
Indices: Stock market update: Nifty IT index advances 0.69%
The Nifty IT index closed 0.69 per cent up at 37540.1.
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NEW DELHI: The Nifty IT index closed on a positive note on Wednesday.Shares of Tech Mahindra Ltd.(up 1.41 per cent), MphasiS Ltd.(up 1.0 per cent), HCL Technologies Ltd.(up 0.84 per cent), Tata Consultancy Services Ltd.(up 0.79 per cent) and Coforge Ltd.(up 0.74 per cent) ended the day as top gainers in the pack.On the other hand, Oracle Financial Services Software Ltd.(down 0.63 per cent) finished as the top losers of the day.The Nifty IT index closed 0.69 per cent up at 37540.1.Benchmark NSE Nifty50 index ended up 129.55 points at 24813.45, while the BSE Sensex stood up 410.19 points at 81596.63.Among the 50 stocks in the Nifty index, 36 ended in the green, while 14 closed in the red.Shares of Vodafone Idea, Tata Teleservices, YES Bank, BEL and Trident Ltd were among the most traded shares on the NSE.Shares of AB Infrabuild, Banco Products, SecMark Consultancy, Stampede Cap(DVR)and Krishana Phoschem hit their fresh 52-week highs in today's trade, while Music Broadcast, Lasa Supergenerics, Chembond Chem, HCL Infosystems and IndInfravit Trust hit their fresh 52-week lows.
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Based on the investment timeframe being short or medium term, the rate cut cycle would start supporting the cost of funds for banks with a time-lag based on their liability franchise, maturity structure and rate cut on savings deposits. The CRR cut and easy liquidity too would help. India's insurance sector remains underpenetrated despite a decade of liberalization. What's the investment case for life vs general insurance at this stage? The outlook for the life insurance segment looks healthy at the moment given these companies faced VNB margin pressure in FY25 due to higher salience of ULIP sales in their mix. The product mix can be more balanced this year, aiding the margin growth. The general insurance segment is seeing slower growth on the motor segment while health insurance segment growth is strong though not very profitable. 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With valuations in private banks and NBFCs at or below long-term averages, do you see this as a compelling entry point or is it more about selective positioning? Yes, equity portfolio construct would always be about selective positioning based on stock specific criteria like growth, management and valuations. At times this gets impacted due to distortions of ownership or inclusion/exclusion in ETFs. Also, it is part of the investing cycles that at any point, some companies trade at higher or lower than long term average. Overall, we see a healthy environment with a supportive monetary policy on both lower rates as well as higher liquidity and this can help few lenders based on their asset liability mix. How do you perceive the growth opportunity in PSU bank stocks? The PSU banks have gone through a healthy consolidation (mergers), governance reforms & balance sheet improvement. The balance sheet has strengthened with higher capital adequacy, and the narrative on PSU stocks has improved due to diversification into retail lending and recoveries from corporate loans. Operationally, the digital rollout is helping and so is control over total employees. Higher capital would help them grow lending when the corporate capex cycle picks up. From a valuation perspective, quite a few PSU banks are trading below book value despite healthy ROA & ROE in FY25. Capital market intermediaries have become significant in BFSI's narrative and an investor favourite as well. Do you see them as consistent compounders? Capital market players have a good growth potential as India moves from being a nation of savers to a nation of investors. Rising per capita income as well as younger demography creates new customer segments who are looking at risk-return trade-offs on their investments. One advantage for these businesses is they don't require much capital for growth and hence a good execution led by digital distribution can help them grow sustainably at higher rates. The BFSI universe includes quite a few capital market intermediaries and we expect more investible opportunities from future listings. However, some of these businesses are cyclical and hence a focus on earning sustainability and valuations is a must. In between the two ends of banks and NBFCs, the tilt has largely been in favour of the latter in a rate cut cycle. But given the valuations for both, which one would you be more biased towards? The fact that banks may face margin pressure in a rate cut cycle and NBFCs may benefit is largely known. So, NBFCs have done well in the last year and now valuations for few NBFCs are higher relative to banks. Based on the investment timeframe being short or medium term, the rate cut cycle would start supporting the cost of funds for banks with a time-lag based on their liability franchise, maturity structure and rate cut on savings deposits. The CRR cut and easy liquidity too would help. India's insurance sector remains underpenetrated despite a decade of liberalization. What's the investment case for life vs general insurance at this stage? The outlook for the life insurance segment looks healthy at the moment given these companies faced VNB margin pressure in FY25 due to higher salience of ULIP sales in their mix. The product mix can be more balanced this year, aiding the margin growth. The general insurance segment is seeing slower growth on the motor segment while health insurance segment growth is strong though not very profitable. With the upcoming regulatory norms on expense management, the profitability of the general insurance sector could show improvement as insurers adhere to expense and commission caps. From the investor side, expected IFRS implementation in the next 2 years will help reduce the gap between accounting profits and VNB profits. Another regulatory support is the expected reduction in GST rate that can make insurance products more affordable. So, both Life & General insurance makes a good investment case from a longer term.