Benchmarks trim gains; Nifty holds 7850 mark

After getting a gap-up start, Indian equities trimmed gains but continued to trade in green in the late morning session on account of buying in frontline blue chip counters. The sentiments got some support with the government’s decision to consider foreign investments in partly paid shares and warrants eligible instruments under the foreign direct investment policy, bringing greater flexibility in their use to raise capital. At present, Sensex and Nifty were trading above the crucial 25,800 and 7,850 levels respectively, with gains of over 0.35 percent. However, the broader markets were underperforming the larger peers with BSE Mid-cap and Small-cap indices trading down by 0.19% and 0.11%, respectively. Investors continue to remain on their toes as the countdown to Thursday’s Federal Reserve interest rate decision continues.  Traders will also be concerned with a US trade official’s comment that though India has made steady progress on several areas of critical reforms but the notion that all problems will be addressed quickly would be 'unrealistic' as it could have a political component. Furthermore, contracting for the ninth month in a row, India's exports plunged by 20.66% in August to $21.26 billion, widening the trade deficit.

On the global front, Asian equity markets are trading mostly in green, taking positive cues from the overnight rally on the Wall Street. However, investors braced for the possibility of the first interest rate hike in the United States in almost a decade. Overnight, the major indices on Wall Street advanced higher on the back of a healthy consumer spending data. Back home, Indian rupee depreciated by another 11 paise to 66.47 against the dollar in early trade on foreign funds outflows amid a significant slump in the country's exports.

Back on street, stocks from Teck, IT and Banking counters were supporting the markets’ uptrend, while those from Capital Goods, Consumer Durables and Power counters were adding to the underlying cautious undertone. In scrip specific development, Suven Life Sciences have rallied after the company secures three product patents two from Canada and one from China for a drug used in the treatment of neuro-degenerative diseases. Furthermore, Sun Pharmaceutical Industries has surged after the drug maker announced the acquisition plan of US-based eye care firm InSite Vision Inc.

The market breadth on BSE was positive, out of 2106 stocks traded, 1073 stocks advanced, while 951 stocks declined on the BSE. 

The BSE Sensex is currently trading at 25819.23, up by 113.30 points or 0.44% after trading in a range of 25819.12 and 25921.90. There were 22 stocks advancing against 8 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 0.19%, while Small cap index down by 0.11%.

The top gaining sectoral indices on the BSE were TECK up by 0.56%, IT up by 0.53%, Bankex up by 0.38%, FMCG up by 0.17% and Auto up by 0.01%, while Capital Goods down by 0.75%, Consumer Durables down by 0.69%, Power down by 0.47%, Realty down by 0.42% and Infrastructure down by 0.31% were the top losing indices on BSE.

The top gainers on the Sensex were Sun Pharma up by 2.26%, Hero MotoCorp up by 2.17%, Bajaj Auto up by 2.00%, Bharti Airtel up by 1.87% and Wipro up by 1.44%. On the flip side, BHEL down by 1.75%, Larsen & Toubro down by 0.90%, Tata Steel down by 0.63%, NTPC down by 0.63% and Hindalco down by 0.52% were the top losers.

Meanwhile, in a bid to encourage banks to carry out better independent credit checks and do more to chase rogue borrowers, the Reserve Bank of India (RBI) is considering a proposal that would limit the number of participants in a single lenders' consortium. The banking regulator is also discussing a few ideas with lenders and ARCs to improve the bad loan management at banks.

RBI deputy governor R Gandhi elaborating the issue said that banks with small exposures assume less responsibility when loans sour. He also pointed that banks with very meager share neither have the incentive nor the information to independently assess a proposal. They typically go by one who has the bigger share.

He further said that the suggestion is to have a regulatory limit on the number of members in a consortium, so that every member will have a serious independent credit appraisal and credit mindset. Though, he added that the proposal could also have drawbacks, as it effectively restricts a bank's freedom.

Bad debts are a major problem for India, as it seeks to tackle $50 billion of bad debt that's slowing credit growth and hampering a broader economic recovery. Gandhi also said that the rate of growth of bad loans of Indian banks in 2011-15 was higher than credit expansion. Gross bad debt of 41 listed banks have jumped to Rs.3.3 lakh crore in June compared to Rs.91,178 crore on March 2011. Apart from regulatory limit on the number of participants in a consortium lending or multiple banking arrangement, proposal of a ready list of financial sector experts which could be referred to if a JLF were to enforce change in management at a defaulting firm is being considered.

The CNX Nifty is currently trading at 7865.05, up by 35.95 points or 0.46% after trading in a range of 7857.90 and 7888.60. There were 35 stocks advancing against 15 stocks declining on the index.

The top gainers on Nifty were Sun Pharma up by 2.28%, Hero MotoCorp up by 2.23%, Bajaj Auto up by 2.07%, Yes Bank up by 1.86% and Bharti Airtel up by 1.79%. On the flip side, BHEL down by 1.70%, Cairn India down by 1.41%, NMDC down by 1.08%, NTPC down by 0.99% and Larsen & Toubro down by 0.91% were the top losers.

Asian markets were trading mostly in green, Shanghai Composite was up by 0.16%, FTSE Bursa Malaysia KLCI gained 0.46%, Straits Times was higher by 0.9%, KOSPI Index increased by 2.03%, Taiwan Weighted added 0.73%, Nikkei 225 surged 0.66% and Hang Seng was higher by 1.17%. On the other hand, Jakarta Composite declined by 0.16%.