Benchmarks continue weak trade in noon deal

Indian equities continued the weak trade in the late afternoon session as investors booked profits at higher levels after sharp gains in the previous six sessions. Sentiment remained under pressure as a survey showed that India's services sector activity slowed in June. Investor also remained concerned with the SBI Chairman Arundhati Bhattacharya’s statement that Brexit is “not good” for the world, as becoming less inclusive and less connected is not the right thing and nations will benefit more by globalization. Some weakness also came with a private report stating that investments in projects remained elusive in the first quarter of the financial year 2016-17 with stalled projects running into an estimated Rs 11.2 lakh crore. The report has further said that most of the stalled projects are in the electricity (31%) and steel (25%) sectors.

On global front, Asian shares stepped back after five straight days of gains.  Back home, PSU banking stocks rallied up to 5 per cent in trade after the government finalised the first tranche of funds, which will be given to state-run banks in the ongoing financial year to boost their capital. In other sector specific development, shares of fertiliser companies including Coromandel International, Zuari Global, National Fertilisers, Zuari Agro Chemicals, Chambal Fertilisers and Rashtriya Chemicals and Fertilizers (RCF) were down more than 1% after the government announced reduction in prices of key fertilizers.

The BSE Sensex is currently trading at 27200.67, down by 78.09 points or 0.29% after trading in a range of 27173.79 and 27348.66. There were 10 stocks advancing against 20 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.14%, while Small cap index was higher by 0.13%.

The top gaining sectoral indices on the BSE were Metal up by 0.64%, PSU up by 0.61%, Oil & Gas up by 0.56%, Realty up by 0.12%, Power up by 0.06%, while Auto down by 0.72%, IT down by 0.42%, FMCG down by 0.41%, TECK down by 0.40%, Bankex down by 0.07% were the losing indices on BSE.

The top gainers on the Sensex were Reliance Industries up by 1.29%, Adani Ports &Special up by 1.08%, Tata Steel up by 0.92%, ONGC up by 0.62% and Coal India up by 0.61%. On the flip side, NTPC down by 1.45%, Bajaj Auto down by 1.45%, GAIL India down by 1.41%, Tata Motors down by 1.40% and Bharti Airtel down by 1.30% were the top losers.

Meanwhile, India Rating Research has said that banks can no longer complain that policy transmission is getting hampered due to liquidity tightness as the Reserve Bank of India has honoured its promise of keeping the banking sector liquidity in a “neutral” zone, or no-deficit, no-surplus mode that will help consumers to derive faster benefits from the central bank's policy rate cuts.

Ratings agency has noted that the central bank has injected Rs 80,000 crore of long-term liquidity through secondary market bond purchases through its open market operations. The government’s surplus cash balances with RBI has now come down to zero even as there has been reduction in cash in circulation in June 2016. OMO (purchase/sale) is a mechanism through which the central bank infuses or sucks out cash into the system. According to the report citing RBI data, the cash-crunch in the system was as high as 1.4 lakh crore during February-March, fag end of the financial year FY16. In the last week of June, the system was marginally cash surplus in the range of Rs 31,700 crore - Rs 19,700 crore.

As per the rating agency the money market rates have stayed on the softer side with the overnight call money rate hovering close to the lower bound of the liquidity adjustment facility corridor as well as in its April bi-monthly policy RBI decided to progressively lower the average ex-ante liquidity deficit in the system to a position closer to neutrality. However, the rating agency also said that the central bank ensured of smooth supply of durable liquidity over the year using asset purchases and sales as needed, aims to narrow the policy rate gap to +/-50 basis points from 100 earlier. The repo or policy rate at which banks borrow short term funds from RBI is now at 6.50 per cent versus 6 per cent reverse repo, at which RBI borrows from banks.

India Rating further said that foreign currency non-resident (B) deposit redemption and an increase in currency-in-circulation from end-1QFY17 will be a major determinant for the next round of OMO purchases. It added that the improved liquidity will also aid at the time of maturity of foreign currency non-resident (bank) or FCNR (B) deposits, when banking system liquidity is expected to get strained.The CNX Nifty is currently trading at 8348.25, down by 22.45 points or 0.27% after trading in a range of 8336.10 and 8381.45. There were 19 stocks advancing against 32 stocks declining on the index.

The top gainers on Nifty were BHEL up by 1.92%,  Reliance Industries up by 1.39%,  Zee Entertainment up by 1.21%,  Adani Ports &Special up by 1.15% and Yes Bank up by 1.09%. On the flip side, NTPC down by 1.76%, Bajaj Auto down by 1.61%, GAIL India down by 1.58%, Tata Motors down by 1.42% and HCL Tech. down by 1.31% were the top losers.

The Asian markets were trading mostly in red, Hang Seng decreased 209.76 points or 1% to 20,849.44, Nikkei 225 was lower by 106.47 points or 0.67% to 15,669.33, Jakarta Composite declined 45.07 points or 0.9% to 4,971.58, Taiwan Weighted  down by 44.51 points or 0.51% to 8,716.07,KOSPI Index  declined 5.45 points or 0.27% to 1,989.85, FTSE Bursa Malaysia KLCI dropped  4.13 points or 0.25% to 1,650.71.

On the other hand, Shanghai Composite up by 14.63 points or 0.49% to 3,003.23 was bucking the trend.