Benchmarks make gap-down opening on feeble global cues

Pressurized by feeble global cues, Indian equity benchmarks have made a gap-down start and are trading with a cut of over half a percent with frontline gauges breaching their crucial 29,300 (Sensex) and 9,100 (Nifty) levels. Traders remained cautious with government continuing the clampdown on cash transactions, proposing to further tighten payment norms by capping cash transactions at Rs 2 lakh. Finance Minister in all has moved 40 amendments to the Finance Bill 2017. Meanwhile, the government has said it is not possible to pinpoint the impact of demonetisation on GDP as economic growth is contingent on a number of factors.

On the global front, all the Asian counters were trading in red at this point of time, as concern continued amid uncertainty over prospects for the U.S. president’s policies. The US markets suffered sharp slump in the last session on uncertainty about the fate of the Republican plan to repeal and replace Obamacare ahead of an anticipated vote on Thursday.

Back home, selling was both brutal and wide-based as none of sectoral indices on BSE, barring IT, were spared. Counters, which featured in the list of worst performers, include telecom, metal and consumer durables. The broader indices too were reeling under pressure, while the market breadth on the BSE was negative; there were 580 shares on the gaining side against 1,325 shares on the losing side while 106 shares remain unchanged.

The BSE Sensex is currently trading at 29282.21, down by 203.24 points or 0.69% after trading in a range of 29263.74 and 29341.41. There were 4 stocks advancing against 26 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index declined 0.88%, while Small cap index was down by 0.48%.

The lone gaining sectoral index on the BSE was IT up by 0.15%, while Telecom down by 1.65%, Metal down by 1.36%, Consumer Durables down by 1.12%, Auto down by 1.07% and Capital Goods down by 0.99% were the top losing indices on BSE.

The few gainers on the Sensex were Axis Bank up by 1.23%, Power Grid up by 0.57%, Infosys up by 0.19% and Wipro was up by 0.03%. On the flip side, Bharti Airtel down by 2.73%, Mahindra & Mahindra down by 1.99%, ICICI Bank down by 1.93%, Tata Motors down by 1.43% and SBI was down by 1.10% were the top losers.

Meanwhile, global rating agency, Moody's Investors Service in its latest report has said that non-banking financial companies (NBFCs) in India will demonstrate broadly stable asset quality, but they are likely to see a spurt in delinquency levels over the next 1-2 quarters with note ban affecting their collections across asset classes. It also said the growth in loans against property has outpaced overall retail credit growth in recent years, but relatively loose underwriting practices, combined with intensifying competition, will translate into higher asset quality risk for this segment.

As per the report, over the past three years, NBFCs have gained some market share in the origination of retail lending on the back of faster growth exhibited by such entities when compared to banks. It stated that this is particularly the case when compared to public sector banks, which face significant challenges on their asset quality and overall solvency profiles.

Moody’s expects that competitive pressures from the banking sector will remain intense as banks are increasing targeting of the retail segment to offset weakness in their corporate lending. In addition, retail lending, particularly housing loans, is more capital efficient for the banks. While the NBFCs’ capitalization levels are adequate with average Tier 1 ratios in excess of 14 percent, capital generation will lag credit growth. Therefore it said that access to external capital will hold the key in sustaining the NBFCs’ growth momentum.

The report said that NBFCs' funding profiles will broadly remain stable, and funding costs should moderate gradually, given the reduction in systemic rates. Also, NBFCs will maintain well-matched asset- liability profiles, despite their weak funding profiles, a situation which will protect them against downside risks. Additionally, the NBFCs’ profitability and capital, as well as funding and liquidity levels, will stay broadly stable.

The CNX Nifty is currently trading at 9057.10, down by 64.40 points or 0.71% after trading in a range of 9041.10 and 9072.90. There were 6 stocks advancing against 45 stocks declining on the index.

The top gainers on Nifty were HCL Tech up by 1.33%, Axis Bank up by 1.22%, Power Grid up by 0.57%, Zee Entertainment up by 0.46% and Infosys was up by 0.12%. On the flip side, Bharti Airtel down by 2.83%, Hindalco down by 2.52%, Mahindra & Mahindra down by 1.90%, ICICI Bank down by 1.87% and BHEL was down by 1.54% were the top losers.

Asian markets were trading in red; Nikkei 225 declined 377.93 points or 1.94% to 19,077.95, Hang Seng dropped 341.98 points or 1.39% to 24,251.14, Taiwan Weighted fell 92.05 points or 0.92% to 9,880.44, Jakarta Composite decreased 33.53 points or 0.6% to 5,509.56, Shanghai Composite shed 23.66 points or 0.73% to 3,237.95, FTSE Bursa Malaysia KLCI slipped 15.39 points or 0.88% to 1,739.28 and KOSPI Index was down by 14.18 points or 0.65% to 2,164.20.