Emir, accepting his Diwali greetings and conveying India’s good wishes for a successful FIFA World Cup tournament scheduled to be held in Qatar. Vice President Jagdeep Dhankhar’s visit for the FIFA inaugural in November had raised expectations that he would address the issue of the detained former Navy officers. However, it appears that this did not happen.

There is an existing agreement between India and Qatar regarding the transfer of convicted prisoners to India, allowing them to serve their sentences in places where their families can visit.

The case of the Indian nationals took a significant turn with their first trial in late March. According to reports, these former naval officers were senior employees of Dahra Global Technologies and Consulting Services, a company advising on a Qatari programme aimed at obtaining advanced Italian-made submarines capable of evading radar detection.

Qatar had signed a memorandum of understanding (MoU) in 2020 with the Italian-based shipbuilding firm Fincantieri SpA for the construction of submarines and the establishment of a naval base and fleet maintenance. However, it appears that the MoU has not yet been implemented. Fincantieri has clarified that they currently have no contracts for submarines with Qatar, but they are continuing work on other vessels, based on a 2016 agreement with the Qatari Ministry of Defence.

In conclusion, the situation of the eight former Indian Navy officers detained in Qatar remains intricate and raises various questions about the India-Qatar relationship.

Buy these two stocks for near term gains as equity indices look set to jump further

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By Subash Gangadharan

Markets have bounced back strongly after the sharp selloff seen last Monday. The Nifty index made a long-legged Doji candlestick bullish reversal pattern on the weekly chart last week. This indicates that the bulls have overpowered the bears as the markets had recovered most of the losses seen during the early part of last week. This week too the Nifty has continued to surge higher to new life highs.The short term uptrend is, however, looking matured as the short term moving averages on the intraday charts have started to flatten. This indicates that markets could rise a bit more from current levels and consolidate in a range for the near term.Crucial supports to watch for a short term trend reversal are at 13864-13842.The below picks are for the next 15-26 trading sessions

Today, the stock also closed above the 20 day SMA, a sign of short term strength. Short term momentum readings like the 14-day RSI too has bounced back and is showing strength.

We believe the stock is ready to continue the next leg of its underlying uptrend and has the potential to move higher in the coming sessions. We, therefore, recommend a Buy between the 7560-7615 levels. CMP is 7609. Stop-loss is at 7430 while targets are at 8000.

Buy Balkrishna Industries

After correcting from a high of 1720 touched in early December 2020, Balkrishna Industries found support at the 50 day SMA around the 1515 levels. The stock has since then gradually climbed higher making higher tops and higher bottoms in the process.

Today, the stock broke out of the 1550-1590 trading range on the back of above-average volumes and also closed above the 20-day SMA in the process. Short term momentum indicators like the 14-day RSI too have bounced back from oversold levels. This augurs well for the uptrend to continue.

We believe the stock is ready to move higher in the coming weeks. We, therefore, recommend a Buy between the 1590-1625 levels. CMP is 1620. Stop-loss is at 1550 while targets are at 1760.

(Subash Gangadharan is a Senior Technical and Derivative Analyst at HDFC Securities. The views expressed are the author’s own. Please consult your financial advisor before investing.) 

Will bears drag Nifty to 16800 or bounceback on cards? 5 things to know before share market opening bell

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After Monday’s rout, the Indian share market may witness a slight bounce back amid mixed global cues. Early trends in the SGX Nifty hinted at a flat to positive opening for NSE Nifty 50 and BSE Sensex. “The RBI’s decision and the outlook would hold great importance post the rate hikes announced by many Central Banks globally following the US Fed aggressive outcome. Even the monthly F&O expiry this Thursday would keep the markets volatile. Fragile global factors and FII outflows would continue to keep the pressure on the market and thus 17000 level would act as a key support level, below which the weakness could intensify,” said Siddhartha Khemka, Head – Retail Research, Motilal Oswal Financial Services.

Also Read: Infosys, Embassy REIT, Jubilant FoodWorks, Mahindra Logistics, Forbes & Co, Orient Bell stocks in focus

Nifty technical view: “A long bear candle was formed on the daily chart with an opening downside gap. Technically, this market action indicates a sharp down-trended movement in the market. After a decisive downside breakout of the immediate support of minor up trend line at 17500 levels, the Nifty is now sliding down to the crucial lower support around 16800 levels as per the concept of change in polarity. There is a higher possibility of an upside bounce from the lower support in the short term. The short-term trend of Nifty is sharply down, and the weakness is expected to continue for the next 1-2 sessions,” said Nagaraj Shetti, Technical Research Analyst, HDFC Securities.

Nifty, Bank Nifty levels to watch for: “Nifty has breached psychological 17000 levels, as 17250-17320 will now act as immediate resistance, whereas support is placed around the 16800 levels. On daily charts, Bank Nifty has formed three black crow patterns, indicating that bears have taken control. Nonetheless the 39800 level is crossed and sell on rise is advised for the short term. India VIX, meanwhile closed at 21.89 levels as it surged over 6.31 per cent intraday. Dips should be utilized to accumulate quality stocks,” said Om Mehra, Technical Associate, Choice Broking.

