Markets extend losses with a gap-down opening

Indian equity benchmarks have extended their losses with a gap-down opening and are now trading lower by over half a percent, tracking weak cues from other Asian markets. Selling witnessed in most of the key heavyweights dragged both the Sensex the NSE below their crucial 25,400 and 7,800 levels. Sentiments were under pressure with a report that exports of 17 sectors, over half of the 30 sectors including petroleum products, textiles, man-made yarn and fabrics, engineering and leather, closely monitored by the Commerce Ministry were in the negative zone in March due to a fall in global commodity prices amid tepid demand. Further, depreciation in Indian rupee against dollar too weighed down sentiments. Rupee weakened by 8 paise to 66.41 against the dollar in early trade at the Inter-bank Foreign Exchange market on account of increased demand for the American currency from importers and banks. Meanwhile, foreign portfolio investors (FPIs) sold shares worth a net Rs 205.30 crore on Friday, as per provisional data released by the stock exchanges.

In the scrip specific development, ICICI Bank declined over 4 percent on reporting a 76 percent drop in quarterly net profit, owing to a sharp rise in bad loans.

On the global front, US markets ended lower on Friday as investors assessed corporate earnings and data showed that US inflation barely rose in March as consumer spending remains tepid. Asian markets were trading in red with the Japanese key index Nikkei giving away as much as 3.5% amid strengthening of Yen and BOJ stance. Markets across Hong Kong, China, and Malaysia are closed today on account of a public holiday.

Back home, traders were seen piling up position in Consumer Durables, Oil & Gas and Metal, while selling was witnessed in Realty, Banking, Power, TECK and IT. The market breadth on BSE was negative in the ratio of 635: 828, while 68 scrips remained unchanged.

The BSE Sensex is currently trading at 25395.71, down by 210.91 points or 0.82% after trading in a range of 25387.29 and 25565.44. There were 5 stocks advancing against 25 stocks declining on the index.

The broader indices were trading mixed; the BSE Mid cap index was up by 0.19%, while Small cap index was down by 0.23%.

The top gaining sectoral indices on the BSE were Consumer Durables up by 0.62%, Oil & Gas up by 0.52% and Metal up by 0.25%, while Realty down by 1.26%, Bankex down by 1.02%, Power down by 0.85%, TECK down by 0.80% and IT down by 0.76% were the losing indices on BSE.

The top gainers on the Sensex were ONGC up by 0.92%, Lupin up by 0.65%, Coal India up by 0.37%, Reliance Industries up by 0.35% and Axis Bank up by 0.14%. On the flip side, ICICI Bank down by 3.38%, NTPC down by 2.31%, Dr. Reddys Lab down by 1.53%, Adani Ports &Special down by 1.45% and ITC down by 1.35% were the top losers.

Meanwhile, Reserve Bank of India (RBI) Governor Raghuram Rajan replying to the Public Accounts Committee (PAC) of Parliament questionnaire on non-performing assets (NPAs) of public sector banks (PSBs), has put the blame on 'economic downturn', among other reasons, in his submission to the panel. In his reply, Rajan said, 'While some of the reasons for recent spurt in NPAs could be subset of those indicated by Narasimham Committee, the level of stressed assets are seen in the context of overall economic downturn'. The RBI governor recalled that NPA ratio had steadily declined from 15.7 per cent in 1996-97 to 2.36 per cent in 2010-11, but the asset quality of the Indian banking system again come under stress in the last couple of years, as a consequence of global as well as domestic economic slowdown.

Rajan listed six primary reasons for spurt in stressed assets that have been observed in recent times. These included domestic and global economic slowdown, delays in statutory and other approvals especially for projects under implementation and aggressive lending practices during upturn as evidenced from high corporate leverage. Other reasons cited by Rajan were laxity in credit risk appraisal and loan monitoring in banks and lack of appraising skills for projects that need specialised skills resulting in acceptance of inflated cost and aggressive projections. Besides, he also listed wilful default, loan frauds and corruption in some cases among the key reasons. Rajan also noted that banks tend to attribute most of the non-performance issues to business/commercial risks of the borrowers, whereas the borrowers attribute such situations to macro-economic factors for banks for not providing timely finance/enhancements etc.

The PAC headed by Congress MP K V Thomas had suo motu taken up the issue of NPAs of public sector banks, which touched Rs 3.61 lakh crore at the end of December 2015.  The PAC Chairman also sought to know the 'real causes for the present spurt in NPAs and stressed assets' and whether these are really different from those listed by the Narsimham Committee that went into the NPA issue in 1998. PSBs had first refused to appear before PAC, but agreed later and made their submission.

In its questionnaire for the RBI Governor, the panel observed that Private Sector Banks and Foreign Banks do not have as much NPAs as the Public Sector Banks. This was despite the constraints under which the entire banking sector operates being the same, except for the Priority Sector Lending (PSL) requirements.  Various public sector banks may also be asked to appear before the panel again to explain their position.

The CNX Nifty is currently trading at 7792.30, down by 57.50 points or 0.73% after trading in a range of 7786.85 and 7823.00. There were 10 stocks advancing against 40 stocks declining on the index.

The top gainers on Nifty were ONGC up by 1.45%, Yes Bank up by 0.85%, BPCL up by 0.69%, Aurobindo Pharma up by 0.66% and Lupin up by 0.66%. On the flip side, ICICI Bank down by 3.67%, NTPC down by 2.15%, Tech Mahindra down by 1.70%, Idea Cellular down by 1.60% and Dr. Reddys Lab down by 1.57% were the top losers.

Asian markets were trading in red, Nikkei 225 decreased 567.52 points or 3.41% to 16,098.53, Jakarta Composite decreased 44.11 points or 0.91% to 4,794.47 and KOSPI Index decreased 13.86 points or 0.7% to 1,980.29.