Indian benchmarks trade flat with positive bias

Indian equity indices continued to trade flat, with Sensex hovering around 31,100 level and Nifty maintaining its momentum above 9600 level. Investors are keeping a close watch on the arrival of monsoon rains, which is expected to hit the southern Kerala coast by the end of the month. The June-September southwest monsoon is critical for the country's agriculture because a considerable part of the country's farmland is dependent on the rains for irrigation. Sentiments got some support with World Bank’s expectation that India, the fastest growing major economy in the world, will grow at 7.2 per cent in the current fiscal and further up to 7.7 per cent by 2019-20 on strong fundamentals, reform momentum and improving investment scenario. It noted that demonetisation in November 2016 caused a slight disruption to India’s growth recovery, following a favourable monsoon last fiscal, but things seem to be bettering. However, weak trend in global markets, continued foreign fund outflows and muted earnings posted by some blue-chip companies, have limited the gains. Foreign portfolio investors (FPIs) sold shares worth Rs 709.97 crore, as per provisional data from the stock exchanges. Meanwhile, India's capital market regulator has proposed to tighten rules on offshore derivative instruments (ODI) by imposing ‘regulatory fees’ and prohibiting the sales of such products unless they are issued for hedging purposes.

On the global front, concerns about a Greek bailout, early Italian elections and comments by the European Central Bank chief about the need for continued stimulus, sapped risk appetite, weighing on Asian stocks and lifting safe havens including the yen and gold, though trading was thin with several markets closed for holidays. Sentiments remained downbeat on the report that North Korean leader Kim Jong-un supervised the test of a new ballistic missile controlled by a precision guidance system and ordered the development of more powerful strategic weapons. Markets are awaiting economic indicators including French first quarter gross domestic product, German inflation data for May, and US inflation for April later in the session. Meanwhile, US crude oil prices rose towards $50 per barrel as a strong start to the summer driving season in the United States suggested strong fuel demand in months ahead.

Back home, stocks from Healthcare, Utilities and Basic Materials counters were supporting the markets’ uptrend, while those from Realty, Capital Goods and FMCG counters were adding to the underlying cautious undertone. In scrip specific development, Sadbhav Engineering surged after the company reported a rise of 95.36% in its net profit at Rs 68.21 crore for the quarter ended March 31, 2017 as compared to Rs 34.92 crore for the same quarter in the previous year. Moreover, Lyka Labs gained after the company entered into out-licensing / technology transfer deal with a US based Generics Company. 

The market breadth remained pessimistic, as there were 937 shares on the gaining side against 1425 shares on the losing side, while 127 shares remained unchanged

The BSE Sensex is currently trading at 31152.26, up by 42.98 points or 0.14% after trading in a range of 31064.04 and 31220.38. There were 21 stocks advancing against 9 stocks declining on the index.

The broader indices were trading mixed; the BSE Mid cap index was up by 0.33%, while Small cap index down by 0.03%.

The top gaining sectoral indices on the BSE were Healthcare up by 1.75%, Utilities up by 0.75%, Basic Materials up by 0.63%, IT up by 0.41% and Bankex up by 0.41%, while Realty down by 1.14%, Capital Goods down by 0.83%, FMCG down by 0.79%, Consumer Durables down by 0.76% and Telecom down by 0.41% were the top losing indices on BSE.

The top gainers on the Sensex were NTPC up by 4.06%, Dr. Reddy’s Lab up by 2.62%, Lupin up by 2.39%, ICICI Bank up by 2.30% and GAIL India up by 2.03%. On the flip side, Power Grid down by 2.13%, Coal India down by 2.05%, Hindustan Unilever down by 1.35%, ITC down by 1.04% and HDFC down by 0.84% were the top losers.

Meanwhile, amid high levels of stressed assets in the Indian banking system, Niti Aayog Vice Chairman Arvind Panagariya has said that the government does not have any immediate plans to create a bad bank to resolve the bad loans issue. He said “Immediately, I don`t see any plans to create a bad bank. In the three-year agenda, we suggested that let us do it through private sector asset reconstruction companies (ARCs) instead of bad bank.”

Referring to the non-performing asset (NPA) ordinance which empowers Reserve Bank of India (RBI) to direct banks to initiate insolvency process against any defaulter, Arvind Panagariya said that it has opened the doors to genuine resolution of this problem. He also said that each of these NPAs will now be put on a path to resolution as there is no other way to resolve the problem. He further said that the first set of 45-50 bad assets are likely to be taken up for resolution in the next six months and added not that they will be resolved, but at least they will be taken out of the books of banks.

Suggesting that the government needs to increase the amount for bank recapitalisation beyond Rs 70,000 crore allocated for four years, Panagariya said “We do a three-year fiscal framework for the country, which is a bit more ambitious than Rs 70,000 crore currently allocated. Fiscally, it is feasible to move up that figure a bit.” He further said that eventually lot of recapitalisation needs to happen, but the banks too need to take initiative.

The CNX Nifty is currently trading at 9610.25, up by 5.35 points or 0.06% after trading in a range of 9581.20 and 9631.60. There were 32 stocks advancing against 19 stocks declining on the index.

The top gainers on Nifty were Aurobindo Pharma up by 8.90%, NTPC up by 4.03%, Hindalco up by 2.76%, Dr. Reddy’s Lab up by 2.72% and ICICI Bank up by 2.27%. On the flip side, BPCL down by 3.49%, Power Grid down by 2.32%, Zee Entertainment down by 2.02%, Bharti Infratel down by 1.94% and Coal India down by 1.89% were the top losers.

Asian markets were trading mostly in red; Nikkei 225 decreased 0.1%, KOSPI Index shed 0.46% and FTSE Bursa Malaysia KLCI was down by 0.04%. On the flip side, Jakarta Composite was up by 0.2%.