Benchmarks trade flat in late morning session

Indian equity benchmarks continued their lackadaisical trade, hovering near neutral line in the late morning session as investors were reluctant to build positions ahead of the Union budget, which is slated to be unveiled later in the day. Extending its winning run for the sixth straight session, the rupee opened at 1-month high against dollar ahead of the Union Budget 2017. Selling of American currency by banks and exporters and inflows by Foreign Institutional Investors (FIIs) in Tuesday’s session further supported the local unit in opening trade on Wednesday. Traders took some support with report following growth in eight core sectors - coal, crude oil, natural gas, refinery products, fertilizer, steel, cement and electricity, which comprise nearly 38% of the weight of items included in the Index of Industrial Production (IIP), expanded at a faster pace of 5.6% in December 2016, against the 4.9% growth recorded in November 2016, supported by double-digit expansion in the steel sector. Manufacturing activity in India rose more-than-expected in the last quarter. The HSBC Markit Manufacturing PMI rose to a seasonally adjusted annual rate of 50.4, from 49.6 in the preceding quarter. Investors were cautious after a FICCI report highlighted that Overall Business Confidence Index (OBCI) slipped to a four quarter low of 58.2 from 67.3 in the last round. The OBCI slipped to a four quarter low of 58.2 from 67.3 in the last round, which was largely on account of the weakness that has gripped the performance of corporate India on account of demonetization and their assessment of the current state of economy. Some cautiousness too crept in, with fiscal deficit in the first nine months of 2016-17 touching 93.9 per cent of the Budget target against 87.9 per cent for the same period a year ago. Traders were seen piling position in Realty, PSU and Capital Goods stocks, while selling was witnessed in IT, TECK and Metal sector stocks. In scrip specific development, Shoppers Stop was trading in red on reporting a decline of 15.36 percent in standalone net profit at Rs 19 crore for the third quarter ended December 2016. It had posted a net profit of Rs 22.45 crore in October-December quarter a year ago.

On the global front, Asian shares were trading mostly in green, taking cues from Chinese manufacturing data and as investors awaited the latest views from the Federal Reserve on monetary policy in its first review of the year. China’s official manufacturing Purchasing Managers' Index (PMI) continued in expansion in January, as the mainland economy shows signs of stabilizing, reaching 51.3, down slightly from 51.4 in December. Back home, the NSE Nifty and BSE Sensex were trading below the psychological 8,600 and 27,700 levels respectively. The market breadth on BSE was positive in the ratio of 1177:989, while 99 scrips remained unchanged.

The BSE Sensex is currently trading at 27662.21, up by 6.25 points or 0.02% after trading in a range of 27590.10 and 27725.16. There were 14 stocks advancing against 16 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.15%, while Small cap index was up by 0.14%.

The top gaining sectoral indices on the BSE were Realty up by 1.03%, PSU up by 0.88%, Capital Goods up by 0.70%, Consumer Durables up by 0.63% and Oil & Gas up by 0.61%, while IT down by 2.24%, TECK down by 1.88%, Metal down by 0.31% and Power down by 0.18% were the losing indices on BSE.

The top gainers on the Sensex were SBI up by 2.27%, Maruti Suzuki up by 1.53%, HDFC up by 1.15%, Larsen & Toubro up by 0.91% and Adani Ports & Special Economic Zone up by 0.90%.

On the flip side, TCS down by 2.66%, Infosys down by 2.22%, Wipro down by 1.39%, Dr. Reddy’s Lab down by 1.12% and NTPC down by 1.07% were the top losers.

Meanwhile, international ratings agency, Fitch Ratings in its latest report has said that cash crunch caused by the demonetisation of large denomination currency notes, is likely to push back recovery in banks' asset quality, as it had a disruptive impact on India's informal economy. According to the ratings agency, the note ban impact on asset quality to start showing up only in the January-March quarter data. It added that cash shortages have affected the income of many borrowers by holding back economic activity and reducing their short-term repayment abilities.

The ratings agency has said that the Reserve Bank of India has allowed forbearance on some loans to the agricultural sector and small businesses, but these accounts for a relatively small share of outstanding lending. Fitch had previously expected the stressed-asset ratio for Indian banks to increase to 12 percent for the fiscal ending March 2017, from 11.4 percent in FY16. Now it said that there is a risk that the ratio will climb higher. But, it still consider that asset-quality indicators are close to their weakest level and will recover slowly over the next few years, but any turnaround is likely to have been pushed back by at least two quarters.

On the loan growth of banks, Fitch said that demonetisation has also weighed on loan growth, at least in the short term as demand weakened in the uncertain economic environment and banks have had to focus on cash management instead of normal lending activities. It added that the growth has slowed to 4.8 percent in November 2016, from 6.7 percent in October. The ratings agency also said that it will be below their previous forecast of 10 percent in FY17 and may even slow from the 8.8 percent recorded in FY16. However, it said that the loan growth may increase if banks cut further their lending rates for which there is much scope as the cost of funds for the banks provided the additional deposits that had come following demonetisation remains with the banks.

The CNX Nifty is currently trading at 8554.80, down by 6.50 points or 0.08% after trading in a range of 8537.60 and 8584.85. There were 24 stocks advancing against 27 stocks declining on the index.

The top gainers on Nifty were Bank of Baroda up by 2.45%, Grasim Industries up by 2.16%, SBI up by 2.13%, Maruti Suzuki up by 1.56% and Tata Motors - DVR up by 1.19%.

On the flip side, Idea Cellular down by 4.45%, HCL Tech down by 3.72%, TCS down by 2.75%, Aurobindo Pharma down by 2.46% and Tech Mahindra down by 2.26% were the top losers.

The Asian markets were trading mostly in green; KOSPI Index increased 10.9 points or 0.53% to 2,078.47, Jakarta Composite increased 30.63 points or 0.58% to 5,324.73 and Nikkei 225 increased 111.41 points or 0.59% to 19,152.75.

On the other hand, Hang Seng decreased 165.55 points or 0.71% to 23,195.23.

China, Malaysia and Taiwan stock exchange has been closed for the day on account of holiday.