Markets extend gains with a modestly positve start

The Indian markets have made a positive start on Friday morning despite mixed regional cues, though the US markets ended modestly in green but the local markets were drawing strength from the inline expected exit poll results from five states that went for assembly election recently. The predictions of several exit polls, that was made public on Thursday, suggested that the Bharatiya Janata Party (BJP) will either comfortably cross the majority mark of 202 in the 403-seat UP Assembly, or come close to it. In other three states of Goa, Uttrakhand and Manipur too, some of the exit polls gave edge to BJP, with only setback likely to be Punjab where the ruling SAD-BJP combine was seen decimated by most of the exit poll results. Traders were also eyeing the second leg of Budget session of the parliament where the Prime Minister Narendra Modi said he expects a breakthrough on Goods and Services Tax (GST) before the session concludes next month. There was some cautiousness in the market with rating agency ICRA stating that higher oil and gold imports will end the four-year trend of moderation in the current account deficit (CAD) in 2017-18, and the gap will widen to $ 30 billion or 1.2 percent of the GDP. Also, the Indian rupee was trading little changed against the US dollar in a thin market ahead of the final results of the assembly elections.

The broader markets were holding their early gains up by about half a percent, while on sectoral front IT and technology stocks have taken the lead after the government on over H1B visa said that the steps taken by the US were aimed at illegal immigration and it would continue to engage with the Donald Trump administration on the issue.

The BSE Sensex is currently trading at 28986.33, up by 57.20 points or 0.20% after trading in a range of 28974.54 and 29076.63. There were 25 stocks advancing against 5 stocks declining on the index.

The broader indices too were trading in green; the BSE Mid cap index was up by 0.32%, while Small cap index was up by 0.49%.

The top gaining sectoral indices on the BSE were IT up by 0.66%, Consumer Durables up by 0.65%, Realty up by 0.63%, TECK up by 0.63% and Capital Goods up by 0.52%, while Oil & Gas down by 0.23% and Energy down by 0.18% were the only losing indices on BSE.

The top gainers on the Sensex were Hero MotoCorp up by 1.28%, Adani Ports & SEZ up by 0.80%, Infosys up by 0.75%, TCS up by 0.69% and Wipro up by 0.68%. On the flip side, Power Grid down by 0.98%, GAIL India down by 0.59%, ONGC down by 0.40%, Reliance Industries down by 0.26% and Sun Pharma down by 0.06% were the top losers.

Meanwhile, Fitch Ratings, the global ratings agency in its latest report has said that few Indian banks will face the risk of skipping coupon payments on their capital instruments over the next couple of years, irrespective of the Reserve Bank of India (RBI) easing up rules and heavy capital injection into state-run banks by government. The rating agency though did not name any lender, but warned that mid-sized banks are the most at risk of breaching capital triggers.

As per the report, distributable reserves at small-to mid-sized state-run banks were down by one-third in the April-December 2016 period compared to 2014-15 which reflects persistent losses and weak internal capital generation. It added that five state-run banks suffered losses which were equivalent to over 30 percent of distributable reserves in the period. It also said that in a recent development the RBI allowed banks to make AT1 coupon payments from statutory reserves, taking a step towards easing pressure on the banks for the purpose of servicing coupon payments.

On the government's capital support, the ratings agency said that some banks are also at risk of missing coupon payments on capital instruments as a result of breaching minimum capital requirements. Total capital adequacy ratio of 12 banks was at or below the 11.5 percent minimum that will be a prerequisite for payment of coupons on both legacy and Basel-III AT1 capital instruments by 2018-19, and 11 banks had core equity ratios at or below the 8 percent minimum that will be required to make coupon payments on AT1 instruments by fiscal 2019.

Fitch also said that Indian banks need around $90 billion fresh capital by 2019 to meet Basel III standards and government owned banks account for around 80 percent of that. Government owned banks are constrained in raising new equity due to heavy discounts on valuations while limited market depth remains a hurdle to issuing capital instruments domestically. It added that the $10.4 billion that the government has earmarked for capital injections into state-run banks is unlikely to be enough to support balance-sheet growth.

The CNX Nifty is currently trading at 8947.15, up by 20.15 points or 0.23% after trading in a range of 8944.20 and 8975.70. There were 39 stocks advancing against 12 stocks declining on the index.

The top gainers on Nifty were Ultratech Cement up by 1.18%, HCL Tech up by 1.15%, BHEL up by 0.95%, Idea Cellular up by 0.87% and Ambuja Cement up by 0.84%. On the flip side, Power Grid down by 1.00%, GAIL India down by 0.62%, Grasim Industries down by 0.57%, Hindalco down by 0.48% and BPCL down by 0.25% were the top losers.

The Asian markets were showing mixed trend, KOSPI Index increased by 4.87 points or 0.23% to 2,095.93, Nikkei 225surged by 251.29 points or 1.3% to 19,569.87 and Hang Seng was up slightly by 4.76 points or 0.02% to 23,501.20.

On the other hand, Taiwan Weighted declined by 48.22 points or 0.5% to 9,610.39, Jakarta Composite was lower by14.74 points or 0.27% to 5,387.65, FTSE Bursa Malaysia KLCI decreased by 2.26 points or 0.13% to 1,715.16 and Shanghai Composite was tad lower by 0.86 points or 0.03% to 3,215.89.