Benchmarks tread water in absence of fresh triggers

After recovering from day’s lows, local barometer gauges continued to consolidate around previous closing level in absence of any fresh positive triggers that could take markets higher after newly appointed Finance Minister Arun Jaitley although underscored that he would focus on bringing down the fiscal deficit and trimming inflation, but did not provide specifics. Additionally, denial for the move of foreign direct investment in the multi-brand retail sector by newly appointed Commerce and Industry Minister Nirmala Sitharaman, which was nothing but reaffirmation of BJP’s stand during time of elections also added to pessimistic milieu. Both, Sensex and Nifty were at this point of time holding above the crucial 24,500 and 7300 levels respectively. Broader indices outperforming larger peers with fat margins were trading higher with gains in the range of 0.55%-1.50%.

On the global front, taking a positive handover from Asian counterparts, European equities got off to a positive start, with another record high set by the U.S. S&P 500index following strong economic data and hopes of further policy easing by the European Central Bank improving sentiment.

Closer home, majority sectoral indices on BSE were trading in positive zone, nevertheless stocks from Information Technology, Realty and Capital Goods counters were the top gainers of the session. On the flip side, major drubbing was witnessed in stocks belonging from Auto, Metal and Public Sector Undertaking counters. In non sectoral guage activity, fertilizer stocks, namely Chambal fertilizers, National fertilizers, Zuari Agro were trading in fine fettle after Fertiliser Minister underscored that will take steps to revive closed urea plants.

The BSE Sensex is currently trading at 24540.51, down by 9.00 points or 0.04% after trading in a range of 24643.33 and 24488.81. There were 14 stocks advancing against 16 stocks declining on the index.

The broader indices continued gaining ground; the BSE Mid cap index was up by 0.54%, while Small cap index up by 1.46%.

The gaining sectoral indices on the BSE were IT up by 1.24%, Realty up by 1.09%, TECK up by 1.24%, Capital Goods up by 0.87% and Healthcare up by 0.40%. While, Auto down by 1.31%, Metal down by 0.80%, PSU down by 0.71%, Oil & Gas down by 0.55% and FMCG down by 0.30% were the losing indices on BSE.   

The top gainers on the Sensex were Tata Power up by 3.40%, Hero Motocorp up by 3.03%, BHEL up by 2.63%, HDFC Bank up by 2.13%, and Dr Reddy’s Lab up by 1.54%. On the flip side, M&M down by 2.56%, Tata Motors down by 2.43%, Coal India up by 2.40%, Gail India down by 1.81% and ONGC down by 1.73%.

Meanwhile, the RBI committee report to review the country's bank board governance standards, has found acceptance with yet another global rating agency, Fitch Rating, which hinted at an upward revision of state-run banks' credit ratings if key suggestions of P J Nayak panel report, which it termed as wider sectoral reform push by the central bank, were implemented. Earlier, Moody’s had termed Nayak report credit-positive for state-run banks.

Fitch, in its note highlighted that should the PJ Nayak report recommendations lead to a greater separation between the state and bank, it could necessitate a reassessment of its current assumptions on the propensity for extraordinary support for these banks, which has been an important factor underpinning the capitalization of many PSUs as this reassessment may have a potential impact on their issuer default ratings.

However, it highlighted that the implementation of the specific recommendations, which require reduction in state ownership would be not be easy as this would be surrounded with significant political and legislative hurdles, to remain highly uncertain in the near-term due to lack of political support necessary for its passage. On the flip side, the global credit rating agency noting that many of the recommendations not requiring legislation, will have a much higher possibility of implementation, which could help strengthen corporate governance standard, particularly at the state-owned banks.

Principal recommendations of PJ Nayak’s report focuses on eliminating various constraints on public sector banks as a result of their state control, which have a bearing on the quality of their governance. The report also calls for creation of a bank investment company to hold state equity stakes, moving to a uniform bank licensing regime for all banks irrespective of ownership, creation of a dedicated bank boards bureau made up of experienced, retired bankers to select the board and management team for start-run banks among other things.

The CNX Nifty is currently trading at 7,325.80, up by 7.80 points or 0.11% after trading in a range of 7,344.75 and 7,302.60. There were 24 stocks advancing against 26 declining on the index.

The top gainers of the Nifty were Ultratech Cement up by 5.55%, ACC up by 4.78%, Ambuja Cement up by 4.29%, TATA Power up by 3.04% and BHEL up by 2.79%. On the flip side, M&M down by 3.08%, Tata Motors down by 2.57% Coal India down by 2.28%, Asian Paints down by 1.86% and Gail India down by 1.75% were the major losers on the index.

Asian equity indices were trading in green; Nikkei 225 up by 0.24%, Taiwan Weighted up by 0.73%, Shanghai Composite up by 0.64%, Hang Seng up by 0.75%, Jakarta Index up by 0.26% and Straits Times up by 0.09%. 

European markets too got off to positive start; with Germany’s DAX trading higher by 0.49%, France’s CAC 40 gaining 0.06% and United Kingdom’s FTSE 100 adding 0.43%.