Indian bourses continue weak trade; Banking drag

Indian bourses continued their weak trade in the afternoon session on broad based selling, with frontline gauges trading below their crucial 26,500 (Sensex) and 8,150 (Nifty) levels. The sentiments were pessimistic after industry body, Associated Chambers of Commerce and Industry of India (ASSOCHAM) in its latest report highlighted that banning of high value notes would lower growth rate due to economic slowdown in the third and fourth quarters of fiscal 2016-17. Some pessimism also came after India’s manufacturing PMI (purchase manager’s index) fell in December 2016 as demonetization took its toll on the economy. The headline seasonally adjusted Nikkei India Manufacturing Purchasing Managers’ Index (PMI) recorded below the crucial 50 threshold for the first time in 2016 during December. Also, the rupee depreciated against the US dollar at the Interbank Foreign Exchange in noon deals due to fresh dollar demand from importers. The downside was however capped after the Reserve Bank of India (RBI) governor Urjit Patel expressed that Goods and Services Tax and the withdrawal of specified bank notes will impart far reaching changes going forward. In scrip specific development, Indiabulls Housing Finance was up by around 3 percent after Prime Minister Narendra Modi announced interest rate subsidy of 4 percent for home loans up to Rs 9 lakh in urban areas.

On the global front, Asian financial markets, including Australia, Japan, China and Hong Kong, were shut for the New Year's holiday except South Korean market which was trading in red. Back home, the BSE Sensex is currently trading at 26484.33, down by 142.13 points or 0.53% after trading in a range of 26447.06 and 26720.98. There were 16 stocks advancing against 13 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.24%, while Small cap index was up by 0.62%.

The top gaining sectoral indices on the BSE were Realty up by 3.27%, Metal up by 0.59%, Oil & Gas up by 0.50%, Capital Goods up by 0.35% and Consumer Durables up by 0.27%, while Bankex down by 1.51%, FMCG down by 0.42%, PSU down by 0.24% and IT down by 0.06% were the losing indices on BSE.

The top gainers on the Sensex were Dr. Reddys Lab up by 1.32%, Bharti Airtel up by 1.29%, Tata Steel up by 1.20%, Sun Pharma Inds. up by 0.98% and Asian Paints up by 0.96%. On the flip side, HDFC down by 3.28%, SBI down by 2.34%, Bajaj Auto down by 2.24%, ICICI Bank down by 2.08% and Hero MotoCorp down by 1.16% were the top losers.

Meanwhile, the Reserve Bank of India (RBI) governor Urjit Patel, in his foreword to the half-yearly Financial Stability Report (FSR) December 2016, has stated that the nationwide goods and services tax (GST) and legislation of bankruptcy code should impart resilience to the economy. He also said that demonitisation of high value currency notes have the potential to transform the economy. 

On the positive impact of demonitisation, Patel has said that the withdrawal of specified bank notes (SBNs) will have far reaching changes towards a transformative effect on the domestic economy going forward. He also said that the increasing adoption of digital modes of payments will lead to greater intermediation, efficiency gains, accountability and transparency. Further, raising anxieties about stress in the banking sector, he said that the stress shown by the domestic banking system is partly reflective of legacy issues but enhanced transparency has helped to reinforce the stability of India's financial system.

According to the RBI data of the financial sector, business growth for banks remained subdued, and public-sector lenders continued to lag their private-sector peers, with profit contracting in the first half of 2016-17. It stood at 9.1 per cent in September, against 7.8 per cent in March 2016. Also, banks’ bad loans were pushing overall stressed advances ratio to 12.3 per cent from 11.5 per cent.

The governor further said that the global financial crisis has prompted regulators to require banks to undertake stress tests to see if their risk appetite matches their risk taking capacity. He also explained that the asset quality review of Indian banks and the subsequent corrective actions are steps in this direction. Overall, he said that there is little room for complacency and it is important to guard against sporadic volatility in financial markets.

The CNX Nifty is currently trading at 8147.35, down by 38.45 points or 0.47% after trading in a range of 8133.80 and 8212.00. There were 32 stocks advancing against 19 stocks declining on the index.

The top gainers on Nifty were Eicher Motors up by 3.29%, Ultratech Cement up by 2.49%, Ambuja Cement up by 1.75%, Bharti Airtel up by 1.41% and Tata Motors - DVR up by 1.37%. On the flip side, HDFC down by 3.25%, Bank Of Baroda down by 3.19%, SBI down by 2.52%, Bajaj Auto down by 2.29% and Indusind Bank down by 2.10% were the top losers.

Equity markets in China, Japan, Hong Kong, and Australia are all shut on account of the New Year holiday. The only counter opened today was KOSPI Index, down by 0.3 points or 0.01% to 2,026.16.