Benchmarks trade jubilantly in early deals; Nifty regains 9,350 mark

Indian equity benchmarks have made a positive start and are trading jubilantly in early deals, with frontline gauges recapturing their crucial 9,350 (Nifty) and 30,100 (Sensex) levels. Sentiments remained up-beat with the Indian Meteorological Department (IMD) predicting a ‘normal’ monsoon this calendar and expecting 100 per cent rainfall instead of 96 per cent as predicted earlier. It has said that recent development on El-Nino indicates that the monsoon could be normal this year and it could reach 100 per cent of the long period average. Some support also came with commerce & industry minister Nirmala Sitharaman stating that India’s manufacturing policy will soon be overhauled with the objective of creating more jobs in an environment where technology is rapidly replacing labour.

Global cues too remained supportive with Asian counters trading mostly in green at this point of time, with dissipating concerns over North Korea’s nuclear program. The Chinese market too was trading higher though the producer price index rose less than forecast in April at 6.4 percent from a year earlier. The US markets made a mixed closing in last session, as the traders remained on sidelines ahead of key economic data releases. Hope that US President Donald Trump will cut corporate and personal taxes too remained in focus for investors.

Back home, there was broad based buying witnessed in the markets and apart from the blue chips, the broader markets too participated strongly in the rally. The market breadth remained in favour of advances, as there were 1,420 shares on the gaining side against 588 shares on the losing side while 87 shares remain unchanged.

The BSE Sensex is currently trading at 30163.26, up by 230.01 points or 0.77% after trading in a range of 29987.44 and 30183.95. There were 27 stocks advancing against 3 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index surged 0.92%, while Small cap index was up by 0.82%.

The top gaining sectoral indices on the BSE were FMCG up by 1.74%, Telecom up by 1.14%, Capital Goods up by 1.14%, Power up by 1.09% and Auto up by 0.94%, while IT down by 0.06% was the lone losing index on BSE.

The top gainers on the Sensex were Hindustan Unilever up by 4.09%, Mahindra & Mahindra up by 2.19%, Bharti Airtel up by 1.65%, HDFC up by 1.42% and ITC up by 1.36%. On the flip side, Wipro down by 0.73%, TCS down by 0.67% and GAIL India down by 0.01% were the few losers.

Meanwhile, the global ratings agency, Moody’s Investors Service in its latest report has termed ‘credit positive’ the measures taken by the government and Reserve Bank of India (RBI) to resolve the NPA issue and has said that the government’s ordinance to amend the Banking Regulation Act will improve the efficacy of bad loans resolution. However, it also said that the measures do not address the lack of capital at the state-owned banks that has prevented them from writing down non-performing loans (NPLs) to realistic levels and expects NPL resolution to be a relatively long drawn out process.

The ratings agency further said that the reason for the limited success of the various regulatory measures so far was that they did not address related structural factors. It said the operating environment in the key stressed sectors remained challenging and the market value of stressed assets was typically much lower than what the banks currently reflect on their balance sheets. Hence, successful resolution, either through debt relief or asset sale, will require banks to take a big hit when they write-down the value of these assets to market value. However, it said that state-owned banks’ weak capital levels mean that they do not have the capacity to take these sort of write-downs.

Moody’s said ‘our base case remains that state-owned banks will use most of their operating profits over the next two years to gradually increase loan loss coverage from the current low levels. It is only at that stage that they will be in a position to appropriately mark down NPLs and clean up their balance sheets.’ Besides, the bad loans of banks are estimated at over Rs 8 lakh crore.

Recently, the government through an ordinance provided the RBI with greater powers to intervene in the resolution of NPLs. This ordinance was followed by a RBI notification lowering the threshold lenders in Joint Lenders' Forum (JLF) to approve a resolution proposal, to 60 per cent from 75 per cent of lenders by value, and to 50 per cent from 60 per cent of lenders by number.

The CNX Nifty is currently trading at 9381.20, up by 64.35 points or 0.69% after trading in a range of 9336.00 and 9386.85. There were 41 stocks advancing against 10 stocks declining on the index.

The top gainers on Nifty were Hindustan Unilever up by 4.25%, Aurobindo Pharma up by 2.62%, Mahindra & Mahindra up by 1.98%, Bharti Airtel up by 1.61% and ITC up by 1.44%. On the flip side, Wipro down by 0.84%, Ultratech Cement down by 0.79%, TCS down by 0.69%, Indian Oil Corporation down by 0.53% and HCL Tech down by 0.52% were the top losers.

Asian markets were trading mostly in green; Shanghai Composite increased 8.11 points or 0.26% to 3,088.63, Nikkei 225 rose 25.45 points or 0.13% to 19,868.45 and Hang Seng was up by 199.24 points or 0.8% to 25,088.27.

On the flip side, KOSPI Index decreased 22.19 points or 0.97% to 2,270.57 and Jakarta Composite was down by 3.79 points or 0.07% to 5,693.27.