From January to September, net investments by MFs reported a monthly average of USD 950 million. (Reuters)

Inflows into equity mutual funds continued for a record 18th month in October with Rs 6,269 crore (around USD 964 million) flowing into various schemes.

Besides, domestic MFs have logged in the highest net buying of USD 9 billion in the first 10 months of this year.

According to a Deutsche Bank research report, inflows sustained into local equity MFs for a record 18th successive month.

“This was the 18th straight month of positive flows, and a strong sign that equitisation of savings is getting entrenched despite volatile equity market in past few months,” Deutsche Bank said in a research note.

The global brokerage firm noted that the trend of shift from physical assets to financial assets is a multi-year phenomenon, and a lower level of inflows were likely in near term due to volatile markets, a robust tax-free bond issuance pipeline, and an “unprecedented streak” of USD 20 billion net inflows in preceding 17 months”.

“While the pace of inflows has moderated in past two months (as against a monthly average of USD 1.36 billion between January-August 2015) we still see around USD 800 million-USD 1 billion clip as very healthy,” it added.

Moreover, in line with the sustained inflows into equity schemes, MFs in turn have continued to be net buyers of Indian equities for eighteenth straight month.

The report said however that the pace of net investments by MFs moderated sharply to lowest since January this year at USD 453 million in October this year.

From January to September, net investments by MFs reported a monthly average of USD 950 million.

“Cumulatively, domestic MFs have net bought USD 9 billion so far this year, making it the highest level of net buying by MFs on record,” the report added.

The 30-share benchmark index Sensex is currently trading around 26,000 level. The index had gained over 435 points or 1.66 per cent during October.

Nomura, a Japanese brokerage firm, believes, Of the 243 assembly constituencies in Bihar, the Grand Alliance (the incumbent JDU, RJD and Congress) currently holds 117 seats, while the BJP holds 84 seats. (AP)

With all eyes on upcoming event of Bihar election results, markets turned choppy on Friday but closed almost unchanged by the end.

Cautiousness inched higher in reaction to exit poll numbers, where majority expect close fight between NDA and the Nitish Kumar-led Mahagatbandhan. Sensex and Nifty closed 38.96 points and 1.15 points down at 26265.24 and 7954.30 on Friday.

The five-phase polling in the state of Bihar ended on November 6. Official results will be announced onNovember 8.

The coalition of local parties led by Chief Minister Nitish Kumar is expected to win 124 out of 243 seats in Bihar’s assembly, giving them a majority, according to a simple average of the exit polls calculated by Reuters.

Similarly, Nomura, a Japanese brokerage firm, believes, Of the 243 assembly constituencies in Bihar, the Grand Alliance (the incumbent JDU, RJD and Congress) currently holds 117 seats, while the BJP holds 84 seats.

“The Bihar polls are perceived to influence the course of reforms. At the same time, they will not impact political stability at the center as PM Modi enjoys a majority in the Lok Sabha. It is another matter that we believe that lending rate cuts stimulating demand rather than reforms hold the key to a cyclical recovery, ” according to Bank of America Merrill Lynch (BofA-ML).

According to BofA-ML, Bihar polls are important politically as they are the first test of the ruling BJP in the Hindi heartland after the May 2014 general elections. The BJP had then swept all four major states – Bihar, Madhya Pradesh, Rajasthan and Uttar Pradesh. In Bihar and Uttar Pradesh, the BJP’s stellar performance was partly attributed to the divisiveness of the opposition parties. In Bihar, two key local leaders, Nitish Kumar and Lalu Prasad Yadav, have now joined hands. It remains to be seen if PM Modi can still win in the state.

Jimeet Modi, chief executive officer, SAMCO Securities, said, “Domestic equity market will have a shy of relief on Monday as the election results will be out and discounted. Lower seat tally for ruling alliance in the centre can cause a knee jerk reaction and markets can open sharply lower potentially giving an opportunity to take a contrarian bet and go long on the markets.”

According to CLSA, If the BJP-led alliance loses the Bihar election, this will lead to more press hype that Modi’s honeymoon is over and that his reforms are failing.

Christopher Wood of CLSA said, “Investors should view this as short term noise and use any significant weakness as a buying opportunity even though it is also true that the current continuing earnings season has so far been relatively disappointing.”

“Irrespective of the election results markets can bounce sharply as India is the only high growth country, which has lagged behind in the current rally across international markets. Going forward the Government seems committed to the reforms and hopefully should succeed in getting the key bills like GST and Bankruptcy code passed. Market can remain volatile on Monday and hopefully will discount the electoral event and move forward with economic realities. Nifty ended the week down by 1.38 % to close at 7954.30,” said Jimeet Modi.

