Markets trade lower in early deals; Nifty breaches 7,000 mark

After witnessing a sharp fall in previous session, Indian equity markets have made a flat start and are now trading with cut of over half a percent in early deals amid volatility in the crude oil prices. Meanwhile, the broader markets were also facing the heat of selling; the BSE mid-cap index declined by 1.46 per cent and the small-cap index was down 0.96 per cent. Sentiments were under pressure on report that the foreign portfolio investors (FPIs) sold shares worth a net Rs 964.19 crore on February 16, 2016, as per provisional data released by the stock exchanges. Further, selling in banking shares also weighted down the sentiment. Bank of India, Canara Bank, Union Bank of India, Punjab National Bank, IDBI Bank, Yes Bank, State Bank of India and Bank of Baroda were trading lower in the range of 2-5 per cent after Standard & Poor's Ratings Services warned that state-run banks' capital requirements for provisioning of bad loans are likely to shoot up, exposing them to possible downgrades. On the secotal front, most of the sectoral indices on BSE were reeling under pressure; stocks from Consumer Durables, Metal, Capital Goods, Banking and PSU are the prominent losers of the session. On the flip side, stocks from IT counter were the only gainers of the session.

In the scrip specific development, Rural Electrification Corporation (REC) dropped 7% on the BSE after the stock turn ex-dividend for Rs 12 per share.

On the global front, the US markets ended higher on Tuesday helped by gains in consumer discretionary and financials, as well as positive developments in China. Asian markets were trading mostly in red in a choppy session, despite a positive finish in Wall Street overnight.

Back home, the NSE Nifty and BSE Sensex were trading below the psychological 7,000 and 23,050 levels respectively. The market breadth on BSE was negative in the ratio of 335: 1167 while 46 scrips remained unchanged.

The BSE Sensex is currently trading at 23047.26, down by 144.71 points or 0.62% after trading in a range of 23046.80 and 23241.88. There were 6 stocks advancing against 24 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 1.46%, while Small cap index was lower by 0.96%.

The lone gaining sectoral index on the BSE was IT up by 0.19%, while Consumer Durables down by 2.37%, Metal down by 2.02%, Capital Goods down by 1.34%, Bankex down by 1.29% and PSU down by 1.10% were the losing indices on BSE.

The top gainers on the Sensex were Dr. Reddys Lab up by 1.39%, NTPC up by 1.37%, Tata Motors up by 1.16%, Infosys up by 0.83% and Sun Pharma Inds. up by 0.77%. On the flip side, Tata Steel down by 2.45%, SBI down by 2.33%, Adani Ports &Special down by 1.85%, Coal India down by 1.70% and Larsen & Toubro down by 1.34% were the top losers.

Meanwhile, Standard & Poor's Ratings Services has warned that state-run banks' capital requirements for provisioning of bad loans are likely to shoot up, exposing them to possible downgrades. It said that Indian public sector banks may find it difficult to raise capital, given their currently weak operating performance, which makes it difficult for them to access the equity capital markets.

It said that the PSU lenders are in a weaker position on the capitalisation front than their private sector peers and may find it difficult to raise capital given their weak performance and said that these banks will therefore have to rely more on government support for capital infusions. The ratings agency further said that it would see if the government infuses a large chunk of the Rs 45,000 crore capital infusion by FY19 this fiscal itself.

The rating agency while trimmed down its outlook on Bank of India to ‘negative’ from ‘stable’, it had put Indian Overseas Bank on ‘CreditWatch’ with negative implications and also retained ‘negative’ outlook on Syndicate Bank. S&P expects BoI’s asset quality to continue to weaken over the next 12-18 months, further straining the bank’s capitalisation and profitability. However, it also said that over the longer run, the tighter NPL norms will improve transparency in the Indian banking system and bring them more in line with global practices. They will also pave the way for much-needed reforms in risk management and governance of banks.

Many leading state-owned banks, reported their highest ever quarterly losses after the Reserve Bank of India (RBI) asked banks to recognise select weak loans as non-performing loans over the quarters ending December 2015 and March 2016, and shore up provisioning.

The CNX Nifty is currently trading at 6988.20, down by 60.05 points or 0.85% after trading in a range of 6986.10 and 7059.75. There were 6 stocks advancing against 44 stocks declining on the index.

The top gainers on Nifty were Dr. Reddys Lab up by 1.56%, NTPC up by 1.41%, BPCL up by 1.37%, Tata Motors up by 1.21% and Infosys up by 1.06%. On the flip side, PNB down by 3.72%, Vedanta down by 3.64%, Bank Of Baroda down by 2.83%, Yes Bank down by 2.83% and Hindalco down by 2.78% were the top losers.

Asian markets were trading mostly in red, Hang Seng decreased 33.72 points or 0.18% to 19,088.36, Nikkei 225 decreased 26.17 points or 0.16% to 16,028.26, KOSPI Index decreased 2.56 points or 0.14% to 1,885.74 and Shanghai Composite decreased 0.54 points or 0.02% to 2,836.03.

On the flip side, FTSE Bursa Malaysia KLCI increased 3.57 points or 0.21% to 1,668.56, Taiwan Weighted increased 5.45 points or 0.07% to 8,217.52, Jakarta Composite increased 25.21 points or 0.53% to 4,770.22.