Benchmarks continue to trade in red in late morning session

Indian bourses continue to trade in red in the late morning session as investors and foreign funds were adopting a cautious approach, ahead of central bank meetings this week, kicking off with the Federal Reserve’s policy decision on Wednesday, followed by the Bank of Japan and Bank of England on Thursday. Sentiments remained subdued with the report that India’s Consumer Price Index (CPI)-based inflation for the month of May 2016 rose to 5.76%, the highest in 19 months, and the most since the new series of retail inflation with base year of 2012 was introduced from January 2015. However, market participants got some confidence with Minister of State for Finance Jayant Sinha’s statement that the government has enough backing from smaller regional parties to pass the Bill in Rajya Sabha without support from the main opposition Congress party and if we can pass it in the monsoon session of Parliament, then we can implement it in April 1, 2017. Some support also came in from reports that foreign portfolio investors (FPIs) bought shares worth a net Rs 212.24 crore on June 13, 2016.

On the global front, Asia markets were trading mostly lower in early trade amid lingering worries about the UK possibly leaving the European Union. Uncertainty over this week's Federal Reserve policy meeting has weighed on markets, though the U.S. central bank is widely expected to leave rates unchanged after the much weaker-than-expected May nonfarm payrolls report. Overnight, US stocks fell for a third straight session Monday, with the S&P 500 and the Dow Jones Industrial Average finishing at their lowest close since May 24, as tech stalwarts Microsoft and Apple dragged on  indexes and investors braced for major economic and political events in the United States and Europe.

Back home, stocks from Realty, Consumer Durables and PSU counters were supporting the markets’ uptrend, while those from IT and TECK counters were adding to the underlying cautious undertone. In scrip specific development, Deepak Fertilisers & Petrochemicals Corporation surged after the company announced that the Ministry of Chemicals and Fertilizers has agreed to release about Rs 485 crore outstanding subsidy payment to the company. On the flip side, KPIT Technologies declined after the company announced that Copart Inc filed a suit against its unit Sparta alleging that it is entitled to seek damages amounting to not less than $50 million for, among other things, breach of contract, fraudulent inducement and negligent misrepresentation. 

The market breadth on BSE was weak, out of 2272 stocks traded, 719 stocks advanced, while 1438 stocks declined on the BSE. 

The BSE Sensex is currently trading at 26372.74, down by 24.03 points or 0.09% after trading in a range of 26325.27 and 26485.45. There were 15 stocks advancing against 15 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.35%, while Small cap index up by 0.75%.

The top gaining sectoral indices on the BSE were Realty up by 1.11%, Consumer Durables up by 0.77%, PSU up by 0.59%, Capital Goods up by 0.41%, Metal up by 0.38% while, IT down by 0.66%, TECK down by 0.56% were the losing indices on BSE.

The top gainers on the Sensex were Adani Ports &Special up by 2.27%, SBI up by 1.95%, Tata Motors up by 1.81%, GAIL India up by 1.59% and Tata Steel up by 0.91%. On the flip side, HDFC down by 1.15%, Infosys down by 0.96%, TCS down by 0.88%, Hero MotoCorp down by 0.81% and Bajaj Auto down by 0.79% were the top losers.

Meanwhile, with an aim to strengthen the lenders’ ability to deal with stressed assets the Reserve Bank of India (RBI) has come out with a scheme for Sustainable Structuring of Stressed Assets. Under this scheme a portion of the debt will be converted into equity or other instruments under supervision of IBA’s Overseeing Committee. The move is intended to help restore the flow of credit to crucial sectors such as infrastructure and iron and steel, among others, reduce the stress on corporate borrowers and stanch bad loans across banks.

RBI in its statement said that after due consultation with lenders, it has formulated the ‘Scheme for Sustainable Structuring of Stressed Assets’ (S4A) as an optional framework for the resolution of large stressed accounts. The scheme will cover those projects which have started commercial operations and have outstanding loan of over Rs 500 crore. Accordingly an Overseeing Committee, set up by the Indian Banks Association (IBA) and comprising of eminent experts, will independently review the processes involved in preparation of the resolution plan. The panel will be set up in consultation with the RBI.

According to the resolution plan, the debt will be divided into two parts Part A will include debt which can be serviced from the existing operation while remaining will be classified as Part B. While there will be no extension of the repayment of Part A, the Part B will be converted into equity/redeemable cumulative optionally convertible preference shares. In a situation where the resolution does not involve a change in promoter, the principle of proportionate loss sharing by promoters will stand. In such a case, existing shareholders will have to dilute their holdings. Further, for the resolution plan to be passed, consent from 75 percent lenders by value and 50 percent lenders by numbers in JLF or consortium will be needed. Once the resolution plan is decided, it will go to the OC. Once the resolution plan is approved by OC, it will be binding on all lenders. However, lenders will have the option to exit JLF and correction action plan.

In order to make sure that the entire exercise is carried out in a transparent and prudent manner, S4A envisages that the resolution plan will be prepared by credible professional agencies, while an Overseeing Committee, set up by the Indian Banks Association, in consultation with the RBI, comprising of eminent experts will independently review the processes involved in preparation of the resolution plan, under the S4A, for reasonableness and adherence to the provisions of these guidelines, and opine on it.

The CNX Nifty is currently trading at 8103.90, down by 6.70 points or 0.08% after trading in a range of 8088.05 and 8134.95. There were 20 stocks advancing against 31 stocks declining on the index.

The top gainers on Nifty were Adani Ports &Special up by 2.30%, SBI up by 2.13%, Bank of Baroda up by 1.88%, Tata Motors up by 1.82% and GAIL India up by 1.49%. On the flip side, Zee Entertainment down by 1.28%, HDFC down by 1.10%, Ambuja Cement down by 0.93%, Ultratech Cement down by 0.87% and Hero MotoCorp down by 0.84% were the top losers.

Asian markets were trading mostly in red; Nikkei 225 was down by 1.37%, Hang Seng slipped 0.16%, KOSPI Index decreased 0.29%, Shanghai Composite dipped 0.33% and FTSE Bursa Malaysia KLCI was down by 0.22%. On the flip side, Jakarta Composite increased 0.12% and Taiwan Weighted was up by 0.35%.