Markets cut back some losses on value buying; short covering ahead of F&O expiry also aids

Indian equity markets have pared some of their losses on the back of some value buying activities by select market-participants, who initiated buying at lower levels. Additionally, some short-covering on last trading session of F&O expiry also helped cut back some of the bourses’ losses. Despite this, markets continued to languish into negative territory, with both Sensex and Nifty trading below the crucial 24, 500 and 7,300 levels, with losses of over half a percent. Meanwhile, broader indices outperforming larger peers with huge margins were trading with gains in the range of 0.15%-0.35% respectively.

On the global front, Asian shares inched up to a one-year high on Thursday, supported by expectations of easier monetary policy from the European Central Bank. An unexpected increase in German unemployment and a deceleration in the euro zone money supply on Wednesday reinforced expectations that the ECB will introduce further stimulus at its meeting on June 5.

Closer home, stocks from Consumer Durable, Healthcare and Public Sector Undertaking (PSU) counters were aiding markets in restricting losses, while those from Information Technology, Technology and Metal counters were endorsing the underlying weakness of the markets. The overall market breadth on BSE is in the favour of advances which have thumped declines in the ratio of 1294:1288; while 96 shares remained unchanged.

The BSE Sensex is currently trading at 24413.35, down by 142.74 points or 0.58% after trading in a range of 24,528.20 and 24,357.95. There were 16 stocks advancing against 14 stocks declining on the index.

The broader indices were trading in down; the BSE Mid cap and Smallcap indices were trading higher by 0.34% and 0.12% respectively

The gaining sectoral indices on the BSE were Consumer Durables up by 0.59%, Healthcare up by 0.22%, PSU up by 0.24%, Bankex up by 0.18% and Auto up by 0.08%. While, Information Technology down by 2.86%, TECK down by 2.18%, Metal down by 1.09%, Realty down by 0.78% and Oil & Gas down by 0.56% were the losing indices on BSE.   

The top gainers on the Sensex were NTPC up by 1.82%, Tata Power up by 1.32%, Dr Reddy’s Lab up by 1.21%, SBI up by 0.99% and Axis Bank up by 0.95%. On the flip side, Infosys down by 7.02%, SSLT down by 1.97%, Wipro down by 1.80%, BHEL down by 1.73% and  Hindalco Inds down by 1.53% were the top losers on the index.

Meanwhile, to address the challenges posed by stressed assets in the banking system, Industry body FICCI has suggested setting up of a National Asset Management Company (NAMCO). Highlighting the need for pro-active and preventive approach to ensure speedy revival of the economy, FICCI President Sidharth Birla said that it is imperative for the government and the RBI to establish NAMCO which will take over stressed assets from the banking system for effective recovery and rehabilitation.

According to the industry chamber suggestions, NAMCO should be established as a ‘special purpose’ asset reconstruction company (ARC) with sponsorship of the government with initial capitalisation of up to Rs 5,000 crore that will allow it to build up a sizeable portfolio of stressed assets. Further, it recommended that private sector should hold majority stake at 51 percent in the company, while the government must encourage public sector banks to participate in equity of NAMCO up to 49 percent. NAMCO should issue security receipts of up to 12 years maturity period for long term assets acquired by it. FICCI further suggested that NAMCO should focus on large ticket stressed assets mainly in Infrastructure, Power, Steel and Telecom sectors.

Indian banking industry is the most dominant segment of the country’s financial sector and plays an imperative role in the economic development of the country. Banks help to boost economic growth by allocating savings to investments that have potential to yield higher returns. Industry, being highly correlated to economic scenario, is under pressure due to prevailing economic slowdown leading to rise in NPAs level of banks. The top 36 banks of India have reported gross NPAs of Rs 2, 34,014 crore by March 2014, a 36 per cent jump from Rs 171,853 crore on year-on-year basis.

The CNX Nifty is currently trading at 7,295.80, down by 33.85 points or 0.46% after trading in a range of 7,325.40 and 7,279.90. There were 26 stocks advancing against 22 declining on the index, while 2 stocks remained unchanged.

The top gainers of the Nifty were PNB up by 3.11%, Bank of Baroda up by 2.52%, NTPC up by 1.88%, Tata Power up by 1.32% and SBI up by 1.27%. On the flip side, Infosys down by 2.64%, SSLT down by 2.37%, Cairn India down by 2.07%, Wipro down by 1.99% and BHEL down by 1.63% were the major losers on the index.

Asian equity indices were trading in green; Nikkei 225 up by 0.07%, Hang Seng added 0.08%, Jakarta Index advanced 0.44% and Straits Times surged 0.97%. While, Shanghai Composite down by 0.36% and Taiwan Weighted down by 0.14% were the losers amongst Asian pack.