Markets erase gains; Nifty slips below 8,700 mark

Indian equity markets erased all early gains and are now trading in red in the afternoon session on account of selling in frontline blue chip counters. The sentiments were under pressure after the Indian Army announced surgical strikes against terrorists across Line of Control. Also the rupee depreciated against the US dollar at the Interbank Foreign Exchange in noon deals due to fresh dollar demand from importers.  All the sectoral indices were trading in red with Realty being the top losing index, trading down by over two and half percent.  In scrip specific development, Pidilite Industries gained half a percent after entering into a sales and distribution agreement with WD-40 Company, while Corporation Bank slid marginally after allotting preferential shares to the government.

On the global front, Asian markets were trading in green, following the surge in crude oil prices overnight in reaction to reports that OPEC members have reached a deal to cut oil production for the first time since 2008. Back home, the BSE Sensex is currently trading at 28019.34, down by 273.47 points or 0.97% after trading in a range of 28019.08 and 28475.57. There were 7 stocks advancing against 22 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 1.47%, while Small cap index was down by 1.01%.

The top losing sectoral indices on the BSE were Realty down by 2.69%, Power down by 1.82%, Metal down by 1.31%, FMCG down by 1.28% and Bankex down by 1.27%.

The top gainers on the Sensex were Mahindra & Mahindra up by 1.46%, GAIL India up by 0.96%, TCS up by 0.60%, Reliance Industries up by 0.41% and Hero MotoCorp up by 0.33%. On the flip side, ICICI Bank down by 2.26%, ITC down by 2.04%, Axis Bank down by 1.86%, Sun Pharma Inds. down by 1.75% and Bharti Airtel down by 1.35% were the top losers.

Meanwhile, raising concerns over the weak credit growth, Reserve Bank of India (RBI) Deputy Governor S S Mundra has said that the correlation between economic growth and banks' credit expansion is becoming weak due to proliferation of other institutions, and lenders will have to make a slew of changes to recover their share. Banks recorded a multi-decade low in credit growth last fiscal, not even breaking into double digits, while the GDP rose 7.6 percent.

RBI deputy governor further said that the relationship has weakened over years as banks have started accommodating companies through other sources like commercial paper (CP) and bonds.  He added that share of non-bank sources like NBFCs, housing finance companies and CPs has increased to 38.6 percent in March 2016 as compared to  35.2 percent in March 2014. The total credit distributed by the non-bank entities has increased to 37.40 percent in these two years, which is twice the pace of the 19.22 percent growth reported by banks. 

He said that a stable multiplier of real economic growth and bank credit may emerge only in the medium term, once the banks overcome a slew of weaknesses such as asset quality stress, revival in private sector investments and when inflation starts trending lower, which will lead to lower lending rates and push loan demand. Though, Mundra also added that banks will continue to remain the mainstay of finance for the economy.

The CNX Nifty is currently trading at 8677.25, down by 67.90 points or 0.78% after trading in a range of 8677.25 and 8800.65. There were 10 stocks advancing against 40 stocks declining on the index.

The top gainers on Nifty were Mahindra & Mahindra up by 1.60%, Bharti Infratel up by 1.23%, TCS up by 0.71%, Reliance Industries up by 0.38% and GAIL India up by 0.36%. On the flip side, BHEL down by 3.47%, Aurobindo Pharma down by 2.71%, ICICI Bank down by 2.67%, ITC down by 2.07% and Axis Bank down by 2.03% were the top losers.

All the Asian markets were trading in green; FTSE Bursa Malaysia KLCI increased 4.9 points or 0.29% to 1,669.86, Hang Seng gained 10.5 points or 0.04% to 23,630.15, Shanghai Composite was up by 13.97 points or 0.47% to 3,001.83, KOSPI Index increased 15.66 points or 0.76% to 2,068.72, Jakarta Composite surged 42.06 points or 0.78% to 5,467.40, Taiwan Weighted increased 76.38 points or 0.83% to 9,270.90 and Nikkei 225 added 228.31 points or 1.39% to 16,693.71.