Markets remain sluggish ahead of RBI policy meet

Indian equity benchmarks continued to trade sluggish in late afternoon session as investors remained on the sidelines ahead of the Reserve Bank of India's policy meeting due tomorrow. The RBI is expected to conduct its sixth and final bi-monthly monetary policy review of the current fiscal on February 7-8, 2017. Profit booking coupled with mixed global cues and a weak rupee, pulled the markets lower. Sentiments also remained downbeat with Commerce Minister Nirmala Sitharaman’s statement that the proposed changes in the regime for issuing H-1B visas for skilled workers by the US government will have an impact on Indian companies and the Commerce Ministry will soon hold a meeting with the industry to discuss its strategy for dealing with it.

On the global front, European markets were trading mostly in green with some encouraging company updates and gains in healthcare stocks helping to counter weakness in oil majors and eurozone banks. However, Asian markets were trading in red as economic and political uncertainty gripped global markets. Back home, in scrip specific development, Cerebra was trading in green after the company inaugurated its much awaited E-Waste Recycling Facility located at Narasapura KIADB Industrial Area, Kolar District which spans over an area of 12 acres of prime industrial land and with built up area of more than 40000 sft.

The BSE Sensex is currently trading at 28364.83, down by 74.45 points or 0.26% after trading in a range of 28334.61 and 28483.41. There were 10 stocks advancing against 20 stocks declining on the index.

The broader indices were trading mixed; the BSE Mid cap index was down by 0.02%, while Small cap index was up by 0.21%.

The top gaining sectoral indices on the BSE were Consumer Durables up by 0.54%, Capital Goods up by 0.51%, Power up by 0.50%, Bankex up by 0.14% and PSU up by 0.10%, while Metal down by 0.96%, Auto down by 0.84%, TECK down by 0.24%, IT down by 0.24% and Oil & Gas down by 0.15% were the top losing indices on BSE.

The top gainers on the Sensex were NTPC up by 0.95%, Maruti Suzuki up by 0.64%, Asian Paints up by 0.57%, ITC up by 0.56% and HDFC up by 0.39%. On the flip side, Coal India down by 2.99%, Tata Motors down by 2.53%, ONGC down by 1.93%, Mahindra & Mahindra down by 1.18% and Adani Ports & Special economic zone down by 1.16% were the top losers.

Meanwhile, credit rating agency, Icra in its latest report has said that Reserve Bank’s new guidelines on Basel III compliant Additional Tier-1 (AT1) bonds have strengthened the banks' ability to service the coupon, thereby partially reducing the default risks for many state-run banks (PSBs). Agency added that new norm is more beneficial for those banks that have low distributable reserves as defined by earlier RBI guidelines and/or are likely to continue reporting losses in the near term, leading to further depletion of their reserves.

Further, agency noted that under the new guidelines, three of the 21 state-run banks-- Central Bank of India, Indian Overseas Bank and United Bank of India will have positive reserves, who had negative distributable reserves under the earlier guidelines. Further it said that banks are required to appropriate 25% of their annual net profits towards statutory reserve. As on Sep-2016, the statutory reserve stood at around Rs 1.28 trillion for 21 public sector banks (PSBs), excluding five SBI associates.

Agency in its report also said that with capital requirements for PSBs till FY19 remaining large, the current relaxation by RBI will enable weaker banks to raise capital through AT1 instruments, subject to investor appetite. It noted that the reserves for servicing the coupon have increased by 2.9 times to Rs 2.72 trillion from Rs 94,000 crore in September 2016 under the new guidelines including the profit/loss reported by the PSBs during the first half of fiscal 2017.

The CNX Nifty is currently trading at 8780.10, down by 20.95 points or 0.24% after trading in a range of 8770.10 and 8809.30. There were 16 stocks advancing against 35 stocks declining on the index.

The top gainers on Nifty were Kotak Mahindra Bank up by 2.05%, BPCL up by 1.85%, BHEL up by 1.63%, Bank of Baroda up by 1.38% and Bharti Infratel up by 1.30%. On the flip side, Tata Motors - DVR down by 3.04%, Coal India down by 3.03%, Tata Motors down by 2.58%, ONGC down by 1.88% and Hindalco down by 1.58% were the top losers.

Asian markets were trading mostly in red; Nikkei 225 decreased 65.93 points or 0.35% to 18,910.78, Hang Seng decreased 16.67 points or 0.07% to 23,331.57, Jakarta Composite decreased 12.33 points or 0.23% to 5,383.67, Shanghai Composite decreased 3.9 points or 0.12% to 3,153.09, FTSE Bursa Malaysia KLCI decreased 2.47 points or 0.15% to 1,688.77 and KOSPI Index decreased 2.45 points or 0.12% to 2,075.21. On the flip side, Taiwan Weighted increased 16.55 points or 0.17% to 9,554.56.

European markets were trading mostly in green; Germany’s DAX increased 11.25 points or 0.1% to 11,521.09 and UK’s FTSE 100 increased 15.92 points or 0.22% to 7,188.07. On the flip side, France’s CAC decreased 1.48 points or 0.03% to 4,776.60.