Rupee: The rupee plunged 58 paise to close at an all-time low of 81.67 (provisional) against the US dollar on Monday as the strengthening of the American currency overseas and risk-averse sentiment among investors weighed on the local unit. Moreover, escalation of geopolitical risks due to the Russia-Ukraine conflict, a negative trend in domestic equities, and significant foreign fund outflows lowered investors’ risk appetite further dragging the domestic currency, according to forex traders.

Also Read: Sensex ends at 2-month low, Nifty support shifts to 200-day SMA at 16850; use volatility to buy quality stocks

Stocks under F&O ban on NSE: Vodafone Idea, Zee Entertainment Enterprises, and Punjab National Bank are the three stocks under the NSE F&O ban list for 27 September. Securities thus banned under the F&O segment include companies where derivative contracts have crossed 95 per cent of the market-wide position limit.

Investors’ wealth dips Rs 76,196 cr amid sell-off in markets

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Investors’ wealth eroded by Rs 76,196.54 crore on Wednesday, with the market witnessing a sell-off amid rising concerns over possible aggressive interest rate hikes to tame high inflation.

The market capitalisation of BSE-listed companies — which is also an indicator of wealth of investors — tumbled Rs 76,196.54 crore to Rs 2,85,94,997.40 crore amid the 30-share Sensex falling 224.11 points or 0.37 per cent to 60,346.97 points.

The 30-share index rebounded more than 1,200 points from the early lows before settling at 60,346.97 points, a loss of 224.11 points or 0.37 per cent compared to Tuesday’s closing level.

The broader NSE Nifty closed lower 66.30 points or 0.37 per cent at 18,003.75 points.

Also read| Buy Hindalco, Lupin, IndusInd Bank to pocket gains; short-term market texture looks bullish; use dips to buy

The Sensex had plunged 1,150 points to a low of 59,417.12 points, while the Nifty declined to a low of 17,771.15 points in early trade on Wednesday, following deep losses in US markets.

Tracking the weak trend in equities, the market capitalisation of BSE-listed firms had tumbled by Rs 2.21 lakh crore in initial deals. However, the markets showed steady recovery and pared most of the losses to settle 4 per cent down.

According to Siddhartha Khemka, Head – Retail Research, Motilal Oswal Financial Services, Indian markets displayed strong resilience in the face of negative global cues.

Also read| Harsha Engineers IPO opens today, GMP strong; anchor investors put in Rs 225 crore, should you subscribe?

While markets opened 1.6 per cent lower, it showed steady recovery throughout the day to wipe out the entire opening loss and managed to close near day’s high with marginal loss of 0.4 per cent.

“Controlled inflationary environment v/s global peers, strong flows from retail, domestic as well as foreign institutions continue to drive the domestic equities.

“Although there can be bouts of volatility due to adverse global cues. Support base buying at lower levels are giving much needed strength to the Indian markets and any sharp decline will be good opportunity to buy in Indian equities,” Khemka added.

Delhi Schools Diwali, Chhath holiday list – Know all dates in October, November and December

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Delhi School Diwali Holiday List: For students, holidays represent an indispensable aspect of their academic life, eagerly awaited and cherished for various festivities and national celebrations such as Gandhi Jayanti, Diwali, and Dussehra. These breaks offer not only respite from the demanding school routine but also serve as occasions for rejuvenation and family bonding. The compilation of upcoming holidays serves as a convenient guide, allowing students to effectively plan their activities during the Delhi School Closure. It encourages them to utilize this time wisely, engaging in recreational pursuits, pursuing personal interests, and embracing valuable moments with loved ones.

Below is a list of holidays for the month of October, November and December:

Gandhi Jayanti – October 2, 2023Maha Panchami – Dussehra – October 19, 2023 to October 24, 2023Maharishi Valmiki Jayanti – October 28, 2023

November

Diwali: November 12, 2023Bhai Duj: November 15, 2023Chhat Puja: November 19, 2023Guru Tegh Bahadur’s Martyrdom Day: November 24, 2023Guru Nanak Jayanti: November 27, 2023.

December

Christmas Eve: December 24, 2023Christmas: December 25, 2023New Year’s Eve: December 31, 2023

Schools to remain closed on October 28

On the occasion of Maharishi Valmiki Jayanti, schools in Delhi and other states will be closed. Parents and students are advised to contact the school authorities for any queries.

Nifty near 18K: Market pundits call for caution

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By Ashley Coutinho

Market pundits are calling for caution amid a surge in Indian equities since mid-June and the benchmark 50-share Nifty nearing a decisive resistance level of 18,000.

“I am at a loss to explain why markets are not reacting more negatively to the bleak global economic outlook,” said Andrew Holland, CEO, Avendus Capital Public Markets Alternate Strategies. “The fall in commodity prices may have raised hopes that inflation has peaked. FPIs have returned due to a possible portfolio rebalancing after a prolonged bout of selling from October to June.”

The turnaround in FPI inflows into equity markets and rising expectations of India’s inclusion in the global bond market indices have led to a stable currency and resilient bond markets over the last month.

