Benchmarks continue lackadaisical trade in red

Indian equity markets continued their lackadaisical trade in red in the late afternoon session on account of selling in front line blue chip counters on account of absence of any upside triggers. Investors maintained a cautious approach after minister of State for Finance Jayant Sinha’s stated 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. Traders were seen piling position in Capital Goods, Power and Metals stocks, while selling was witnessed in Consumer Durables, Bankex and IT sector stocks.  In the scrip specific development, V-Mart Retail was trading firm after the Reserve Bank allowed foreign institutional investors to increase their stake in the company. The RBI has allowed FIIs to buy up to 49% of the equity capital in the medium-sized retail company. Pipavav Defence and Offshore Engineering is locked at upper circuit limit on reports that it is likely to sign a Rs 66,000 crore deal with Russia.

On the global front, the Asian markets were trading mostly in red while the European markets were trading on mixed note. Back home, the NSE Nifty and BSE Sensex were trading below the psychological 7,850 and 25,900 levels respectively. The market breadth on BSE was positive in the ratio of 1491:1040 while 213 scrips remained unchanged.

The BSE Sensex is currently trading at 25812.11, down by 38.19 points or 0.15% after trading in a range of 25806.48 and 25922.47. There were 17 stocks advancing against 13 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.26%, while Small cap index up by 0.38%.

The gaining sectoral indices on the BSE were Capital Goods up by 0.62%, Power up by 0.56%, Metal up by 0.46%, Oil & Gas up by 0.22%, Auto up by 0.17% while, Consumer Durables down by 0.69%, Bankex down by 0.47%, IT down by 0.07%, TECK down by 0.02%, Realty down by 0.01% were the losing indices on BSE.

The top gainers on the Sensex were Bharti Airtel up by 1.02%, Tata Motors up by 0.87%, Coal India up by 0.61%, Adani Ports &Special up by 0.54% and GAIL India up by 0.52%.

On the flip side, Tata Steel down by 0.89%, Maruti Suzuki down by 0.86%, ICICI Bank down by 0.84%, HDFC down by 0.71% and SBI down by 0.61% 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 7848.90, down by 17.05 points or 0.22% after trading in a range of 7848.75 and 7888.75. There were 27 stocks advancing against 23 stocks declining on the index.

The top gainers on Nifty were Vedanta up by 2.41%, Cairn India up by 2.33%, Bharti Airtel up by 1.10%, Tata Motors up by 0.99% and Idea Cellular up by 0.93%.

On the flip side, Zee Entertainment down by 1.85%, Tata Steel down by 1.13%, HDFC down by 0.93%, Maruti Suzuki down by 0.90% and PNB down by 0.87% were the top losers.

The Asian markets were trading mostly in red; Nikkei 225 decreased 97.01 points or 0.51% to 18,789.69, Shanghai Composite decreased 23.6 points or 0.65% to 3,612.49 and KOSPI Index decreased 8.57 points or 0.43% to 1,990.65.

On the other hand, Taiwan Weighted increased 8.66 points or 0.1% to 8,324.36 and Hang Seng increased 97.54 points or 0.44% to 22,138.13. Indonesia Stock Exchange and Malaysia stock exchange was closed on account of national holiday.

The European markets were trading on mixed note; UK’s FTSE 100 increased 18.45 points or 0.3% to 6,259.43 while, France’s CAC decreased 9.69 points or 0.21% to 4,664.84.