Markets off day’s high; Sensex slips below 31,000 mark

Indian equity benchmarks pared some of their gains but continued to trade in green in late afternoon session ahead of the derivatives expiry of June series. Sentiments remained upbeat with India Meteorological Department’s (IMD) statement that 79 percent of the country has received normal-to-above-normal rainfall. It is seeing a steady progress in rainfall in central India and expects average July rainfall at 96 percent. Besides, investments in domestic capital markets via participatory notes (P-notes) have surprisingly surged to a seven-month high of Rs 1.81 lakh crore at the end of May despite stringent norms put in place by Sebi to curb inflow of illicit funds.  Shares of oil and gas companies were trading higher as the government launched the National Data Repository (NDR) along with the Open Acreage Licensing Policy (OALP). However, the markets trimmed gains with the Fitch ratings’ latest report that loan waiver schemes being doled out to farmers could have a significant impact on state government finances and might undermine efforts to bring down general government debt. The rating agency noted that the farm loan waivers will also lead to further fiscal slippage at the state level or will reduce the funds available for public investment.

On the global front, European markets were in green as investors awaited a NATO meeting of defense ministers and digested major buyback plans from some of the US’ biggest banks. Asian markets were trading in green. Back home, in scrip specific development, UCO Bank moved up on plan to raise Rs 3,000 crore in this fiscal and turn profitable by FY19. The turnaround plan will be finalised within a week.

The BSE Sensex is currently trading at 30943.16, up by 108.84 points or 0.35% after trading in a range of 30870.58 and 31097.92. There were 21 stocks advancing against 10 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.55%, while Small cap index was up by 1.00%.

The top gaining sectoral indices on the BSE were Metal up by 2.06%, Telecom up by 1.34%, Basic Materials up by 1.15%, Realty up by 0.89% and TECK up by 0.87%, while Bankex down by 0.12% was the only losing index on BSE.

The top gainers on the Sensex were Axis Bank up by 3.04%, Tata Steel up by 2.27%, Bharti Airtel up by 1.83%, Infosys up by 1.58% and Power Grid Corporation up by 1.09%. On the flip side, Kotak Mahindra Bank down by 2.35%, Sun Pharma down by 1.05%, SBI down by 0.49%, HDFC Bank down by 0.37% and Reliance Industries down by 0.26% were the top losers.

Meanwhile, raising concerns over the recent spate of declarations of farm loan waivers across the country, the credit rating agency, Fitch Ratings in its latest report has said that these moves could have a significant impact on state government finances and might undermine efforts to bring down general government debt. The rating agency noted that the farm loan waivers will also lead to further fiscal slippage at the state level or will reduce the funds available for public investment.

The report titled ‘Indian loan waivers are a risk to fiscal consolidation’ said that larger state deficits would delay an expected gradual reduction in general government debt, which includes central and state government debt. While the central government has indicated that it will not participate in the waivers, the report pointed that the combined finances of the states - which are included in general government debt and deficits - have been under pressure. Besides, the agency said that public pay hikes, election spending and higher interest costs stemming from the UDAY scheme - under which state governments have taken on debt from power distribution companies - are all likely to add to expenditure.

Fitch rating highlighted that banks could also be affected by the waiver schemes, but it could benefit banks if they offload farm loans with weak repayment prospects to state governments. The agency also indicated uniform farm loan waivers could lead to moral hazard and weaken the general repayment culture among financially healthy farmers, but they will still have an incentive to repay loans in order to retain access to future funding.

The CNX Nifty is currently trading at 9521.95, up by 30.70 points or 0.32% after trading in a range of 9502.00 and 9575.80. There were 32 stocks advancing against 19 stocks declining on the index.

The top gainers on Nifty were Axis Bank up by 3.62%, Vedanta up by 3.11%, Tata Steel up by 2.17%, Indiabulls Housing Finance up by 2.03% and Bharti Airtel up by 1.78%. On the flip side, Kotak Mahindra Bank down by 2.28%, Indian Oil Corp. down by 1.14%, Sun Pharma down by 1.13%, Tech Mahindra down by 0.68% and Tata Power down by 0.61% were the top losers.

Asian markets were trading mostly in green; KOSPI Index increased 13.1 points or 0.55% to 2,395.66, Shanghai Composite increased 14.86 points or 0.47% to 3,188.06, Taiwan Weighted increased 31.1 points or 0.3% to 10,421.65, Nikkei 225 increased 89.89 points or 0.45% to 20,220.30 and Hang Seng increased 281.92 points or 1.1% to 25,965.42. On the flip side, FTSE Bursa Malaysia KLCI decreased 0.46 points or 0.03% to 1,770.77.

European Markets were trading mostly in green; Germany’s DAX increased 14.99 points or 0.12% to 12,662.26 and UK’s FTSE 100 increased 36.07 points or 0.49% to 7,423.87. On the flip side, France’s CAC decreased 17.08 points or 0.33% to 5,235.82.