Rising interest rates in the US have put emerging market economies with large import bills and dollar-denominated debt on the back foot. JP Morgan analysts put an ‘underweight’, or ‘sell’ sign, on international emerging market (EM) sovereign debt on Friday.

Also Read: Mcap of 7 of top 10 most valued firms climb over Rs 1.33 lakh crore; TCS, Reliance lead gainers

India stands out among the EMs because of its currency stability, growth prospects, robust forex reserves as well as relatively low levels of external debt, current account and fiscal deficits.

A return to risk-off trade, however, could spell bad news for the country, says Holland. “India will not be totally immune to a global sell-off even if our growth prospects are better. But the hope is that if global markets correct by, say, 10%, India will go down by maybe 5% as the country looks relatively more attractive in the EM pack.”

The US Federal Reserve is expected to raise rates by 75 basis points this month. The European Central Bank raised its key interest rates by an unprecedented 75 bps last week in a bid to tame inflation amid worries of a looming recession.

“A key variable to track is crude oil prices since the Indian market is quite vulnerable to higher oil prices. Moreover, the consequences of a coordinated global central bank balance-sheet tapering exercise need to be closely watched because it has the potential to lead FPIs to a robust risk-off stance,” UR Bhat, director at Alphaniti Fintech, said.

Brent crude oil prices have slid 25% over the last three months.

“While there is a lot of talk of decoupling and a robust market in light of the global scenario, India is neither immune, nor isolated from the headwinds and knock-on affects of a possible global recession, high energy costs, rising rates and inflation,” said Arun Chulani, sponsor & investment adviser, First Water Capital, a category III Alternate Investment Fund (AIF).

Valuations are a concern. Over the last 12 months, the MSCI India index (4%) has outperformed the MSCI EM index (-24%) by a wide margin. The Nifty now trades at 21x FY23E EPS, comfortably above its long period average.

“With the post-Covid earnings momentum at play, equity valuations have corrected from the 2021 peaks but are still some distance away from the value zone. The current valuations are well in excess of one standard deviation away from the historic mean,” Bhat said.

With interest rates on the rise, the historic mean has less significance than in normal times. He added: “On a price to book basis, the valuation premium is even more stark. For valuations to come within the fairly valued zone, earnings have to surprise positively or some meaningful correction has to happen.”

Jefferies believes that the IT sector remains at significant risk in case of a sell-off. “Any potential market correction will likely emanate out of hawkish stance by the Fed and the likely stagflation worries. That could hit the IT sector,” it said in a recent note.

Punjab National Bank Q2 profit rises 327% on strong advances

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The net profit of Punjab National Bank rose 327% year-on-year in July-September quarter, aided by a growth in its loan book and lower provisions.The state-owned bank posted a net profit of Rs 1,756 crore, up 40% on a sequential basis.

The net profit was much higher than the Rs 1,163 crore estimated by Bloomberg.

Retail loans rose 40.2% year-on-year to Rs 2.2 trillion as on September 30. Of the retail portfolio, core retail rose nearly 17% year-on-year to Rs 1.5 trillion.

Personal loans rose 39% to Rs 19,868 crore.

Home loans and vehicle loans rose 14% and 28.3%, respectively.

Agriculture segment rose 4.5% to Rs 1.5 trillion. Micro, small and medium-sized enterprises (MSME) segment rose 6.5% to Rs 1.4 trillion.

The share of retail, agriculture, and MSME loans within the overall portfolio rose 218 basis points (bps) to 55.6% as on September 30.

Corporate loans and other segments rose 8.3% to Rs 4 trillion as on September 30.

Domestic deposits rose 9.4% to Rs 12.8 trillion.

Total term deposits rose 15.3% to Rs 7.7 trillion as on September 30. Low-cost current account savings account deposits rose 2.6% to Rs 5.4 trillion.

CASA share to domestic deposits fell to 42.15% as on September 30 from 44.9% a year ago.

Net interest income, difference between interest earned and interest expended rose nearly 20% to Rs 9,923 crore in the quarter under review. Net interest margin rose to 3.24% in the September quarter from 3.11% a year ago.

However, the state-owned bank’s cost of funds rose to 4.21% as on September 30 from 3.39% a year ago.

ASSET QUALITY

Domestic gross non-performing asset ratio fell to 7.06% as on September 30 from 10.7% a year ago. Gross non-performing asset ratio was highest in the MSME, and agriculture segment.

Provisions fell nearly 30% to Rs 3,444 crore in the quarter under review.

Slippages ratio fell to 0.86% as on September 30 from 3.34% a year ago.

Cash recoveries and upgrades were Rs 3,498 crore in the quarter under review. Fresh slippages were Rs 1,750 crore. The bank wrote-off bad loans worth Rs 3,665 crore in the quarter under review.

The bank recovered loans worth Rs 5,333 crore in the September quarter.

Provision coverage ratio rose to 91.9% as on September 30 from 83.96% a year ago. Capital to risky asset ratio rose to 15.09% as on September 30 from 14.7% a year ago.