Benchmarks continue firm trade in late morning session

Indian equity benchmarks continued their firm trade in late morning session on account of buying in front line blue chip counters. The sentiments were on optimistic note tracking firm cues from Asian markets after crude prices shot up in overnight trade as the dollar weakened a bit and reports suggested that Russia was keen on cutting output to boost crude prices. Indian rupee opened up against dollar on account of some selling of American currency by banks and exporters. The weakness of dollar in the international market capped the rupee fall against the dollar. Moody’s Investors Service in its latest report, on non-financial corporate, has stated that Indian corporate sector is expected to log healthy profit growth in 2017 on the back of sustained economic growth, capacity additions and higher commodity prices. Some additional support also came with Commerce and Industry Minister Nirmala Sitharaman stating that FDI went up 60% to $77.86 billion after the launch of Make in India initiative in September 2014. There has been an unprecedented increase in FDI into the country after the launch of this initiative. Make in India was launched with an aim to promote India as an important investment destination and a global hub for manufacturing.

Investors will be keeping an eye on the street as twelve companies are likely to announce their September quarter results. The list includes Larsen & Toubro, Allcargo Logistics, Birla Corporation, Jindal Stainless, Siti Networks and GTL Infrastructure. The street is still cautious over concern of India’s demonetisation move estimated to pull down gross domestic product growth this financial year from last year’s 7.6%. The domestic rating agency ICRA has forecast a 40 bps dip in growth rates to 7.2% in the second quarter of the current fiscal, citing debilitating impact of the demonetisation drive on the economy. Traders were seen piling up positions in Metal, IT and TECK stocks, while selling was witnessed in Capital Goods, Power and Realty sector stocks. In the scrip specific development, aviation stock companies were showing mixed reaction after aviation regulator DGCA reported that domestic airlines flew 86.72 lakh passengers in October. IndiGo cornered the largest market share in October at 42.6 percent, higher than 40 percent seen in September. SpiceJet’s share rose marginally to 12.9 percent, while that of AirAsia India inched up to 2.7 percent. The market share of Jet Airways and GoAir fell last month to 14.7 percent and 7.9 percent, respectively.

The market may remain volatile this week as traders may roll over positions in the Futures & Options (F&O) segment from the near month i.e. November 2016 series to next month i.e. December 2016 series. The near month November 2016 derivatives contracts will expire on Thursday i.e. November 24, 2016. On the global front, Asian shares were trading in green, in the wake of solid gains in US markets overnight, as oil prices rallied on expectations that key oil-producing countries will agree to a deal to slash production. Back home, the NSE Nifty and BSE Sensex were trading above the psychological 7,950 and 25,800 levels respectively. The market breadth on BSE was positive in the ratio of 1173:932, while 131 scrips remained unchanged.

The BSE Sensex is currently trading at 25856.93, up by 91.79 points or 0.36% after trading in a range of 25816.53 and 26039.70. There were 20 stocks advancing against 10 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.33%, while Small cap index was up by 0.10%.

The gaining sectoral indices on the BSE were Metal up by 1.87%, IT up by 0.92%, TECK up by 0.90%, Auto up by 0.66% and Oil & Gas up by 0.65%, while Capital Goods down by 1.56%, Power down by 0.96% and Realty down by 0.58% were the losing indices on BSE.

The top gainers on the Sensex were Cipla up by 2.26%, Maruti Suzuki up by 2.05%, Adani Ports & Special up by 1.92%, Hindustan Unilever up by 1.54% and Tata Steel up by 1.39%.

On the flip side, GAIL India down by 2.81%, Larsen & Toubro down by 2.54%, NTPC down by 1.78%, Dr. Reddy’s Lab down by 1.08% and Power Grid down by 0.86% were the top losers.

Meanwhile, a joint study carried out by the Associated Chambers of Commerce & Industry of India (Assocham) and rating agency, Crisil, has stated that the successful implementation of Insolvency and Bankruptcy Code can potentially release about Rs 25,000 crore capital over next 4-5 years currently locked in bad loans. The study highlighted that the code if implemented successfully will help India’s banking sector to catch up with or even exceeds the recovery rates of 32% and average time taken of 2.8 years in other emerging markets. It said that the released capital can be deployed for other productive lending, which in turn could help in credit expansion.

The Assocham-Crisil study titled ‘Insolvency and Bankruptcy Code 2016: A game changer’ noted that the Reserve Bank of India (RBI) has already tightened norms for wilful defaulters, which, together with implementation of the code, will enhance recoveries from such borrowers and improve overall credit discipline as this code will also contain slippages into NPAs by spawning better credit discipline. Though it added considering that institutionalising the code will be a long-drawn affair, it may not provide any material capital relief to banks over short term.

The study also said that this legislation could improve recovery rate of asset reconstruction companies (ARCs) which has been low at an average of 36%, with resolution taking about five years, more so as timely recovery remains key to long-term sustainability of ARCs. It added that the new code along with 100% foreign direct investment (FDI) in ARCs through the automation route is expected to boost capital flows. The joint study highlighted that with the implementation of the code, India’s position in World Bank’s ease of doing business ranking will improve, attracting more foreign investors.

The insolvency and Bankruptcy Code, 2016, seeks to consolidate and amend laws relating to reorganisation as well as insolvency resolution of corporate persons, partnership firms and individuals in a time-bound manner. Over a period of time, the code will help promote entrepreneurship and increase the role of professionals from various fields such as law, accountancy and finance.

The CNX Nifty is currently trading at 7964.45, up by 35.35 points or 0.45% after trading in a range of 7946.35 and 8018.45. There were 36 stocks advancing against 15 stocks declining on the index.

The top gainers on Nifty were Hindalco up by 4.19%, Zee Entertainment up by 3.25%, Cipla up by 2.37%, Maruti Suzuki up by 1.97% and Hindustan Unilever up by 1.84%.

On the flip side, BHEL down by 3.45%, GAIL India down by 2.97%, Larsen & Toubro down by 2.52%, Bosch down by 1.85% and NTPC down by 1.84% were the top losers.

The Asian markets were trading in green; FTSE Bursa Malaysia KLCI increased 3.58 points or 0.22% to 1,630.86, Jakarta Composite increased 12.4 points or 0.24% to 5,160.72, KOSPI Index increased 18.02 points or 0.92% to 1,984.07, Shanghai Composite increased 24.11 points or 0.75% to 3,242.26, Nikkei 225 increased 46.98 points or 0.26% to 18,153.00, Taiwan Weighted increased 105.54 points or 1.17% to 9,146.65 and Hang Seng increased 309.52 points or 1.38% to 22,667.30.