Indian equities decline for second straight session; Sensex slips below 31000 mark

Indian equity bourses commenced the fresh week on a depressing note, as the benchmark indices extended previous week's sell-off and sank by over half a percent, as investors maintained conservative approach and remained cautious ahead of Federal Reserve Chair Janet Yellen’s speech later in the day for clues on the outlook for US monetary policy. The broader markets too failed to show any kind of fervor and plunged by close to a percent, underperforming their larger peers by quite a margin. Sentiments were undermined after CRISIL enlightened that the steps taken by Reserve Bank of India (RBI) to resolve NPAs are likely to raise provisioning by a whopping 25% this year as lenders will take up to 60% hair cut while resolving these accounts. Further, the central bank told banks to set aside at least 50% of loan amount for cases referred to insolvency process. The move could take its toll on banks’ earnings.

Adding the cautiousness among market participants, Finance Minister Arun Jaitley said that the Centre made a last-ditch effort to get Jammu & Kashmir on board to launch goods and services tax (GST) from July 1 suggesting that the state government had elbow room to convey its concurrence to join the new regime. He cautioned that a failure to launch GST will impact consumers and businesses in the state. Meanwhile, Prime Minister Narendra Modi and President Donald Trump have agreed to strengthen the Indo-US economic partnership in a way that results in a win-win for the two major economies, while amicably working on resolving differences. Going forward in near term, Market is expected to stay choppy ahead of F&O expiry due this week and GST rollout lined up for June 30 midnight.

On the global front, Asian equity markets ended mostly in green on Tuesday, as investors awaited an appearance by Federal Reserve Chair Janet Yellen for clues on the outlook for interest rates and the American economy. Yellen is scheduled to take part in a discussion on global economic issues at London's Royal Academy and a number of other top Fed officials are also due to speak later in the global day. Chinese shares ended higher after official data showed profit growth in China's industrial sector picked up speed in May, but investors turned cautious amid a strong rally in blue-chips after MSCI decided last week to add 222 China-listed stocks to its Emerging Markets Index. Furthermore, Japan's Nikkei share average edged up to hover near two-year highs as a weaker yen helped exporters rise, while financial stocks rebounded from Monday's declines. Meanwhile, European markets dropped in early trade, feeling the weight of a rising euro, as profit warnings and merger concerns pulled regional equities toward their lowest level in nearly two weeks.

Back home, the market breadth remained pessimistic, as there were 711 shares on the gaining side against 1881 shares on the losing side, while 180 shares remained unchanged.

Finally, the BSE Sensex declined 179.96 points or 0.58% to 30,958.25, while the CNX Nifty was down by 63.55 points or 0.66% to 9,511.40. 

The BSE Sensex touched a high and a low of 31294.96 and 30847.08, respectively and there were 10 stocks on gainers side as against 21 stocks on the losers side on the index.

The broader indices ended in red; the BSE Mid cap index declined 0.79%, while Small cap index was down by 1.57%.

The only gaining sectoral indices on the BSE were Telecom up by 1.19% and Consumer Durables up by 0.33%, while Bankex down by 1.45%, Realty down by 1.40%, PSU down by 1.32%, Capital Goods down by 1.20% and Consumer Disc down by 1.16% were the top losing indices on BSE.

The top gainers on the Sensex were Bharti Airtel up by 1.61%, ONGC up by 1.23%, Hero MotoCorp up by 0.97%, Tata Steel up by 0.60% and Adani Ports & SEZ up by 0.56%. On the flip side, SBI down by 3.27%, Axis Bank down by 2.34%, Infosys down by 1.80%, Asian Paints down by 1.73% and Bajaj Auto down by 1.61% were the top losers.

Meanwhile, citing need of higher capital requirement to handle Non-performing assets (NPAs), the Finance Ministry has asked the Reserve Bank of India (RBI) to extend deadline for implementing Basel III banking norms beyond March 2019. Besides, the ministry noted that an extension would help banks meet the capital needs and increase credit flow to productive sectors along with balance sheet clean-up.

The apex bank had already extended the timeline for full implementation of the Basel III capital regulations from March 2018 to March 2019 in 2014. It believes that there is a set framework and it should not be disturbed and any divergence from Basel III norms by the RBI can impact the perception on Indian banks and the central bank globally. Besides, the Union Budget has allocated Rs 10,000 crore towards recapitalisation of public sector banks in the current fiscal in line with the Indradhanush scheme.

Meanwhile, Basel III capital regulations have been implemented in a phased manner from April 01, 2013 in India. According to the norms, banks need to maintain a minimum common equity ratio of 8 per cent and total capital ratio of 11.5 per cent by March 2019. Moreover, most of the 21 state-owned banks are already above the average prescribed by RBI but there are 6 PSU banks which have been put under prompt corrective action (PCA) requiring course correction and higher capital to come out of poor financial health.

The CNX Nifty traded in a range of 9,615.40 and 9,473.45. There were 16 stocks in green as against 34 stocks in red on the index, while 1 stock remained unchanged.

The top gainers on Nifty were Indian Oil Corporation up by 1.77%, GAIL India up by 1.54%, Bharti Airtel up by 1.32%, ONGC up by 1.20% and Hero MotoCorp up by 1.09%. On the flip side, Bank of Baroda down by 4.20%, ACC down by 3.73%, Zee Entertainment Enterprises down by 3.72%, Ultratech Cement down by 3.19% and SBI down by 3.10% were the top losers.

The European markets were trading in red; UK’s FTSE 100 decreased 3.5 points or 0.05% to 7,443.30, Germany’s DAX decreased 36.45 points or 0.29% to 12,734.38 and France’s CAC decreased 18.83 points or 0.36% to 5,276.92.

Asian equity markets ended mostly in green on Tuesday. A weaker yen helped exporters rise in Japan and solid industrial profits data supported underlying sentiments in China. ECB President Mario Draghi talked up benefits of the ECB's easy monetary policy and crude oil futures rose for a fourth consecutive session on Tuesday. Meanwhile, investors looked ahead to Federal Reserve Chair Janet Yellen's speech later in the day for additional clues on whether the US central bank will hike rates going forward. Chinese shares ended higher after official data showed profit growth in China's industrial sector picked up speed in May, but investors turned cautious amid a strong rally in blue-chips after MSCI decided last week to add 222 China-listed stocks to its Emerging Markets Index. The markets in Malaysia and Indonesia remained closed in observance of Eid-ul-Fitr.