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Indian Indices End Marginally Higher; Energy Stocks Witness Gains

After opening their day on a strong note, Indian share markets gave up earlier gains and ended their session marginally higher. Gains were largely seen in the energy sector and IT sector, while telecom stocks ended the day lower.

At the closing bell, the BSE Sensex stood higher by 142 points (up 0.4%) and the NSE Nifty closed higher by 45 points (up 0.4%). The BSE Mid Cap index ended the day down by 0.5%, while the BSE Small Cap index ended the day down by 1.3%.

Asian stock markets finished on a positive note as of the most recent closing prices. The Hang Seng was up 1.97% and the Nikkei was trading higher by 1.47%. The Shanghai Composite stood higher by 0.46%. The rupee was trading at 63.93 to the US$ at the time of writing.

Punjab National Bank share price was in focus today. The stock witnessed selling pressure and closed around 13% lower today after the bank revealed that it has detected a US$1.77 billion (about Rs 114 billion) scam where billionaire jeweller Nirav Modi allegedly acquired fraudulent letters of undertaking from a branch in Mumbai to secure overseas credit from other Indian lenders.

In the news from the IPO space, the initial public offering (IPO) of Aster DM Healthcare has been subscriber 89% so far on its final day of the offering.

The company has set the price band of Rs 180-190 per equity share for its IPO.

The company currently operates in all the GCC states, which comprises the United Arab Emirates, Oman, Saudi Arabia, Qatar, Kuwait and Bahrain, in Jordan, India and the Philippines. The company's GCC operations are headquartered in Dubai, while the United Arab Emirates and Indian operations are headquartered in Kochi, Kerala.

The company operates in multiple segments of the healthcare industry, including Hospitals, Clinics and Retail Pharmacies and provides healthcare services to patients across economic segments in several GCC states through their various brands 'Aster', 'Medcare' and 'Access'.

As of 30th September 2017, the company had 323 operating facilities, including 19 hospitals with a total of 4,754 installed beds.

To know our view on this IPO, you can read our IPO note on Aster DM Healthcare (requires subscription).

In the news from the banking space, as per an article in the Economic Times, the new Reserve Bank of India (RBI) rules are strengthening fears that the worst of the bad-loans buildup is yet to come.

Note that the RBI surprised the financial sector this week by halting all of its existing loan-restructuring mechanisms with immediate effect. It further rolled out new rules that will push more debt defaulters into bankruptcy courts.

The measures set by the RBI include setting strict timelines for lenders to take action against defaulters and threatening penalties if banks failed to act in a timely manner.

Earlier this week, an audit by the Reserve Bank of India (RBI) showed about US$ 3.6 billion of bad loans in the books of the country's biggest bank - the State Bank of India (SBI).

The above-reported figure is higher than what SBI reported for the end of March 2017.

The above audit and underreporting further amplified questions about distress in the financial sector.

The underreporting of SBI was striking as the lender is often seen as a proxy for the nation's economy, where the ratio of bad loans has surged to be among the highest in the world.

Note that the problem of bad loans at Indian PSBs has grabbed many headlines lately. And to clean up the bad loan mess and revive lending, the government announced the recapitalization plan last year. Under the plan, it is set to inject Rs 2.11 trillion into public sector banks over a period of two years.

But if historical data is anything to go by, implementation of such initiatives take a long time, especially in India. Recovery takes the longest time here as compared to other developed nations. India takes an average of 4.3 years to resolve insolvencies as compared to one year in the US. Also, recovery rates in India are amongst the lowest at 26.4%, as can be seen from the chart below: