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For the entire 2018-19, the bank reported a net loss of Rs 2,922.35 crore on a consolidated basis, as against Rs 5,212.47 crore loss in 2017-18.

Most brokerage firms retained their rating, but Credit Suisse and CLSA slashed their respective target price and earnings estimates for Union Bank of India after its net loss widened to Rs 3,370 crore in the fourth quarter of 2018-19 mainly on account of higher provisioning.

The company registered a net loss of Rs 2,583.38 crore in the same quarter of the preceding fiscal. However, the bank posted a net profit of Rs 153.21 crore in the third quarter of 2018-19.

The asset quality of the bank remained poor with the gross non-performing assets (NPAs) standing at 14.98 percent of gross advances at the March-end 2019 against 15.73 percent as of March 31, 2018.

The high level of bad asset ratio compelled the bank to make higher provisioning of Rs 5,783.09 crore for the March quarter, compared to Rs 5,638.57 crore in the year-ago period.

The bank’s provision coverage ratio as on March 31, 2019, stood at 66.24 percent, as against 57.16 percent a year ago.

For the entire 2018-19, the bank reported a net loss of Rs 2,922.35 crore on a consolidated basis, as against Rs 5,212.47 crore loss in 2017-18. Income during the year stood at Rs 39,355.38 crore, up from Rs 38,413.65 crore a year earlier.

Reacting to the news, shares of Union Bank of India plunged over 6 percent in morning trade.

Here’s what brokerages recommended on Union Bank of India post-March quarter results:

Credit Suisse: Neutral| Slash target to Rs 75 from Rs 78 earlier

Credit Suisse maintained its neutral rating on Union Bank of India post-March quarter results but slashed its target price to Rs 75 from Rs 78 earlier.

The Q4 results were weak as slippages remain elevated and growth moderated. The deposit growth remains muted, but the CASA growth was slightly better.

With weak pre-provision profitability, the bank would continue to need capital for growth. Credit Suisse slashed EPS by 13 percent.

CLSA: Buy| Target cut to Rs 96 from Rs 105

CLSA retained its buy rating on Union Bank of India post-March quarter results but slashed its target price to Rs 96 from Rs 105 earlier.

The global investment bank retained its buy rating as valuations remain reasonable. The larger-than-expected loss was largely on account of high credit costs.

The global investment bank was disappointed with high slippages at about 4.2 percent of the past-year loan. Even adjusted for IL&FS, the delinquency is high and broad-based.

Given lower capital adequacy, the bank will need capital support. The global investment bank raised earnings for FY20-21 but slashed target price.

Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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The MSCI quarterly index review changes will take effect from May 29, 2019, said the MSCI release

MSCI Inc., a leading provider of research-based indices and analytics, announced the Semi-Annual Index Review for the MSCI Equity Indices, including the MSCI India index and MSCI India Domestic Small Cap index.

The research firm included ICICI Lombard General Insurance in the MSCI India Domestic Index while deleted Cadila Healthcare from it, according to changes announced on May 13.

The MSCI quarterly index review changes will be effective May 29, 2019, said the MSCI release.

The MSCI India index is designed to measure the performance of the largecap and midcap segments of the Indian market. The index is reviewed quarterly—in February, May, August, and November—with the objective of reflecting a change in the underlying equity markets in a timely manner, while limiting undue index turnover

Currently, with 80 constituents, the index covers ~85 percent of the Indian equity universe. Sectorally, financial services have the highest weight in the index followed by technology.

Top 10 holding of MSCI index includes Reliance Industries, HDFC, Infosys, TCS, Axis Bank, HUL, ITC, ICICI Bank, Maruti Suzuki and L&T.

The research firm added 14 stocks in the MSCI India Domestic Small-cap index. They are: Aavas Financiers, Abbott India, Adani Gas, AstraZeneca Pharma, Balrampur Chini, Chalet Hotels, Credit Acess Grameen, Indostar Capital Finance, L&T Technology Services, Maharashtra Scooters, Oil India, Orient Electric, Sanofi India and TCNS Clothing.

It deleted 10 stocks from the MSCI India Domestic Small-cap index. They include CESC Ventures, DCM Shriram, Gujarat Mineral, Reliance Communication, Reliance Power, S H Kelkar, Shankara Building, Spencer Retail, Supreme Petro and Triveni Turbine.

The above report is for information only and not buy or sell ideas.

Disclaimer: Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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U.S. West Texas Intermediate (WTI) futures were at $61.58 per barrel, down 9 cents, or 0.2% at 0223 GMT, from their previous settlement. WTI closed the last session steady on the day.

Oil futures were mixed on Monday, with U.S. crude edging lower, as investors and traders fretted over global economic growth prospects amid a standoff in Sino-U.S. trade talks.

U.S. West Texas Intermediate (WTI) futures were at $61.58 per barrel, down 9 cents, or 0.2% at 0223 GMT, from their previous settlement. WTI closed the last session steady on the day.

Meanwhile, Brent crude futures were at $70.73 a barrel, up 11 cents, or 0.2%, from their last close. Brent ended the previous session little changed.

The trade conflict between the world's top two economies escalated on Friday, with the United States hiking tariffs on $200 billion worth of Chinese goods after President Donald Trump said Beijing "broke the deal" by reneging on earlier commitments made during months of negotiations.

The parties appeared at a deadlock over negotiations on Sunday as Washington demanded promises of concrete changes to Chinese law and Beijing said it would not swallow any "bitter fruit" that harmed its interests.

The United States and China together accounted for 34% of global oil consumption in the first quarter of 2019, data from the International Energy Agency showed.

"The US-China trade war is set to intensify, which will limit gains in prices," said Abhishek Kumar, head of analytics at Interfax Energy in London.

"Market participants will closely watch China's retaliatory steps in response to the imposition of additional US tariffs on Chinese goods," Kumar said, adding the dispute "could be particularly detrimental to the growth in global oil demand".

Separately, in an early indicator of future output, U.S. energy companies last week reduced the number of oil rigs operating for the third time in four weeks.

Drillers cut two oil rigs in the week to May 10, bringing the total count down to 805, General Electric Co's Baker Hughes energy services firm said in its closely followed report on Friday.

The rig count has declined over the past five months as independent exploration and production companies cut spending on new drilling.

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Investors will watch out for Consumer Price Index (CPI) on YoY basis which is scheduled to be released on Monday while WPI for the month of April is slated to be released May 14, 2019.

The market remained in the bear grip throughout the week and pushed the Nifty 50 below crucial support levels on closing basis.

The Nifty 50 plunged 3.7 percent while the S&P BSE Sensex was down by 3.8 percent to post their biggest loss since October 2018 for the week ended May 10.

FIIs have pulled out nearly Rs 4000 crore for Indian equity markets so far in the month of May after pouring by about Rs 60,000 crore in the first four months of 2019.

In terms of market capitalization, investors lost nearly Rs 5 lakh crore during this week. The average market-capitalization of BSE-listed companies fell from Rs 151.62 lakh crore on May 3 to Rs 146.51 lakh crore on May 10.

On the macro front, markets will react to manufacturing data which was released post market hours on Friday. India’s industrial output declined by 0.1 percent in March, hitting a 21-month low compared to 0.1 percent in February.

Investors will watch out for Consumer Price Index (CPI) on YoY basis which is scheduled to be released on Monday while WPI for the month of April is slated to be released May 14, 2019.

The Indian rupee on Friday rebounded after falling beyond 70 a US dollar. At day's low, the rupee fell 70.06 as US-China trade war hit emerging market currencies. Rupee later pared losses and traded ended higher at 69.91 as compared to Thursday's close of 69.94.

On the provisional front, FIIs were net sellers in Indian markets for Rs 1245 crore while DIIs were net buyers to the tune of Rs 1057 crore, provisional data showed.

Big News: As many as 68 companies will declare their results for the quarter ended March which include names like Andhra Bank, CCL Products, Godrej Industries, HDFC, Vodafone Idea, ITC, Karnataka Bank, Muthoot Finance, OBC, and United Bank of India, etc. among others.

ITC: PAT likely to grow by 9% YoY to Rs 3194 crore

HDFC: PAT likely to grow by 2% YoY to Rs 307 crore

Vodafone Idea: Likely to report a loss of Rs 4120 crore

(All the estimates are from Motilal Oswal)

Technical View: Nifty formed a bearish candle for the 8th day

It is below the crucial short term moving averages which are not a good sign for the bulls

The Nifty50 for the week closed 3.7 percent lower while the S&P BSE Sensex closed 3.8% in the same period

The broader market outperformed as the Nifty Midcap index gained 0.47 percent while the Nifty Smallcap index rose 0.57 percent.

Going forward, 11,250 will be important for bulls if they have to regain control of D-Street. A, suggest experts.

Three levels: 11251-11200, 11345, 11500

Max Call OI: 12000, 12500

Max Put OI: 11000, 11500

Stock in the News:

Larsen & Toubro, India's largest construction and engineering company, reported net profit growth of 7 percent year-on-year to Rs 3,418 crore in the fourth quarter ended March 31 driven by strong revenue growth and operational performance.

Motilal Oswal Financial Services reports Q4FY19 PAT of Rs 147 crores. Consolidated Revenues for 4QFY19 stood at Rs 721cr and in FY19 at Rs 2677cr. Consolidated PAT for FY19 stood at Rs. 2677 cr.

State-owned Indian Overseas Bank on May 11 reported narrowing of its net loss to Rs 1,985.16 crore in the quarter ended March 2019 on account of declining bad loans.

Technical Recommendations: We spoke to Angel Broking and here's what they have to recommend:

BEML: Buy| LTP: Rs 842.95| Target: Rs 900| Stop Loss: Rs 811.40| Upside 7%

Heidelberg Cement: Buy| LTP: Rs 180.10| Target: Rs 204| Stop Loss: Rs 167| Upside 13%

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PC Jeweller | IDFC First Bank | SRF | L&T | UPL | Gail, and ITC are stocks, which are in news today.

Results Today: ITC, HDFC, Andhra Bank, Automotive Axles, Balkrishna Paper Mills, Borosil Glass Works, Capacity Infraprojects, Godrej Industries, Vodafone Idea, Karnataka Bank, Just Dial, Metropolis Healthcare, MRPL, MT Educare, Muthoot Finance, OBC, Shemaroo Entertainment, SRF, Subex, Trident, United Bank of India

Allahabad Bank Q4: Net loss at Rs 3,834 crore versus loss of Rs 3,510 crore, NII up 41.6% at Rs 1,258 crore versus Rs 888.3 crore, YoY.

GSK Consumer Q4: Net profit up 34.9% at Rs 29 crore, revenue up 9% at Rs 1,286.1 crore

Relaxo Q4: Net profit up at Rs 54 crore versus Rs 53 crore, revenue up 15.5% at Rs 635.7 crore versus Rs 550.4 crore, YoY

Vakrangee Q4: Net profit down 91.5% at Rs 6.5 crore versus Rs 76 crore, revenue down 94.5% at Rs 101.5 crore versus Rs 1,846.9 crore, YoY

Asian Hotels Q4: Net profit down 4.3% at Rs 3 crore versus Rs 3.2 crore, Revenue up at Rs 29.8 crore versus Rs 25.4 crore, YoY

Oberoi Realty Q4: Net profit up 9% at Rs 155.7 crore versus Rs 142.9 crore, revenue up 66.2% at Rs 573 crore versus Rs 345 crore, YoY

V-Mart Retail Q4: Net loss at Rs 0.9 crore versus Rs 15.9 crore, revenue up 15.9% at Rs 344.5 crore versus Rs 297.3 crore, YoY

Chalet Hotels Q4: Consolidated net profit at Rs 13.3 crore versus loss of Rs 92.8 crore, revenue down 66% at Rs 269.8 crore versus Rs 795.5 crore, YoY

Tata Investment Q4: Net profit up 25.2% at Rs 18.8 crore versus Rs 15 crore, revenue down at Rs 24.9 crore versus Rs 25.3 crore, YoY

P&G Health Q4: Net profit up 79.3% at Rs 40.7 crore versus Rs 22.7 crore, revenue up 16.6% at Rs 231 crore versus Rs 198 crore, YoY

Eicher Motors Q4: Net profit up 18.1% at Rs 544.8 crore versus Rs 461.5 crore, revenue falls at Rs 2,500.1 crore

Avenue Supermarts Q4: Net profit up 21.4% at Rs 202.9 crore, revenue up 32.1% at Rs 5,033.4 crore.

ITC chairman and non-executive director Y C Deveshwar passes away

Gail completes awards worth Rs 10,500 crore for line pipe supply and laying

SRF signed a business transfer agreement with DSM India for divestment of Engineering Plastics Business

Shriram Transport - CRISIL assigned CRISIL PP-MLD AA+r/Stable for Rs 500 crore long-term principal protected market linked debentures

LIC Housing Finance appoints Sudipto Sil as chief financial officer w.e.f May 10

UPL invested Rs 9.24 crore in Allfresh Supply Management for 26.75% stake

Moody’s, initiated the corporate family rating of Indiabulls Housing Finance at Ba1 with a stable outlook

NCLT pronounced scheme of amalgamation of Welspun Pipes with Welspun Corp

L&T has considered and approved a scheme of arrangement for a merger of L&T Shipbuilding with the company

Oberoi Realty recommended a final dividend of Rs 2 per equity share

Adani Green commissioned 50 MWac solar power project in the state of Uttar Pradesh

Torrent Pharma recalls over 8.82 lakh bottles of hypertension drug from US, Puerto Rico - PTI

Relaxo Footwears recommended issue of bonus shares in the ratio of 1:1

PC Jeweller board approved the scheme of arrangement for demerger of export division

IDFC First Bank approved the issue of debt securities up to an amount not exceeding Rs 5,000 crore

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The lackluster market response comes against the backdrop of a spike in trade tensions between the United States and China and increased investor skepticism about the company's ability to turn profitable soon enough.

Uber Technologies Inc's shares fell nearly 9% in their debut on May 10, marking a rocky start to one of the most high-profile U.S. initial public offerings since Facebook Inc's seven years ago.

The stock's opening at $42 undermined Uber's strategy to price its oversubscribed IPO conservatively at $45 per share to avoid a repeat of rival Lyft Inc's stock market struggles following a strong debut in March.

The IPO marks a landmark moment for the decade-old company, which was started after its founders struggled to find a cab on a snowy night and grown into the world's largest ride-hailing company, making more than 10 billion trips.

Led by Chief Executive Officer Dara Khosrowshahi, a team of Uber officials was on the NYSE trading floor to mark the start of the day's trading. Co-founder and former CEO Travis Kalanick, who resigned in 2017 under pressure from investors, was also seen on the trading floor.

The company's road to IPO was marred by several hurdles including increased regulations in several countries and fights with its drivers over wages.

Uber has said that it has the potential to grow not just in the cab-hailing business, but also as a "super app" to provide a variety of logistics services, such as grocery and food delivery, organizing freight transportation, and even financial services, much like Grab, it's Southeast Asian counterpart.

As a private company, Uber has raised more than $15 billion from investors to fuel its growth and expansion into food delivery and freight hauling, with little regard for turning a profit. Uber reported a loss of $3.03 billion in 2018 from operations.

But as a public company, it will have to deal with quarterly earnings reports and demands from shareholders to plot a path to profitability.

The company weathered controversies including the unearthing of a culture of sexism and bullying at Uber to a U.S. Department of Justice federal investigation, which culminated in the resignation of Kalanick

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Kotak expects India wireless EBITDA of Rs 2,010 crore, broadly stable versus the Rs 1,950 crore print for 3QFY19 and expects a sequential decline in EBITDA in all non-India-wireless businesses.

Telecom major Bharti Airtel is due to report its Q4 earnings on April 6.

According to a report by Kotak Institutional Equities, Bharti Airtel is expected to post a modest 1 percent sequential uptick in revenues at Rs 10,300 crore.

Reported ARPU will likely see a sharp 14 percent QoQ uptick to Rs120/sub/month, on account of the clean-up done in December 2018.

Kotak expects India wireless EBITDA of Rs 2,010 crore, broadly stable versus the Rs 1,950 crore print for 3QFY19. The firm expects a sequential decline in EBITDA in all non-India-wireless businesses. Africa EBITDA decline in rupee terms would primarily be on account of rupee appreciation.

At a consolidated level, it expects the company to report a top line of Rs 20,200 crore for 4QFY19E, down 1.5 percent QoQ and up 3 percent YoY. Kotak expects consolidated EBITDA to decline 2.5 percent QoQ and 13 percent YoY to Rs 6,060 crore despite expected QoQ stability in India wireless EBITDA.

The research firm expects a sharp 80 percent YoY decline in EBIT to Rs 400 crore and a PAT loss of Rs 1,200 crore.

According to a CNBC-TV18 Poll, Bharti Airtel's revenue may rise 0.7 percent QoQ at Rs 20,666 crore against Rs 20,519.2 crore while EBITDA is expected at Rs 6,351 crore against Rs 6,306.9 crore QoQ. The company is expected to report a loss of Rs 1,141 crore against a profit of Rs 86.2 crore.

