Benchmarks trade flat ahead of Fed policy decision

Indian equity benchmarks were hovering near the neutral lines in afternoon session as traders’ maintained cautious approach ahead of the US Federal Reserve monetary policy review, which is widely perceived to raise policy interest rates by 25 bps. Domestic sentiment was also hit as retail inflation rose to a 4-month high of 3.65 per cent in February and that of wholesale prices shot up to a 39-month high of 6.55 per cent. However, some support came with rupee strength which was up by 29 paise to 65.53 against the dollar and hit its highest level since November 2015 in early trade. In scrip specific development, Bharat Heavy Electricals (BHEL) was up by over three percent after commencing commercial operation of its first 800 MW unit - highest-rating coal-based supercritical thermal power plant.

On the global front, Asian markets were trading in red as investors took profits before a US Federal Reserve policy meeting that could signal how much monetary tightening to expect during the remainder of 2017, with an immediate rate increase fully priced in by markets.

The BSE Sensex is currently trading at 29429.63, down by 13.00 points or 0.04% after trading in a range of 29402.52 and 29500.08. There were 15 stocks advancing against 15 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.82%, while Small cap index was up by 0.63%.

The top gaining sectoral indices on the BSE were Telecom up by 1.42%, Consumer Durables up by 0.86%, Auto up by 0.61%, Energy up by 0.60% and Consumer Disc up by 0.59%, while IT down by 1.64%, TECK down by 1.12% and Utilities down by 0.14% were the losing indices on BSE.

The top gainers on the Sensex were Reliance Industries up by 1.44%, SBI up by 1.18%, Tata Motors up by 0.82%, Hero MotoCorp up by 0.79% and Adani Ports &SEZ up by 0.73%. On the flip side, Infosys down by 2.19%, TCS down by 2.04%, Hindustan Unilever down by 1.38%, Wipro down by 0.74% and Larsen & Toubro down by 0.52% were the top losers.

Meanwhile, supporting the idea of a 'national bad bank', Chief Economic Adviser Arvind Subramanian has said that the government needs to bail out troubled large corporate borrowers at time, though it may lead to the allegations of corruption and crony capitalism. He also emphasized that at times there is no other way to solve the problem but to write off the mountain of debt.

In order to tackle the mounting Non Performing Assets (NPAs), there have been suggestions from various quarters to set up a 'bad bank'. Subramanian said that it could be a state-owned entity to collect banks' sour assets and try to resolve the stress, which may include writing off the bad loans where there is no scope of revival. He also said that it is a very difficult problem and not unique to India, and added that no political system finds it easy to forgive debt to the private sector, especially to big companies.

CEA further said that political system has to be able to do that and bad bank is one way of trying to do that. He also said that the bad bank will adopt all other options of resolution, including changing the promoters and management as well. He noted that there is a twin balance sheet problem, of stress in the corporate sector as well as the banks due to bad assets, which needs to be resolved so as to facilitate credit supply to the economy. 

In the financial year 2015-16, the non-performing assets (NPAs) or bad loans in the banking system, mainly state-owned lenders, more than doubled to Rs 6.95 lakh crore or over 9.3 per cent from close to Rs 2.97 lakh crore in 2012-13. As of December 2016, the total stressed assets, including restructured accounts, amounted to more than 15 per cent of the total advances.

The CNX Nifty is currently trading at 9090.15, up by 3.15 points or 0.03% after trading in a range of 9076.25 and 9105.35. There were 29 stocks advancing against 22 stocks declining on the index.

The top gainers on Nifty were Idea Cellular up by 9.90%, Bank of Baroda up by 3.42%, BHEL up by 3.13%, Grasim Industries up by 2.65% and Reliance Industries up by 1.42%. On the flip side, Infosys down by 2.34%, TCS down by 2.24%, HCL Tech. down by 1.33%, Hindustan Unilever down by 1.31% and Wipro down by 0.84% were the top losers.

Asian markets were trading in red; Nikkei 225 decreased 32.12 points or 0.16% to 19,577.38, Hang Seng was down by 20.67 points or 0.09% to 23,807.28, FTSE Bursa Malaysia KLCI shed 6.15 points or 0.36% to 1,716.32, Taiwan Weighted declined 3.9 points or 0.04% to 9,740.31, Shanghai Composite slipped 2.56 points or 0.08% to 3,236.77, KOSPI Index decreased 0.78 points or 0.04% to 2,133.00 and Jakarta Composite was down by 0.27 points or 0.01% to 5,431.31.