Benchmarks continue to hover in negative zone

Indian equity benchmarks continued to hover in a negative zone in late afternoon session ahead of macroeconomic data - industrial production numbers for March and inflation data for April based on consumer price index (CPI) - to be announced after market hours today. Some cautions also prevailed with Fitch Ratings’ latest report that Indian authorities are making a more concerted push to clean up bad loans in the banking sector but the move would impinge on banks' profitability in the short-term and it is possible that further losses will push some weaker banks closer to breaching minimum capital requirements, unless they receive pre-emptive capital injections. Weak trade in other Asian markets and heavy selling pressure in Banking, Basic Materials and Healthcare stocks, too added to the downward trajectory. Traders unseen Finance Secretary Ashok Lavasa’s statement that India can clock a GDP growth of over 7.5 percent in the fiscal 2017-18 and the country's macro-economic fundamentals, including fiscal deficit and inflation, are all very sound. Meanwhile, the Central Board of Direct Taxes (CBDT) released the draft Income Computation and Disclosure Standard (ICDS) on real estate transactions for public consultation, requesting stakeholders to submit their comments on draft by May 26, 2017.

On the global front, European markets were trading in green as investors reacted to the latest batch of corporate earnings, while oil prices extended gains on renewed optimism over potential production cuts. However, Asian markets were trading in red. Back home, in scrip specific development, Reliance Infrastructure was trading higher after the company won Rs 2950 crore arbitration award against DMRC.

The BSE Sensex is currently trading at 30153.48, down by 97.50 points or 0.32% after trading in a range of 30137.84 and 30299.74. There were 11 stocks advancing against 19 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 0.82%, while Small cap index was down by 0.74%.

The top gaining sectoral indices on the BSE were IT up by 0.96%, TECK up by 0.50% and Auto up by 0.01%, while Bankex down by 0.86%, Healthcare down by 0.82%, Consumer Disc down by 0.63%, Basic Materials down by 0.62% and Utilities down by 0.62% were the top losing indices on BSE.

The top gainers on the Sensex were Infosys up by 1.92%, Hero MotoCorp up by 1.77%, Coal India up by 0.87%, Tata Motors up by 0.77% and Sun Pharma up by 0.76%. On the flip side, Asian Paints down by 2.81%, Axis Bank down by 2.78%, ICICI Bank down by 1.60%, HDFC down by 1.18% and GAIL India down by 1.02% were the top losers.

Meanwhile, acknowledging India’s efforts to deal with the rising bad loan problems, the credit rating agency, Fitch ratings has said that the Indian authorities are taking more concerted push in solving the bad loan problems, though it also said that the move may impinge on banks’ profitability in the short-term and it is possible that further losses will push some weaker banks closer to breaching minimum capital requirements, unless they receive pre-emptive capital injections.

In its latest report ‘Prospects for bad Loan clean-Up at Indian banks improving’, the agency noted that asset resolution will be a dominant theme in the sector over the next few years. Besides, it also said that in case of some of the weakest small- to medium-sized state banks, the further losses could pressure them to shrink, or to eventually exit the system by entering into forced mergers, adding that the authorities should manage this in a way that is least disruptive for the financial system, but the process will entail risks for investors of capital securities, at least in the case of weakest banks.

Fitch ratings further said that the increased powers given to the Reserve Bank of India (RBI) to clean up asset quality, and to intervene in banks at an earlier stage when risks build, represents an important positive step toward ensuring a healthy banking system in the future. It added that RBI direction that pushes banks into initiating insolvency processes against borrowers could help to break a deadlock caused by concerns among bank officials that decisions on troubled borrowers will attract investigation by anti-corruption agencies. However, it also pointed that there will be significant implementation challenges, but asset resolution is likely to strengthen over the next few years.

The CNX Nifty is currently trading at 9381.80, down by 40.60 points or 0.43% after trading in a range of 9377.00 and 9437.75. There were 18 stocks advancing against 32 stocks declining on the index, while 1 stock remained unchanged.

The top gainers on Nifty were Kotak Mahindra Bank up by 2.30%, Infosys up by 1.91%, Hero MotoCorp up by 1.88%, Tech Mahindra up by 1.68% and Coal India up by 1.02%. On the flip side, Yes Bank down by 5.41%, Zee Entertainment down by 3.49%, Axis Bank down by 2.79%, Asian Paints down by 2.78% and Indiabulls Housing Finance down by 2.60% were the top losers.

Asian markets were trading mostly in red; Nikkei 225 decreased 77.65 points or 0.39% to 19,883.90, Taiwan Weighted slipped 14.66 points or 0.15% to 9,986.82, KOSPI Index decreased 10.35 points or 0.45% to 2,286.02 and FTSE Bursa Malaysia KLCI was down by 0.06 points or 0% to 1,775.33. On the flip side, Jakarta Composite increased 21.72 points or 0.38% to 5,674.72, Shanghai Composite surged 22.01 points or 0.72% to 3,083.51 and Hang Seng was up by 30.79 points or 0.12% to 25,156.34.

All the European markets were trading in green; France’s CAC increased 5.42 points or 0.1% to 5,388.84, UK’s FTSE 100 rose 17.88 points or 0.24% to 7,404.51 and Germany’s DAX was up by 27.59 points or 0.22% to 12,738.65.