The sharp decline came ahead of the Supreme Court's hearing in the Adjusted Gross Revenue (AGR) case, scheduled for 3 pm today.
Banking stocks cracked at the bourses in the late afternoon session on Friday, dragging the benchmark indices S&P BSE Sensex and NSE's Nifty50 nearly 1 per cent lower. Nifty Bank index declined 3.3 per cent to trade at 21,459 level on the NSE in the intra-day trade. The index eventually settled 2.3 per cent lower at 21,679.4 level.
Nifty PSU Bank and Nifty Financial Services indices, which skid around 3 per cent each in the intra-day trade, ended 2.6 per cent and 2 per cent lower, respectively.
The sharp decline came ahead of the Supreme Court's hearing in the Adjusted Gross Revenue (AGR) case, scheduled for 3 pm today. In its July 20 hearing, the apex court had reserved its decision on whether the telcos including Vodafone Idea and Bharti Airtel, would be allowed to make payment over a span of 15-20 years or not.
As of January, SBI had an exposure of Rs 11,200 crore towards Vodafone Idea, IndusInd Bank (Rs 3,995 crore), IDFC First Bank (Rs 2,500 crore), ICICI Bank (Rs 1,725 crore), and Punjab National Bank (Rs 1,027.7 crore).
As for IDFC First Bank, its debt exposure to Vodafone Idea accounts for 11 per cent of its net worth, and 9 per cent of the IndusInd Bank's net worth, said a report by global brokerage Macquarie. "Exposure of banks to the entire telecom sector ranges between 10 per cent and 30 per cent of their total equity," it said.
Among private banks, Yes Bank has the highest exposure at Rs 7,937 crore or 29 per cent of equity and SBI among public sector banks has extended debt of Rs 36,542 crore or 16 per cent of its total equity. In figures, among large lenders, Axis Bank has Rs 17,178 crore and HDFC Bank has Rs 28,353 crore exposure.
Among individual stocks, RBL Bank tanked 5 per cent on the NSE, followed by weakness in Axis Bank, Bank of Baroda, IDFC First Bank, Punjab National Bank, and State Bank of India, down between 3-4 per cent. Federal Bank, ICICI Bank, IndusInd Bank, HDFC Bank, and Bandhan Bank slipped in the range of 1.5-3 per cent.
That apart, PFC, SBI Life, Cholamandalam Finance and Investment Co, Bajaj Finance, and Shriram Transport Finance slipped between 2-6 per cent.
According to the DoT’s calculations, Bharti Airtel owes Rs 43,780 crore in AGR dues to the government, of which the company has paid Rs 18,004 crore, with the balance at Rs 25,776 crore. Vodafone Idea has so far paid Rs 7,854 crore of its total Rs 50,399 crore in dues, while Tata Teleservices has paid Rs 4,197 crore with the balance at Rs 12,601 crore.
Interest rate cut expectations
July CPI (consumer price index) inflation came in significantly higher than expected at 6.93 per cent on the back of sharp up-tick in the food prices. The increase was led by higher food inflation of 9.6 per cent (8.7 per cent in June) fueled by vegetables (11.3 per cent), pulses (15.9 per cent), oils and fats (12.4 per cent), meat and fish (18.8 per cent), and spices (13.3 per cent).
"Given the MPC’s guidance related to awaiting a durable reduction in CPI inflation before easing the repo rate further, we see limited scope for a rate cut until the December policy. The MPC may then take a call depending on the inflation trajectory. Till then, the policy focus would remain on liquidity/regulatory measures to avoid financial sector dislocations," said analysts at Kotak Institutional Equities.
Besides, the Wholesale Price Index continued to be in the deflationary territory for the fourth straight month in July. Data released by the Commerce Ministry on Friday showed that WPI inflation came in -0.58 per cent year-on-year, compared with -1.81 per cent in June and a 4.5-year low of -3.37 per cent in May.
Meanwhile, 10-year government bond yield rose from 5.86 per cent to 5.95 per cent on Friday.