Weak trade persist in late morning session

Indian equity benchmarks continued their weak trade in late morning session on account of selling in frontline blue chip counters taking cues from regional counterparts. The global weakness is on account of North Korea missile test and concerns over Donald Trump’s tax promises. The rupee opened lower against dollar on account of buying of American currency by banks and importers amid bleak global cues. Traders remained cautious on reports that the government wants to tighten even further the proposed Budget measure aimed at discouraging black money through restrictions on cash transactions to Rs 2 lakh from Rs 3 lakh. The government also plans to make inclusion of the Aadhaar ID mandatory in applications for permanent account number (PAN) cards. Meanwhile, the government said that it is not possible to pinpoint the impact of demonetization on GDP as economic growth is contingent on a number of factors. Traders were seen selling in Metal, Consumer Durables and Telecom sector stocks. In scrip specific development, Nila Infrastructures was trading in green as the company has signed two pacts with Gujarat State Road Transport Corporation (GSRTC) for development of bus terminals at Amreli and Modasa in the state. Sphere Global Services was trading in green after the company along with its Indian subsidiary - Adroit Infotech has bagged work orders amounting to Rs 10 crore.

On the global front, Asian shares were trading in red, as growing doubts about US President Donald Trump’s economic growth agenda prompted investors to dump risky assets and to rush to safe havens such as gold and government bonds. Back home, the NSE Nifty and BSE Sensex were trading below the psychological 9,050 and 29,300 levels respectively. The market breadth on BSE was negative in the ratio of 678:1549, while 139 scrips remained unchanged.

The BSE Sensex is currently trading at 29236.90, down by 248.55 points or 0.84% after trading in a range of 29219.59 and 29341.41. There were 2 stocks advancing against 28 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 1.07%, while Small cap index was down by 0.63%.

The losing sectoral indices on the BSE were Metal down by 1.71%, Consumer Durables down by 1.65%, Telecom down by 1.59%, Basic Materials down by 1.32% and Auto down by 1.29%, while there were no gainers.

The top gainers on the Sensex were Axis Bank up by 1.68% and Power Grid up by 0.05%.

On the flip side, Bharti Airtel down by 2.67%, Tata Motors down by 1.82%, ICICI Bank down by 1.63%, Asian Paints down by 1.56% and Mahindra & Mahindra down by 1.49% 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 9042.95, down by 78.55 points or 0.86% after trading in a range of 9036.15 and 9072.90. There were 4 stocks advancing against 46 stocks declining, while 1 stock remained unchanged on the index.

The top gainers on Nifty were Axis Bank up by 1.72%, HCL Technologies up by 0.67%, Idea Cellular up by 0.11% and Power Grid up by 0.10%.

On the flip side, Hindalco down by 2.95%, Bharti Airtel down by 2.60%, BHEL down by 2.49%, Tata Motors down by 1.94% and Ultratech Cement down by 1.92% were the top losers.

The Asian markets were trading in red; Nikkei 225 decreased 366.24 points or 1.88% to 19,089.64, Hang Seng decreased 355.79 points or 1.45% to 24,237.33, Taiwan Weighted decreased 68.68 points or 0.69% to 9,903.81, Jakarta Composite decreased 30.07 points or 0.54% to 5,513.03, Shanghai Composite decreased 25 points or 0.77% to 3,236.61, FTSE Bursa Malaysia KLCI decreased 15.08 points or 0.86% to 1,739.59 and KOSPI Index decreased 12.21 points or 0.56% to 2,166.17.