Benchmarks continue firm trade in noon session

Indian equity indices continued to trade firm in noon session on continued buying activities by both funds and retail investors in select blue-chip stocks. Sentiments got boost taking support from Finance Minister Arun Jaitley’s statement dismissing the slowdown concerns said that higher tax mop up indicates uptick in economic activity. He further added that demonetised notes had no role to play in the tax collections for December as people were allowed to pay taxes in the spiked currency only in November and the indirect and direct tax collections between April and December this year increased by 25 percent and 12.01 percent respectively compared to the same period last year. Furthermore, describing demonetisation as only a ‘bump’, Cisco Executive Chairman John Chambers said India is well-positioned to maintain GDP growth rate of over 7 per cent for the next few years and it should be a 'top ally' for the US in the Asia Pacific region. Some support also came with Moody’s report which maintained positive outlook on India and said beyond the short-term negative impact on growth, demonetisation has the potential to raise government revenues and provide some fiscal space to support growth if required. The report enlightened that measures including relaxation of foreign investment restrictions, passage of the Goods and Services Tax, and advancement of a workable bankruptcy code have potential to stimulate private sector investment, which could lead to stable, balanced growth and gradually lower the government debt burden.

On the global front, Asian markets were trading mostly lower on Tuesday, tracking the lackluster cues from Wall Street and the plunge in crude oil prices overnight.  Worries about the likelihood of a ‘hard Brexit’ also weighed on investors sentiments. On Wall Street, the Dow Jones Industrial Average index closed 0.38% down on Monday, while the S&P 500 settled 0.4% lower, with energy stocks declined amid lack of any major economic news.

Back home, all BSE sectoral indices were trading in the green. Among them, Oil & Gas index gained the most by 1.28 per cent, followed by Consumer Durables 0.96 per cent, Metal 1.90 per cent and PSU 1.64 per cent. In scrip specific development, Hindustan Construction Company (HCC) surged after the company bagged an order worth Rs 368.6 crore from IRCON International for construction of the cable stayed bridge including its approaches across river Anji Khad in Jammu & Kashmir. Furthermore, Engineers India (EIL) rose after the company received a project worth Rs 2,500 crore from the state-owned oil marketing company Hindustan Petroleum Corporation (HPCL) for execution of Vizag Refinery Modernization Project (VRMP).

The market breadth remained optimistic as there were 1517 shares on the gaining side against 880 shares on the losing side, while 113 shares remained unchanged.

The BSE Sensex is currently trading at 26850.98, up by 124.43 points or 0.47% after trading in a range of 26804.17 and 26902.05. There were 19 stocks advancing against 10 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.38%, while Small cap index up by 0.63%.

The top gaining sectoral indices on the BSE were Oil & Gas up by 1.28%, Consumer Durables up by 0.96%, Metal up by 0.76%, PSU up by 0.76% and FMCG up by 0.61%, while there were no losers on BSE sectoral front.

The top gainers on the Sensex were Tata Motors up by 2.41%, GAIL India up by 1.61%, ONGC up by 1.31%, Tata Steel up by 1.27% and Adani Ports up by 1.11%. On the flip side, Axis Bank down by 1.09%, Hero MotoCorp down by 0.41%, Dr. Reddys Lab down by 0.27%, Bajaj Auto down by 0.27% and HDFC down by 0.20% were the top losers.

Meanwhile, the global credit rating agency, Moody’s Investors Service and its Indian arm ICRA in its joint report has said that the asset quality of Indian banks is likely to remain under pressure and will impact their credit profile over the medium term despite continued deterioration of the asset quality having been arrested by most of the lenders. The report said that asset quality will remain a negative driver of the credit profiles of most rated banks in the country and the stock of impaired loans. Non-performing loans and standard restructured loans will still rise during the horizon of their outlook that lasts till the next financial year.

According to Moody's, such pressure on asset quality largely reflects the system's legacy problems, as the banking sector had witnessed strong credit growth in 2009-2012 when the investment plans of Indian corporates rose significantly. While corporate balance sheets would remain weak, the rating agency believes that a further deterioration in key credit metrics such as debt/equity and interest coverage ratios has been arrested. The report said that the pace of asset quality deterioration over the next 12-18 months should be lower than what was seen over the last five years, and especially compared to the financial year 2015-16. It considers the Reserve Bank of India’s (RBI’s) asset quality review in December 2015 as an important catalyst in pushing banks to recognise some large accounts as being impaired. Now it estimates the true level of impaired loans for Indian banks to be around 1-1.5 percentage points higher than the latest reported numbers.

Further, the latest Financial Stability Report by the RBI had said the gross non-performing advances ratio increased to 9.1 per cent from 7.8 per cent between March and September 2016, pushing the overall stressed advances ratio to 12.3 per cent from 11.5 per cent. Moody's said given the magnitude of stressed assets in the system, it expects the banks to increase their focus on resolving some of the large problem accounts. ICRA said that weak demand for credit, increasing competition and greater dis-intermediation will continue to exert downward pressure on lending rates. It said the overall capitalisation levels of most of the public sector banks remain moderate to weak, given that they need to attain the regulatory minimum tier-I requirement of 9.5 per cent by March 2019. The current plan of infusing Rs 45,000 crore during 2016-17 and 2018-19, of which Rs 16,414 crore have already been infused in the current year, is below its estimate of capital requirements of Rs 1,50,000-1,80,000 crore.

The CNX Nifty is currently trading at 8268.10, up by 32.05 points or 0.39% after trading in a range of 8261.00 and 8288.10. There were 32 stocks advancing against 18 stocks declining on the index, while one stock remained unchanged.

The top gainers on Nifty were Hindalco up by 3.64%, Tata Motors up by 2.49%, BPCL up by 2.47%, Tata Motors - DVR up by 2.05% and GAIL India up by 1.37%. On the flip side, Axis Bank down by 1.27%, Indusind Bank down by 1.23%, Ambuja Cement down by 1.00%, Eicher Motors down by 0.76% and ACC down by 0.65% were the top losers.

Asian markets were trading mostly in red; Nikkei 225 slipped 0.82%, Jakarta Composite decreased 0.26%, KOSPI Index slipped 0.25% and Shanghai Composite was down by 0.18%. On the flip side, FTSE Bursa Malaysia KLCI gained 0.15%, Taiwan Weighted rose 0.08% and Hang Seng was up by 0.53%.