Benchmarks continue weak trade in late morning session

Indian equity benchmarks continued their weak trade in late morning session, on account of selling in frontline blue chip counters. Caution set in as investors waited for the launch of the Goods and Services Tax (GST) due on July 1. The rupee opened higher against dollar on Friday, on account of selling of American currency by banks and exporters. Foreign Portfolio Investors sold shares worth Rs 88.59 crore on Thursday with gross purchases and gross sales of Rs 4835.29 crore and Rs 4923.88 crore, respectively. Investors took a cautious approach after the domestic brokerage firm highlighted that with more states announcing farm loan waiver schemes, if the trend continues the total write-down could add up to Rs 1.5- 2.3 trillion, and banks will bear the brunt.  So far, Maharashtra and UP have waived nearly 30-40% of outstanding agri-bank credit, while for Punjab it was 15%. In the meanwhile, Karnataka has also announced farm loan waiver scheme. There is high probability that more states like Madhya Pradesh, Gujarat, Rajasthan, Haryana, may join the bandwagon. The report raised concern that if this plays out and assuming 20-30% of outstanding agri-bank loans are waived, the total loan waiver could add up to a sizeable around Rs 1.5-2.3 trillion (1.0-1.5% of 2017-18 GDP). Separately, credit rating agency ICRA said that asset quality pain for banks is expected to continue in fiscal year ended March 2018 due to restructuring by banks, weakness in some large corporate accounts and events like waiver of farm loans. It expects gross non-performing assets (GNPAs) of Indian banks to increase to 9.9% to 10.2% by March 2018 from 9.5% in March 2017 with fresh slippages of loans expected at 3% to 4% in the fiscal.

Traders were seen piling up position in IT and TECK stocks, while selling was witnessed in Realty, Metal and Basic Materials stocks. In scrip specific development, Wockhardt was trading in green after the company and its two subsidiaries, Wockhardt UK Holdings and CP Pharmaceuticals (CP), in the United Kingdom (collectively Wockhardt) have settled an ongoing commercial litigation before the High Court in London, United Kingdom in relation to a supply contract for a drug named Trisenox. Mid-tier IT firm Mindtree was trading in green after the company said it would look at share buyback, and the proposal would be discussed at the board meeting to be held on June 28.

On the global front, Asian shares were trading mostly in green, with China in focus after the country’s banking regulator sought more information on credit risks linked to loans to major companies that bought major assets abroad. Japanese manufacturing activity slowed in June as new orders grew at the slowest pace in seven months, a sign of a slight weakening in domestic demand. Back home, the NSE Nifty and BSE Sensex were trading below the psychological 9,600 and 31,300 levels respectively. The market breadth on BSE was negative in the ratio of 477:1675, while 82 scrips remained unchanged.

The BSE Sensex is currently trading at 31211.85, down by 78.89 points or 0.25% after trading in a range of 31197.36 and 31365.39. There were 11 stocks advancing against 20 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 1.35%, while Small cap index was down by 1.50%.

The top gaining sectoral indices on the BSE were IT up by 0.28% and TECK up by 0.14%, while Realty down by 2.06%, Metal down by 1.42%, Basic Materials down by 1.33%, Industrials down by 1.30% and Auto down by 1.24% were the losing indices on BSE.

The top gainers on the Sensex were Power Grid up by 1.29%, Wipro up by 1.06%, NTPC up by 0.50%, Sun Pharma up by 0.50% and Infosys up by 0.49%.

On the flip side, Tata Steel down by 1.94%, Tata Motors down by 1.65%, Hero MotoCorp down by 1.43%, Adani Ports & Special Economic Zone down by 1.37% and ONGC down by 1.34% were the top losers.

Meanwhile, allaying fears about the $160-billion IT industry slowdown, Reserve Bank of India Governor Urjit Patel has said that there is no need to be unduly pessimistic about job scenario in the information technology (IT) sector and pointed out that growing startups can help to create a good number of jobs. Patel’s remarks come amid trade body Nasscom’s guidance that pegged export revenue growth to contract at 7-8 percent in 2017-18 as against 8.6 percent achieved last fiscal.

Patel has said that there could be pressure on employment in some of the IT sectors, it is not  necessarily in terms of literally a job destruction, but may be the growth rate is affected by what is happening. He noted that the number of startups in that same space is almost compensating for most of this. Talking about fintech (financial technology), he said that with the emergence of technology-enabled innovation in financial services there will both opportunities and risks to financial sector stability.

RBI Governor further said that at present, the IT industry employs over four million people directly. He also explained that increasing automation and protectionist policies in the developed world, especially the US which is the biggest market for the sector, are being blamed for the reverses. Adding further, he said that India has benefited from its open trade policies on external trade relations. He noted that unequivocally, India's position should be for an open trading system and added that they should stick to it despite the changes adopted in a few countries.  

The CNX Nifty is currently trading at 9590.25, down by 39.75 points or 0.41% after trading in a range of 9585.15 and 9647.65. There were 15 stocks advancing against 36 stocks declining on the index.

The top gainers on Nifty were Power Grid up by 0.99%, Wipro up by 0.88%, NTPC up by 0.63%, Sun Pharma up by 0.62% and TCS up by 0.48%.

On the flip side, Indiabulls Housing down by 4.51%, Indian Oil Corporation down by 2.96%, Bank of Baroda down by 2.15%, Bosch down by 2.07% and Tata Steel down by 2.03% were the top losers.

The Asian markets were trading mostly in green; FTSE Bursa Malaysia KLCI increased 0.26 points or 0.01% to 1,777.69, KOSPI Index increased 6.79 points or 0.29% to 2,377.16, Hang Seng increased 9.72 points or 0.04% to 25,684.25 and Nikkei 225 increased 13.65 points or 0.07% to 20,124.16.

On the other hand, Shanghai Composite decreased 25.89 points or 0.82% to 3,121.56 and Taiwan Weighted decreased 20.91 points or 0.2% to 10,378.15.

Jakarta Stock Exchange was closed on account of ‘Commemoration Day’ holiday.