Financial stocks are rallying hopes for a recovery plan; IndusInd Bank soars by 40%

Shares of financial companies, including banks, non-bank finance companies (NBFCs), housing finance companies (HFCs) and insurance companies, climbed to 40% on the National Stock Exchange (NSE ) Thursday pending a huge stimulus package announcement by the government.

At 10:25 a.m., the Nifty Bank, Nifty Financial Services and Nifty Private Bank indices were up 9-10%, while the benchmarks Nifty 50 and Nifty PSU Bank were up 5%. In the last three trading days, financial sector indices have jumped 15% to 20%, after falling as much as 42% in the first three weeks of March.

US indices have made back-to-back gains over the past two trading days in hopes of huge stimulus approval.

According to a Commercial standard report, the Narendra Modi government is also reportedly considering an income support scheme for those most affected by the decline in economic activity due to the coronavirus pandemic and the resulting national lockdown.

The program could mean transferring 5,000 to 6,000 rupees to the bank accounts of 80 to 100 million poor families, the report added.

Discussions are also underway to authorize a deferral of equivalent monthly payments (EMI) for targeted individuals, and loan repayment for micro, small and medium enterprises (MSME). But it will also require some support to the banking system, sources said. CLICK HERE TO READ THE FULL REPORT

Among individual stocks, IndusInd Bank shares ended their eight-day losing streak and jumped 40% to Rs 421.80 on the NSE on Thursday. This is the share’s biggest daily gain.

Despite today’s strong rally, the stock has fallen 66% so far in the current month. In Monday’s session, the private lender’s shares fell 30% to an 8-year low at Rs 235.55 after the retirement of the Managing Director and CEO (MD & CEO) of the bank, Romesh Sobti.

In February, the global rating agency Moody’s revised the outlook for IndusInd Bank’s instrument from “stable” to “negative” to take into account the risk of further deterioration in asset quality. However, he confirmed the ratings of deposits in foreign currencies and national currencies, based on a strong capital base. In recent quarters, the bank has seen a deterioration in the quality of its assets, especially in the corporate segment. Strict refinancing conditions for borrowers were a trigger for the crystallization of non-performing loans (NPLs), the agency said.