Muthoot  Finance’s (Muthoot) Q2FY16 PAT of Rs 175 crore  (up  2%  YoY,  down  5%  QoQ)  was  lower  than  our  estimate following slower–than–expected  revenue  momentum—a  function  of  declining  NIMs  and  relatively  lower AUM  traction (up 1.9% QoQ,  a derivative of slower demand). A large part of growth was volume driven as gold tonnage grew 4.3% QoQ to 144 tonne while overall LTV/gram declined to Rs 1,720.

Key highlights were, continuing trend of decline in NIMs to 9.27% on  lower lending rates (over >35bps QoQ fall in Q1FY16 as well); GNPLs  inching  up to  2.55%   (2.13%  in Q1FY16)  due to  delayed recovery  and  auctions;  and  with rise  in  branch  and  employee  base,  opex/AUM  rising to 4.77%. Despite cutting earnings by 10% following NIM pressure  and lower growth trajectory in H1FY15, it will still generate RoE of >15%  by FY17E. Given limited asset quality risk due to collateralized nature of  lending,  we  believe  emerging  certainty  in  AUM  growth  following  customer acquisition push at branch level and stabilising gold price will lead to valuation re–rating. Maintain ‘buy’ with target price of Rs 275.

One of the key monitorables for Muthoot is accretion to AUMs, which over the past  couple  of  quarters  were  on  expected  lines.

Among the sectoral indices, the banking sector registered a positive momentum after the largest lender, State Bank of India (SBI), on Friday surprised the Street by reporting a 25.13% on-year jump in its net profit for the September quarter.

The stock of SBI rallied 3.86% and ended at Rs 243.25 on the BSE. It has reported a 7.4% on-year increase in its net interest income (NII).  The asset quality improved, compared with a number of other state-owned lenders, who continue to show an increase in stressed assets. Gross non-performing assets (NPAs) were at 4.15% at the end of the September quarter, compared with 4.29% in Q1FY16  and 4.89% in the year-ago period.

“SBI’s 25% profit after tax (PAT) growth came as a positive surprise to the markets. Provisions coverage ratio of the bank has moved above 70% for the first time. However, loan growth remained subdued at 4%,” said Ravi Shenoy, AVP-midcaps research, Motilal Oswal Securities.

A total of 3.4 crore shares changed hands across the exchanges on Friday, against the three-month average of 1.64 crore. The scrip helped the BSE sectoral index for banking shares close 0.67% higher as majority of banking stocks closed in the green.

Bank of Baroda was the biggest gainer in the banking space as its shares closed up 4.95%. Bank of Baroda also announced its quarterly earnings on Friday.

During Q2FY16, the net profit of Bank of Baroda fell 88.73% on year due to higher provisions and contingencies and lower net interest income (NII). Shares of Bank of Baroda came under intense selling pressure when it announced the results. The scrips lost nearly 12% intraday, but managed to recover during later hours of trading and closed at Rs 167.40 on the BSE.

Shares of Punjab National Bank, another public sector bank which announced its results on Friday, closed 2.47% higher.

Although earnings of the bank missed the Street expectations, investors cheered the improvement in its bad loans quarter on quarter. Private lenders ICICI Bank and YES Bank were the only Bankex constituents to close in the red on Friday. Shares of ICICI Bank declined 1%, while those of YES Bank closed 0.38% lower.

For the quarter under review, SBI posted standalone net profit at Rs 3,879.07 crore against Rs 3,100.41 crore in the same quarter last year. (Photo: Reuters)

Shares of the country’s top lender by assets State Bank of India (SBI) gained on Friday after the company reported better-than-expected 25 per cent rise in its standalone net profit figures for the second quarter ended September 30, 2015 on the back of higher interest income and a drop in bad loans.

At 1.46 am, SBI shares were trading 2.46 per cent up at Rs 239.95. The scrip opened at Rs 235.20 and had touched a high and low of Rs 244.70 and Rs 233.10, respectively, in trade so far. Later, the scrip of the company closed 3.86 per cent up at Rs 243.25.

For the quarter under review, SBI posted standalone net profit at Rs 3,879.07 crore against Rs 3,100.41 crore in the same quarter last year.

Vaibhav Agrawal, VP research, banking, Angel Broking, said, “State Bank of India reported 2QFY2016 results, which were above our as well as street expectations. The bank’s core strength has been its high CASA and fee income, which has supported its core profitability in challenging times. Its strong capital adequacy also provides comfort. In our view, the stock is currently trading at a moderate valuation of 0.9x FY2017E ABV as compared to its peers. Hence, we recommend a ‘Buy’ rating on the stock.”

Analysts on average had expected the lender to report a net profit of Rs 3,639 crore, according to data compiled by Thomson Reuters.

Gross bad loans as a percentage of total loans dropped to 4.15 per cent from 4.29 percent in the June quarter. Provisions for bad loans dropped almost 7 per cent.