Benchmarks pare some early losses; still continue to trade in red

Recovering from day’s low, benchmark equity indices have gained momentum however were still trading below the neutral line on continues selling by funds and retail investors amid weak trend in other Asian markets. Sentiments turned down-beat after talks between Greece and its creditors to avert the latter's loan default failed yesterday, even as both the sides are expected to resume talks on Saturday, probably for a last time, in an attempt to break the impasse. Also, there will be some concern, with the Reserve Bank of India (RBI) Governor Raghuram Rajan warning of 2013 rupee plunge repeat. He added that the currency needs to reduce its inefficiencies if it wants to insulate itself from the possible tightening by the US Federal Reserve. However, strong buying interest in many heavyweights stocks, better-than-expected monsoon, hope for rate cuts, expectation of better IIP and lower inflation are some of the reasons for keeping the cautiously positive sentiment on the markets. Some support also came in from reports that foreign portfolio investors (FPIs) bought shares worth a net Rs 280.21 crore on June 25, 2015.

On global front, Asian stock markets were mostly lower as Greece failed again to reach an agreement with its creditors and stumbled towards a default, while China stocks tumbled more than 4 percent as spooked investors dumped shares as regulators cracked down on risky margin trading and on mounting uncertainty over the direction of Beijing's monetary policy. Back home, Indian rupee declined by 3 paise to 63.65 against the US dollar in early trade, extending weakness for the second day, due to appreciation of the American currency overseas.

Back on street, stocks from IT, Teck and Consumer Durables counters were supporting the markets’ uptrend, while those from Banking, Capital Goods and Infrastructure counters were adding to the underlying cautious undertone. In scrip specific development, shares of Jet Airways have gained on the company’s plan to raise $400 million through non-convertible debentures (NCDs) or bonds to fund expansion. On the flip side, shares of GAIL (India) have declined after a foreign brokerage reportedly maintained underperform rating on the stock.

The market breadth on BSE was negative, out of 2055 stocks traded, 979 stocks advanced, while 982 stocks declined on the BSE.

The BSE Sensex is currently trading at 27842.78, down by 53.19 points or 0.19% after trading in a range of 27722.14 and 27921.86. There were 13 stocks advancing against 17 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.03%, while Small cap index up by 0.41%.

The gaining sectoral indices on the BSE were IT up by 1.54%, TECK up by 0.98%, Consumer Durables up by 0.52%, Auto up by 0.17% and FMCG up by 0.06%, while Bankex down by 1.02%, Capital Goods down by 0.63%, Infrastructure down by 0.59%, Power down by 0.52% and Realty down by 0.47% were the top losing indices on BSE.

The top gainers on the Sensex were Infosys up by 2.00%, Cipla up by 1.46%, Dr. Reddys Lab up by 1.12%, TCS up by 1.07% and Mahindra & Mahindra up by 0.96%. On the flip side, GAIL India down by 2.07%, HDFC down by 1.62%, Vedanta down by 1.61%, BHEL down by 1.50% and ICICI Bank down by 1.33% were the top losers.

Meanwhile, the Reserve Bank of India in its Financial Stability Report (FSR) June 2015, the eleventh issue of its half yearly publication has cautioned that banks' leverage has increased, which will further strain a sector groaning under bad loans. Reserve Bank of India (RBI) Governor Raghuram Rajan also warned of a 2013 rupee plunge repeat, adding that India needs to reduce its inefficiencies if it wants to insulate itself from the possible tightening by the US Federal Reserve. The report however said that India is better prepared this time round.

The report has warned about Indian banks' high levels of bad loans that have worsened their ability to repay debt. Adding that the falling profit margins and decreasing debt repayment capabilities of the corporate sector add to these concerns, though overall leverage level in Indian economy is comfortable when compared to other jurisdictions. The report said that macro stress tests suggest that current deterioration in the asset quality of SCBs may continue for few more quarters, and PSBs may have to bolster their provisions for credit risk from present levels, to meet the ‘expected losses’ if macroeconomic environment were to deteriorate under assumed stress scenarios.

Regarding the securities and commodities markets, the report highlighted that concerns emanating from rapid rise in algorithm trading in recent years draws need for caution for India’s securities markets. It said that the agricultural insurance needs urgent focus in the wake of frequent episodes of weather related calamities and their impact, particularly on small and marginal farmers.

The report highlighted that “A combination of global factors and concerted domestic policy decisions have helped, to a considerable extent, in improving the macroeconomic fundamentals of our economy as also in building additional buffers against future uncertainties. Stating that there has been significant improvement in the macroeconomic environment and going forward, economic performance is expected to be better.

The CNX Nifty is currently trading at 8387.85, down by 10.15 points or 0.12% after trading in a range of 8352.50 and 8408.55. There were 22 stocks advancing against 28 stocks declining on the index.

The top gainers on Nifty were HCL Tech up by 2.72%, Infosys up by 2.04%, Cipla up by 1.63%, BPCL up by 1.45% and Mahindra & Mahindra up by 1.25%. On the flip side, GAIL India down by 2.19%, Cairn India down by 1.84%, Kotak Mahindra Bank down by 1.69%, HDFC down by 1.67% and BHEL down by 1.62% were the top losers.

Asian markets were mostly trading in red; Hang Seng was down by 1.49%, Shanghai Composite down by 4.06%, Nikkei 225 down by 0.13%, Taiwan Weighted down by 0.14%, Straits Times down by 0.41% and FTSE Bursa Malaysia KLCI was down by 0.2%. On the flip side, KOSPI Index was up by 0.46% and Jakarta Composite was up by 0.14%.