Post Session: Quick Review

Indian equity benchmarks traded on a weak note throughout the day and ended in red as investors lightened their position ahead of the outcome of central bank’s policy meet. The benchmark indices retreated from four-month highs hit in the previous session on account of selling in Metal and Auto counters. Investors were eyeing the RBI policy review meet with a hope for a cut in the interest rate on the backdrop of easing inflation and 3.2% fiscal deficit target. The Indian rupee weakened against the US dollar, snapping a nine-day rally, tracking losses in the Asian currencies markets. A private poll showed that Indian rupee will reverse recent gains and sink to a record low in the coming year on expectations for a rise in the dollar even though US President Donald Trump has made clear his dislike of a strong currency. The equity benchmarks made a sluggish start and traded slightly in red in early deals, traders remained concerned 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. Noting that the rupee had witnessed a massive devaluation in 2013, NITI Aayog Vice Chairman Arvind Panagariya said that a much bigger shock was administered in November last year both due to demonetisation and more importantly due to the events in the US which led to capital leaving virtually all emerging markets. Panagariya added that in implementing demonetisation what did not go as planned was that ‘a lot of bank officials really played it in the way that they should not have played it’ and it was on a scale not anticipated.

On the global front, Asian markets ended mostly lower, as global cues dampened sentiments and as economic and political fears sent investors seeking shelter in the yen. China’s foreign exchange reserves unexpectedly fell below the closely watched $3 trillion level in January for the first time in nearly six years, though tighter regulatory curbs appeared to making some progress in slowing capital outflows. Markets in Europe were hovering above neutral line as earnings and data continue to be the main focus for investors. European corporate earnings offered investors some cheer but caution was fueled by the growing unpredictability of the French presidential election race.

Back home, select fertilizer companies closed in green as the Finance Ministry granted Rs 10,000 crore to Fertiliser Ministry under special banking arrangement to provide loan to cash-starved fertilizer companies at reasonable rates.

The BSE Sensex ended at 28328.68, down by 110.60 points or 0.39% after trading in a range of 28239.12 and 28483.41. There were 10 stocks advancing against 20 stocks declining on the index. (Provisional)

The broader indices ended in red; the BSE Mid cap index was down by 0.15%, while Small cap index was down by 0.04%. (Provisional)

The top gaining sectoral indices on the BSE were Capital Goods up by 1.06%, Power up by 0.39%, Consumer Durables up by 0.30%, IT up by 0.17% and TECK up by 0.01%, while Metal down by 1.00%, Auto down by 0.86%, Oil & Gas down by 0.75%, Realty down by 0.29% and PSU down by 0.25% were the losing indices on BSE. (Provisional)

The top gainers on the Sensex were Infosys up by 1.11%, Larsen & Toubro up by 1.02%, Maruti Suzuki up by 0.89%, Asian Paints up by 0.52% and HDFC up by 0.25%. (Provisional)

On the flip side, Tata Motors down by 3.58%, ONGC down by 2.71%, Coal India down by 2.35%, Adani Ports & Special Economic Zone down by 1.78% and Lupin down by 1.65% were the top losers. (Provisional)

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 ended at 8770.75, down by 30.30 points or 0.34% after trading in a range of 8741.05 and 8809.30. There were 14 stocks advancing against 37 stocks declining on the index. (Provisional)

The top gainers on Nifty were BHEL up by 5.07%, BPCL up by 1.74%, Larsen & Toubro up by 1.20%, Infosys up by 1.06% and Bank of Baroda up by 1.03%. (Provisional)

On the flip side, Tata Motors down by 3.57%, Tata Motors - DVR down by 3.41%, ONGC down by 2.71%, Coal India down by 2.32% and Hindalco down by 1.95% were the top losers. (Provisional)

The European markets were trading in green; UK’s FTSE 100 increased 38.6 points or 0.54% to 7,210.75, Germany’s DAX increased 39.61 points or 0.34% to 11,549.45 and France’s CAC increased 2.01 points or 0.04% to 4,780.09.

Asian equity markets ended mostly lower on Tuesday as economic and political uncertainty gripped global markets. Given the worries about the political landscape in Europe and lingering uncertainty surrounding Donald Trump's fiscal and trade policies, investors were apprehensive about holding riskier assets. Safe-haven assets such as the Japanese yen and gold gained ground as risk appetite waned. Japanese shares ended lower as caution crept in ahead of a meeting between Japanese Prime Minister Shinzo Abe and US President Donald Trump due this weekend. Chinese shares ended down as the People's Bank of China refrained from adding cash into the system for a third straight session, underlining its tightening bias to deflate potential credit bubbles in the world's second-largest economy. Trading sentiment weakened further ahead of data expected to show that foreign exchange reserves fell for the seventh straight month by about $10.5 billion to $3 trillion in January.