Benchmarks trim gains; trade continues in green

After getting a gap-up start, Indian equities trimmed gains but continued to trade in green in the late morning session on continued buying by participants amid good quarterly earnings. Sentiments got a boost as India's engineering exports grew by over 20 per cent year-on-year to $6.48 billion in September on account of high demand particularly in South Asia and West Asian nations. Some support also came with optimism over U.S. corporate earnings and speculation that the Federal Reserve will reiterate its stance to keep interest rates low for a ‘considerable time’ to address the recent weakening in inflation and the poor quality of a recovery in labor markets. Besides, covering-up of short positions by speculators ahead of monthly expiry in the derivatives segment, supported the rally.  However, gains remained capped as global ratings agency Standard & Poor’s warning that gross non-performing assets (NPAs) of Indian banks are likely to rise to 4.5 per cent by the end of March 2015 from 4 per cent in the previous year. There will be some cautiousness with a latest World Bank’s ‘Ease of Doing Business’ report, where India has been placed at 142 among 189 countries, a drop by two places from the last year’s ranking.

Traders were seen piling positions in Auto, Consumer Durables and FMCG while selling was witnessed in Banking, Power and Capital Goods sector stocks. In scrip specific development, Share of IL&FS Engineering and Construction Company have surged after the company bagged a contract worth Rs 179.84 crore for development of multipurpose terminal berth at Dighi Port. Besides, Hero MotoCorp rose after the RBI allowed hike in FII shareholding in the company up to 49%. On the flip side, shares of Jubilant Life Sciences have declined after the company reported a higher loss for the second quarter on account of USFDA warning on Spokane facility and regulatory changes in China.

On global front, Asian markets rose following strong gains on Wall Street, as traders awaited news from the US Federal Reserve about interest rate plans for the world's largest economy. Back home, Indian rupee strengthened by 7 paise to 61.25 against the dollar in early trade on increased selling of the US currency by exporters and banks. The market breadth on BSE was positive, out of 2278 stocks traded, 1399 stocks advanced, while 788 stocks declined on the BSE. 

The BSE Sensex is currently trading at 27003.77 up by 122.95 points or 0.46% after trading in a range of 27062.12 and 26971.16. There were 19 stocks advancing against 11 stocks declining on the index.

The broader markets gained too with the BSE Midcap and Smallcap indices adding 0.40 percent and 0.57 percent, respectively.

The gaining sectoral indices on the BSE were Auto up by 1.24%, Consumer Durables up by 0.97%, FMCG up by 0.94%, Realty up by 0.75% and IT up by 0.69%, while Bankex down by 0.25%, Power down by 0.17% and Capital Goods down by 0.02% were the losing indices on BSE.

The top gainers on the Sensex were Tata Motors up by 2.59%, Mahindra & Mahindra up by 1.90%, Hero MotoCorp up by 1.32%, Tata Steel up by 1.25% and Infosys up by 1.18%. On the flip side, NTPC down by 1.08%, Sesa Sterlite down by 0.74%, GAIL India down by 0.64%, SBI down by 0.35% and Bharti Airtel down by 0.34% were the top losers.

Meanwhile, Global ratings agency Standard & Poor’s, in its Country Risk Assessment report on the Indian banking sector, underscored that country’s plan to grant new banking licences to companies could heighten the risk for banking sector as the aggressive market share gaining tactics, like underwriting standards or undercutting prices by new entrants may adversely impact the banking sector's stability.

The Reserve Bank of India (RBI), which has been cautiously opening up banking sector to companies, so far has awarded two new licences in April after a gap of 10 years in a country where only one household in two has access to formal banking services. Also, RBI is in the process of issuing fresh guidelines for companies applying for on-tap bank licences, or rolling applications that are assessed as they come in the current fiscal year ending March.

Further, the rating agency also highlighted the risk from prolonged weakness in banking’s asset quality, which could hurt the economic recovery. S&P expects gross non-performing loans to increase to 4.5% by the end of March 2015 from 4% in the end of March 2014. At the same time, the rating agency expects the pace of creation of stressed assets to slow over the next two to four quarters.

Further, the rating agency, unveiled that Indian banks scored better on potential economic risks compared with Brazil and China due to RBI’s conservative approach, stringent capital regulations under Basel III and moderate inflation-adjusted real estate prices. The report highlighted Indian banks’ large deposit base and ability to issue long-term senior bonds to fund infrastructure loans and a buoyant capital market would continue to support their funding profiles. It termed banking sector as largely stable despite being fragmented.

The CNX Nifty is currently trading at 8,060.10 up by 32.50 points or 0.40% after trading in a range of 8,081.05 and 8,052.25. There were 31 stocks advancing against 19 declining on the index.

The top gainers on Nifty were Tata Motors up by 2.60%, BPCL up by 2.02%, Cairn India up by 1.72%, Mahindra & Mahindra up by 1.62% and Infosys up by 1.34%. On the flip side, Bank of Baroda down by 1.49%, PNB down by 1.37%, IDFC down by 1.13%, NTPC down by 1.12% and Sesa Sterlite down by 0.98% were the top losers.

Asian markets were trading in the green; Nikkei 225 spurted by 1.51%, Hang Seng gained 1.22%, KOSPI Index inched up 1.77%, Straits Times added 0.36%, Jakarta Composite surged by 0.86%, Shanghai Composite jumped 1.60%, FTSE Bursa Malaysia KLCI climbed 0.65% and Taiwan Weighted was up by 1.42%.