Choppiness continues on Dalal Street in noon deals

Indian equity benchmarks continue to trade choppy in noon deals with frontline gauges trading tad below their neutral lines as investors refrain from building large positions in a holiday-shortened week. Meanwhile, the sentiment remained dampened at the D-Street as the crucial GST bill failed to see the light of the day. Sentiments also remained downbeat with minister of State for Finance Jayant Sinha’s statement that 2016-17 would be a challenging term with headwinds from low farm sector growth, the global slowdown, and implementation of the Seventh Pay Commission report and the One Rank One Pension.

On the global front, Asian markets were exhibiting mixed trend at this point of time as investors opted to book some of their profit at higher levels. Back home, shares of metal and mining companies remained in limelight following a rebound in the commodity prices. Stocks related to defence sector such as Pipavav Defence and Offshore Engineering, Bharat Electronics, Walchandnagar Industries remained on buyers’ radar on report that the Ministry of Defence has initiated various policy measures to address the concerns of the industry for ease of doing business. The broader indices were outperforming benchmarks and were trading with a gain of around half a percent, while the market breadth on the BSE was positive; there were 1,457 shares on the gaining side against 954 shares on the losing side while 203 shares remain unchanged.

The BSE Sensex is currently trading at 25826.59, down by 23.71 points or 0.09% after trading in a range of 25815.18 and 25922.47. There were 16 stocks advancing against 13 stocks declining on the index while 1 stock remained unchanged.

The broader indices were trading in green; the BSE Mid cap index was up by 0.34%, while Small cap index up by 0.43%.

The top gaining sectoral indices on the BSE were Capital Goods up by 0.68%, Utilities up by 0.67%, Power up by 0.62%, Metal up by 0.52% and Basic material up by 0.51%, while Consumer Durables down by 0.59%, Bankex down by 0.32%, Finance down by 0.30%, Telecom down by 0.24% and TECK down by 0.16%, were the top losing indices on BSE.

The top gainers on the Sensex were Tata Motors up by 1.35%, GAIL India up by 0.68%, Coal India up by 0.61%, Cipla up by 0.49% and BHEL up by 0.44%. On the flip side, ICICI Bank down by 0.71%, HDFC down by 0.66%, Maruti Suzuki down by 0.66%, Tata Steel down by 0.64% and Bharti Airtel down by 0.60% were the top losers.

Meanwhile, the Reserve Bank of India, in the twelfth issue of the Financial Stability Report (FSR), has expressed concerns on the debt servicing capability of large borrowers which, in turn, was affecting the health of the banking sector.  The FSR which was released along with the Report on 'Trend and Progress of Banking in India 2014-15' (RTP), said that the performance of the Indian banking sector remained subdued as it experienced a slowdown in balance sheet growth in 2014-15. While the PSBs registered deceleration in credit growth, the private sector banks (PVBs) and foreign banks (FBs) showed higher credit growth. Retail loan portfolio of the banks continued to grow at around 20 per cent during 2014-15.

The FSR has highlighted that the business of scheduled commercial banks (SCBs) slowed as reflected in further decline in both deposit and credit growth. Between March and September 2015, the gross non-performing advances ratio increased, whereas restructured standard advances ratio declined. Sectoral data as of June 2015 indicates that ‘industry’ continued to record the highest stressed advances ratio of about 20 per cent, followed by ‘services’ at 7 per cent. The capital to risk-weighted asset ratio (CRAR) of SCBs registered some deterioration during the first-half of 2015-16.

The report further said that among other financial institutions, the asset quality of both scheduled urban co-operative banks (SUCBs) as well as non-banking financial companies (NBFCs) deteriorated during the first-half of 2015-16 and the banking stability indicator showd that risks to the banking sector increased since the publication of the previous FSR, mainly on account of deteriorating asset quality, lower soundness and sluggish profitability.

The RBI analysed 2,711 listed non-government and non-financial listed companies from FY11 to first half of FY16. Of the companies studied, 19.4% have either negative net worth or a debt-to-equity ratio of more than or equal to two and 15.3% have a debt-to-equity ratio of greater than or equal to three. It also said capital expenditure (capex), which had risen sharply, was declining despite rising debt. This is because corporate profitability has declined and consequently companies’ debt-servicing capabilities. Capex by Indian companies in 2014-15 was at a five-year low of Rs 2.76 lakh crore.

The report also raised concerns over volatility in global financial and commodities markets. Uncertainty related to the US Federal Reserve’s interest rate hike has roiled India and other emerging markets even as markets cheered when the actual hike occurred. It also said that while the first Fed rate hike since 2006 appeared to have been factored in by the markets, the pace of further increase may have a significant bearing on market behaviour.

RBI governor Raghuram Rajan has said that corporate sector vulnerabilities and the impact of their weak balance sheets on the financial system need closer monitoring. Rajan had earlier too said that large wilful defaulters should be recognised as freeloaders and should not be lionised as industry captains.

The CNX Nifty is currently trading at 7856.20, down by 9.75 points or 0.12% after trading in a range of 7853.00 and 7888.75. There were 31 stocks advancing against 19 stocks declining on the index.

The top gainers on Nifty were Cairn India up by 2.73%, Vedanta up by 2.07%, Tata Motors up by 1.33%, Hindalco up by 1.19% and Tata Power up by 0.68%. On the flip side, Zee Entertainment down by 1.89%, Tata Steel down by 1.02%, PNB down by 0.91%, HDFC down by 0.83% and ICICI Bank down by 0.74% were the top losers.

Asian markets were trading mixed; Nikkei 225 decreased 97.01 points or 0.51% to 18,789.69, Shanghai Composite declined 18.86 points or 0.52% to 3,617.23 and KOSPI Index was down by 8.57 points or 0.43% to 1,990.65. On the flip side, Taiwan Weighted increased 8.66 points or 0.1% to 8,324.36 and Hang Seng was up by 97.54 points or 0.44% to 22,138.13.