Benchmarks trade flat in late morning session

Indian equity benchmarks continued their lackluster trade gyrating around neutral line in late morning session. The rupee opened higher against dollar after weak US inflation data overshadowed an interest hike by the Federal Reserve. The Federal Reserve raised interest rates on Wednesday for the second time in three months and said it would begin cutting its holdings of bonds and other securities this year, signaling its confidence in a growing US economy and strengthening job market. The sentiments were under pressure after a foreign brokerage firm highlighted that the likely increase in farm loan waivers will dampen sentiment on PSU banks, NBFCs. The agri stress indicates that Tamil Nadu, Karnataka and Haryana may follow up with farm loan waivers, taking the total farm loan waivers to about $28 billion from $10 billion. The report added that assuming these are staggered over five years, the annual rise in consolidated fiscal deficit works out to 25 bps of GDP. Else, other developmental expenditure would be compromised, potentially softening a capex cycle upturn. Meanwhile, four major lenders SBI, PNB, Axis Bank and HDFC Bank voiced concerns over stress in the telecom sector and flagged possibility of defaults by debt-laden operators at a meeting with an inter-ministerial group. The bankers expressed apprehensions on the financial viability of the telecom companies and their capacity to service the huge debt that they carry on their books. Bankers told the government that telecom companies are on the verge of defaults as competitive pressures, post the launch of Reliance Jio in September last year, have created a severe financial stress on the business dynamics of the industry.

Traders were seen piling up position in Realty, Healthcare and Telecom stocks, while selling was witnessed in Oil & Gas, PSU and Bankex stocks. In scrip specific development, Wipro was trading in green as it has won IT Applications Managed Services engagement with Finnish company, Valmet, a leading global developer and supplier of technologies, automation and services for the pulp, paper, and energy industries. Valmet has selected Wipro as the partner for supporting its renewed Infor LN ERP platform. Shipping Corporation of India (SCI) was trading firm after Niti Aayog proposed stake sale in the company.

On the global front, Asian shares were trading mostly in red, with investors in Japan looking ahead to a central bank policy review to conclude on Friday. China’s central bank left interest rates for open market operations unchanged, shrugging off an overnight increase in the US Federal Reserve’s key policy rate.  Back home, the NSE Nifty and BSE Sensex were trading above the psychological 9,600 and 31,100 levels respectively. The market breadth on BSE was positive in the ratio of 1327:813, while 116 scrips remained unchanged.

The BSE Sensex is currently trading at 31164.72, up by 8.81 points or 0.03% after trading in a range of 31113.43 and 31229.44. There were 17 stocks advancing against 13 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.15%, while Small cap index was up by 0.53%.

The top gaining sectoral indices on the BSE were Realty up by 1.36%, Healthcare up by 1.25%, Telecom up by 0.50%, Power up by 0.35% and FMCG up by 0.34%, while Oil & Gas down by 0.58%, PSU down by 0.35%, Bankex down by 0.28%, IT down by 0.28% and TECK down by 0.19% were the losing indices on BSE.

The top gainers on the Sensex were Sun Pharma up by 1.93%, Dr. Reddy’s Lab up by 1.65%, Reliance Industries up by 1.26%, Cipla up by 0.97% and Bharti Airtel up by 0.79%.

On the flip side, GAIL India down by 1.56%, Coal India down by 1.28%, TCS down by 0.82%, Asian Paints down by 0.81% and ONGC down by 0.65% were the top losers.

Meanwhile, in a bid to protect clients of financial service providers in financial distress, the Union Cabinet cleared a proposal to introduce a Financial Resolution and Deposit Insurance Bill, 2017 in Parliament. The Bill, when enacted, will pave the way for setting up of the Resolution Corporation and will provide for a comprehensive resolution framework to handle any bankruptcy situation in banks, insurers and financial sector entities. The Bill aims to inculcate discipline in financial service providers in the event of a financial crisis by limiting the use of public money to bail out distressed entities.

According to the government’s statement, the Bill will lead to repeal or amendment of resolution-related provisions in sectoral Acts as listed in Schedules of the Bill. It will also result in the repealing of the Deposit Insurance and Credit Guarantee Corporation Act, 1961, to transfer the deposit insurance powers and responsibilities to the Resolution Corporation. The Resolution Corporation would ensure the stability and resilience of the financial system, protecting the consumers of covered obligations up to a reasonable limit and public funds to the extent possible.

The government had recently enacted the Insolvency and Bankruptcy Code, 2016 ('Code') for the insolvency resolution of non- financial entities. The proposed Bill complements the Code by providing a resolution framework for the financial sector. Once implemented, the Bill together with the Code will provide a comprehensive resolution framework for the economy.

The Bill seeks to give comfort to consumers of financial service providers during any financial distress. It would also help in maintaining financial stability in the economy by ensuring adequate preventive measures while at the same time providing necessary instruments for dealing with a post-crisis situation. The Bill aims to strengthen and streamline the current framework of deposit insurance for the benefit of a number of retail depositors.

The CNX Nifty is currently trading at 9610.10, down by 8.05 points or 0.08% after trading in a range of 9589.40 and 9621.40. There were 20 stocks advancing against 31 stocks declining on the index.

The top gainers on Nifty were Aurobindo Pharma up by 5.41%, Dr. Reddy’s Lab up by 1.71%, Sun Pharma up by 1.68%, Cipla up by 1.19% and Reliance Industries up by 1.14%.

On the flip side, BPCL down by 2.38%, GAIL India down by 1.63%, Coal India down by 1.34%, Indian Oil Corporation down by 1.32% and HCL Tech down by 1.18% were the top losers.

The Asian markets were trading mostly in red; Hang Seng decreased 253.37 points or 0.98% to 25,622.53, Nikkei 225 decreased 58.31 points or 0.29% to 19,825.21, KOSPI Index decreased 14.03 points or 0.59% to 2,358.61, Jakarta Composite decreased 12.99 points or 0.22% to 5,779.91 and Shanghai Composite decreased 0.46 points or 0.01% to 3,130.21.

On the other hand, FTSE Bursa Malaysia KLCI increased 0.39 points or 0.02% to 1,792.74 and Taiwan Weighted increased 2.46 points or 0.02% to 10,074.92.