Benchmarks continue firm trade; Sensex above 28,100 level

Indian benchmarks are trading on a steady note on Thursday’s noon trades, maintaining the quarter percent gain amid sustained buying in several large, medium and small cap stocks. Investor’s sentiments were boosted after Commerce and Industry Minister Nirmala Sitharaman pitched for as much as 200 basis points or 2%, interest rate cut by RBI to help the cash-starved MSME sector.  Further, in a big boost to infrastructure companies, NITI Aayog is preparing a Cabinet note for infra related ministries, road transport, urban development, petroleum, to ease arbitration norms and release stalled payments of infra companies.  However, the up-side remained capped over the private report indicating that India Inc is enduring its worst earnings drawdown of the last 20 years, burdened by weak growth, high interest costs with excessive private sector debt and over-capitalised balance sheets. Also raising anxiety among investors Reserve Bank Deputy Governor S. S. Mundra said the level of bad loans and restructured assets rose to 12% while for the public sector banks it has jumped to 15.4% as of the June quarter. Meanwhile, some buying was observed in selected Cement counters on the report that cement demand seems to be rising in the southern states where the cement has seen a hike in price by 12-15 percent. In Andhra Pradesh and Telangana, cement prices have risen by Rs 30-40 per bag in last two days. 

On the global front, Asian markets were trading mixed on Thursday as investors turned jittery ahead of Federal Reserve Chairwoman Janet Yellen's speech tomorrow, which could provide hints about the timing of the next rate hike from the Fed. Minutes from the Federal Open Market Committee's (FOMC) July meeting showed officials were split on whether an increase in interest rate was needed soon. Meanwhile, Chinese stocks declined, led by property and small-cap shares, on concern that the government will act to cool speculative activity in the nation’s financial markets.

Back home, stocks from Realty, FMCG and Consumer Durables counters were supporting the markets’ uptrend, while those from IT and Teck counters were adding to the underlying cautious undertone. In scrip specific development, AstraZeneca Pharma India dipped after the company received notice from AstraZeneca UK for termination of distribution arrangements for Meronem in India. On the other hand, Jubilant Life Sciences rallied after the pharmaceutical company received ANDA final approval for Felodipine Extended-Release tablets USP, 2.5 mg, 5 mg, and 10 mg, the generic version of Plendil tablets of AstraZeneca, which is used for the treatment of hypertension.

The market breadth remained optimistic as there were 1458 shares on the gaining side against 871 shares on the losing side, while 161 shares remained unchanged.The BSE Sensex is currently trading at 28130.29, up by 70.35 points or 0.25% after trading in a range of 28097.77 and 28154.21. There were 22 stocks advancing against 8 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.42%, while Small cap index up by 0.60%.

The top gaining sectoral indices on the BSE were Realty up by 0.75%, FMCG up by 0.74%, Consumer Durables up by 0.64%, Auto up by 0.50% and Capital Goods up by 0.49%, while IT down by 0.57% and TECK down by 0.51% were the few losing indices on BSE.

The top gainers on the Sensex were ITC up by 1.52%, Cipla up by 1.10%, Axis Bank up by 1.04%, Tata Motors up by 0.86% and Power Grid up by 0.79%. On the flip side, Adani Ports &Special down by 2.15%, Wipro down by 1.28%, Infosys down by 0.98%, TCS down by 0.72% and NTPC down by 0.47% were the top losers.

Meanwhile, the level of stressed advances which include Non Performing Assets (NPAs) and restructured assets for the industry rose to 12 per cent, but for the public sector banks (PSBs), it has jumped to 15.4 per cent as of June 2016. As a result the returns on assets for the public sector banks have turned negative and are in net losses during the quarter.

The net combined loss for the 25 listed PSBs was Rs 1,193 crore in the first quarter ended June 2016 against net profit of Rs 9,449 crore in April-June 2015. Reserve Bank of India Deputy Governor S S Mundra said credit growth has been tepid for many quarters and affecting interest income. A surge in slippages led to huge provisions and reversal of interest income. Governor said that some of the reasons for such miserable performance of the state-run banks are external and not in the control of the bank managements. An important lesson from such events is that in the absence of strong structural and governance reforms, consistency of the performance would always remain susceptible to such events.  He stressed that the prevailing priority is to complete the ongoing clean-up process of the state-run bank’s balance sheets.

Deputy Governor said that continuity of top management is crucial, as there is a five-year term for a state-run bank chief executive officer and initial appointment can be for three years with certain milestones as riders for extension. If these milestones were achieved or a satisfactory explanation was available for not achieving these, at the end of the third year, there should be an automatic extension for another two years without any questions being asked. He added if there is a reasonable tenure, it allows someone to prepare a strategy and see that it is implemented. If the tenure is very short, there may be an inclination to postpone the problem because it can be handled by the next generation.

The CNX Nifty is currently trading at 8674.75, up by 24.45 points or 0.28% after trading in a range of 8664.05 and 8683.05. There were 37 stocks advancing against 14 stocks declining on the index.

The top gainers on Nifty were ITC up by 1.60%, Aurobindo Pharma up by 1.40%, HCL Tech up by 1.40%, Axis Bank up by 1.09% and IndusInd Bank up by 1.02%. On the flip side, Adani Ports &Special down by 2.17%, Wipro down by 1.39%, Infosys down by 1.02%, TCS down by 0.77% and Zee Entertainment down by 0.76% were the top losers.

Asian markets were trading mixed; FTSE Bursa Malaysia KLCI increased 0.19%, Jakarta Composite added 0.43%, Hang Seng rose 0.3% and Taiwan Weighted were up by 1.09%. On the flip side, Shanghai Composite declined 0.94%, Nikkei 225 slipped 0.23% and KOSPI Index was down by 0.03%.