Markets trade with marginal gains in early deals

After falling continuously for last many sessions, Indian benchmarks made a good start but pared their initial gains and are now trading with marginal gains in early deals on Friday.  Sentiment got some support with Reserve Bank of India (RBI) Governor Raghuram Rajan’s statement that the ongoing clean-up of bank balance sheets will help spur economic growth and improve the lenders’ profitability. Meanwhile, a private report said that the Indian economy is likely to witness gradual cyclical recovery, mainly driven by consumption led demand and is likely to clock a GDP growth of 7.7 per cent in the next financial year.  However, upside remained capped as Investors remained on the sidelines and refrained from any buying activity ahead of the key macro data, Index of Industrial Production (IIP) and Consumer Price Inflation (CPI) which will be announced later in the day. Further, foreign portfolio investors (FPIs) sold shares worth a net Rs 1112.66 crore yesterday as per provisional data released by the stock exchanges that also kept pressurizing the sentiments.  On the sectoral front, tradres were seen piling up position in TECK, IT, FMCG and Auto, while selling was witnessed in Oil & Gas, Capital Goods, Realty, PSU and Metal.

In the scrip specific development, Bharat Heavy Electricals dropped nearly 11% after the state-owned company reported a huge loss of Rs 1,102 crore compared to a net profit of Rs 212.60 crore in the quarter ended December 31, 2014.

On the global front, the US markets ended lower on Thursday, but well off their lows, as investors digested a massive global sell-off, falling oil prices, and chatter about a possible OPEC production cut. Asian markets were trading lower as mounting concerns about the health of European banks further threatened a global economic outlook already under strain from falling oil prices.

Back home, the NSE Nifty and BSE Sensex were trading below the psychological 7,000 and 22,950 levels respectively. The market breadth on BSE was negative in the ratio of 437: 1264, while 67 scrips remained unchanged.

The BSE Sensex is currently trading at 22944.24, down by 7.59 points or 0.03% after trading in a range of 22891.17 and 23116.27. There were 14 stocks advancing against 16 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 1.47%, while Small cap index lost 1.61%.

The gaining sectoral indices on the BSE were TECK up by 0.79%, IT up by 0.64%, FMCG up by 0.51% and Auto up by 0.04%, while Oil & Gas down by 2.94%, Capital Goods down by 2.52%, Realty down by 2.31%, PSU down by 2.22% and Metal down by 1.21% were the losing indices on BSE.

The top gainers on the Sensex were Axis Bank up by 3.19%, NTPC up by 2.60%, HDFC up by 2.21%, Wipro up by 2.12% and Mahindra & Mahindra up by 1.87%. On the flip side, BHEL down by 11.55%, Adani Ports &Special down by 4.96%, ONGC down by 4.66%, ICICI Bank down by 3.54% and SBI down by 3.18% were the top losers.

Meanwhile, after various public sector banks came up with result of steep fall in profits and many even reporting loss with sharp spike in loan write-offs and non-performing assets, Reserve Bank Governor Raghuram Rajan has said that the ongoing clean-up of bank balance sheets will help spur economic growth and improve the lenders’ profitability. He said “While the profitability of some banks may be impaired in the short-run, the system, once cleaned, will be able to support economic growth in a sustainable and profitable way.”

Rajan further said there are two polar approaches to loan stress. One is to apply band aids to keep the loan current and hope that time and growth will set the project back on track, he said. An alternative approach is to try to put the stressed project back on track rather than simply applying band aids. This may require deep surgery.” He said that banks “may require deep surgery” to clean up their balance sheets and put stressed projects back on track. The classification of loans as non-performing assets (NPAs), he said, is an anaesthetic that allows the bank to perform extensive necessary surgery to set the project back on its feet. But to do deep surgery such as restructuring or writing down loans, the bank has to recognise it has a problem, classify the asset as a non-performing asset. He justified the move to ask banks to classify loans that were identified during the AQR as bad loans and said loan classification is merely good accounting - it reflects what the true value of the loan might be and said our intent is to have clean and fully provisioned bank balance sheets by March 2017.

The RBI governor referring to the impact of the clean-up exercise, said, “The market turmoil will pass. The clean-up will get done, and Indian banks will be restored to health. While we should not underplay the dimensions of the task, we should be confident that it is manageable and that the Government and the RBI will do what it takes to make sure that banks are able to support the tremendous growth that lies ahead.

The CNX Nifty is currently trading at 6992.90, up by 16.55 points or 0.24% after trading in a range of 6952.95 and 7026.75. There were 27 stocks advancing against 23 stocks declining on the index.

The top gainers on Nifty were Axis Bank up by 3.86%, NTPC up by 2.89%, HDFC up by 2.51%, Idea Cellular up by 2.32% and Power Grid Corpn. up by 2.12%. On the flip side, BHEL down by 11.89%, ONGC down by 4.50%, BPCL down by 3.76%, PNB down by 3.76% and Adani Ports &Special down by 3.32% were the top losers.

Asian markets were trading in red, FTSE Bursa Malaysia KLCI increased 0.67 points or 0.04% to 1,644.62, Nikkei 225 decreased 678.98 points or 4.32% to 15,034.41, Hang Seng decreased 132.16 points or 0.71% to 18,413.64, Taiwan Weighted decreased 68.24 points or 0.84% to 8,063.00, KOSPI Index decreased 31.77 points or 1.71% to 1,829.77 and Jakarta Composite decreased 27.59 points or 0.58% to 4,748.27.