Markets trade flat with negative bias in early noon session

Indian equity benchmarks are trading flat with the negative bias in early noon session, as investors maintained cautious stance ahead of central bank meetings in the US and Japan. The US Federal Open Market Committee will begin its two-day meeting today while the Bank of Japan will start its two-day meeting tomorrow. Sentiment also remained subdued with the India Meteorological Department (IMD) report suggesting the progress of southwest monsoon is relatively slow as it is not getting a favourable system to move forward, but days of heat wave condition in central and northwest India will soon be over as pre-monsoon showers will bring moisture in the air. Sentiments also got hurt with India’s Consumer Price Index (CPI)-based inflation for the month of May 2016 rising 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, losses remained capped with the 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.

In scrip specific development, share of Deepak Fertilisers surged over 5% after the Ministry of Chemicals and Fertilisers agreed to release about Rs 485 crore outstanding subsidy payment to the company. Shares of public sector undertaking (PSU) banks and the debt-ridden companies remained on buyers’ radar after the Reserve Bank of India (RBI) allowed banks to conduct deep restructuring of large accounts to revive projects that can be saved.

The BSE Sensex is currently trading at 26383.00, down by 13.77 points or 0.05% after trading in a range of 26325.27 and 26485.45. There were 16 stocks advancing against 14 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.34%, while Small cap index up by 0.77%.

The top gaining sectoral indices on the BSE were Realty up by 1.32%, Consumer Durables up by 0.66%, PSU up by 0.51%, Capital Goods up by 0.38% and FMCG up by 0.35%, while IT down by 0.68% and TECK down by 0.60% were the only losing indices on BSE.

The top gainers on the Sensex were Adani Ports &Special up by 2.62%, SBI up by 2.00%, Cipla up by 1.76%, GAIL India up by 1.59% and Tata Motors up by 1.36%. On the flip side, HDFC down by 0.98%, Bajaj Auto down by 0.91%, Infosys down by 0.90%, TCS down by 0.82% and Hindustan Unilever down by 0.82% 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 8102.65, down by 7.95 points or 0.10% after trading in a range of 8088.05 and 8134.95. There were 22 stocks advancing against 29 stocks declining on the index.

The top gainers on Nifty were Adani Ports &Special up by 2.67%, SBI up by 2.18%, Cipla up by 1.88%, Bank of Baroda up by 1.81% and GAIL India up by 1.43%. On the flip side, Zee Entertainment down by 1.40%, Ambuja Cement down by 1.03%, HDFC down by 0.97%, Asian Paints down by 0.88% and Hindustan Unilever down by 0.88% were the top losers.

Asian markets were trading mostly in red; Nikkei 225 decreased 160.18 points or 1% to 15,859.00, Hang Seng decreased 15.08 points or 0.07% to 20,497.91, KOSPI Index decreased 7.03 points or 0.36% to 1,972.03 and FTSE Bursa Malaysia KLCI decreased 3.57 points or 0.22% to 1,626.20, while Jakarta Composite increased 5.66 points or 0.12% to 4,812.89, Shanghai Composite increased 7.83 points or 0.28% to 2,840.90 and Taiwan Weighted increased 39.9 points or 0.47% to 8,576.12.