Also, revenue from the domestic front may rise 1.2 percent at Rs 10,311 crore against Rs 10,189.4 crore while EBITDA is expected at Rs 2,052 crore against Rs 1,949.8 crore. From its Africa business, its revenue may fall to Rs 5711 crore against Rs 5,903 crore while EBITDA is expected at Rs 2,061 crore against Rs 2,186.8 crore.

Telecom tribunal TDSAT on May 2 granted a partial stay on Rs 8,300 crore demand raised by the telecom department from Bharti Airtel for approving its merger with Tata Teleservices.

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Rating downgrades cast doubt on the debt repayment prospect of companies and tend to create panic among investors.

The turbulence in the financial sector, which started as a liquidity crunch in the non-banking finance companies (NBFCs) space, has now spread to the mutual fund industry as well as the banking system.

The most recent casualties are Reliance Capital and PNB Housing Finance. Rating agency ICRA downgraded Reliance Capital’s short-term debt worth Rs 950 crore to A4, while CARE put AAA-rated PNB Housing Finance’s select debt instruments on “credit watch with developing implications”. This was preceded by a repayment crisis in the Essel Group early this year, and a spate of rating downgrades in the housing finance company DHFL last year.

Rating downgrades cast doubt on the debt repayment prospect of companies and tend to create panic among investors. These developments, however, are not surprising. Given the dynamics of the lender-borrower relationship, a change in the repayment prospect inevitably create troubles for the lender. But what could make this into a broader crisis, however, is the collateral damage for a gamut of stakeholders if the default fears materialize. These stakeholders include larger institutions such as insurance companies and mutual funds.

Insurance companies, for instance, are dealing with the possibility of breaching the regulator IRDAI’s investment rules that mandate them to invest at least 95 percent in AA+ rated instruments. A spate of recent rating downgrades has changed the credit composition of the debt portfolio of these companies. Thus, insurance companies have sought regulatory forbearance to comply with the rules.

Mutual fund investors in fixed maturity plans, debt funds, and even hybrid funds have been caught in a fix, owing to the exposure of their schemes to one of these downgraded groups. Kotak Mahindra AMC and HDFC AMC, for instance, deferred a part of the redemption for one of their fixed maturity plans that were due recently. This was because of their exposure to the Essel Group firms where they have entered into a standstill agreement with the latter.

A similar situation is currently playing out in hybrid funds. Three hybrid schemes of Reliance Nippon AMC, for instance, have significant exposures to the Reliance Capital group. As per reports, these three schemes have roughly 5.6 percent exposure or Rs 900 crore of the total scheme assets, which could cause the AMC to book mark-to-market losses.

Then, there is lingering uncertainty over the credit profile of the housing finance company DHFL. A host of rating agencies recently downgraded DHFL’s short-term debt papers on account of liquidity concerns. A fallout of this is that several mutual funds, which have a combined exposure of roughly Rs 6,500 crore to DHFL, stand to face their liquidity issues as investors seek to exit.

How did we get here? The present liquidity crunch in NBFCs is a result of asset-liability mismatch and governance lapses (recall IL&FS). Its impact on the cost of capital has made it difficult for them to refinance loans, maintain margins and asset quality.

Mutual funds, on the other hand, have increasingly been engaged in a yield chasing spree. This is mainly owing to two factors. One, the assets under management of mutual funds have witnessed stupendous growth over the last ten years – from roughly Rs 5 lakh crore in 2008 to Rs 23 lakh crore in 2018. Against this growth in AUM, the amount of AAA-rated firms as a proportion of the total rated universe of companies has remained at a meager 0.85 percent. Therefore, fund managers had to go down the credit chain to deploy funds and reap returns.

Second, with substantial growth and greater competition for investors’ funds, there has been pressure to deliver high returns. Also, most fund houses lack dedicated teams to monitor credit profiles on a regular basis.

As things stand now, it seems unlikely that the mess created out of governance failures, unhealthy asset-liability balance, and poor management of investors’ funds would be resolved within the next 12-18 months.

Policymakers should, however, tighten the rules governing asset-liability mismatch in NBFCs and harmonize them with those prevailing in the banking sector. They should also review the mutual fund exposure rules, specifically those concerning lending to private, unlisted companies against shares of their listed counterparts.

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