Sensex, Nifty trade in green; IT stocks lose shine

Indian equity benchmarks traded in green in late morning session, on back of positive Asian markets coupled with buying in Banking, Realty and Capital Goods stocks. Traders took some support from the Asian Development Bank’s latest report which predicted Asia’s economy to expand faster in 2017; South Asia to remain the fastest growing of all sub-regions and India to achieve a 7.4 per cent growth due to strong consumption. Sentiments also remained up-beat with Finance Minister Arun Jaitley describing the Goods and Services Tax (GST) as a win- win deal for all as it will expand the tax net, end inspector raj and bring down prices of goods. Besides, the finance ministry is working on the capital infusion strategy for public sector banks and an announcement to this effect will come soon. Meanwhile, Indian companies raised Rs 1,835 crore in April this year by issuing shares on preferential basis, an over 53 per cent drop compared to the same month a year ago.

On the global front, Asian markets were trading mostly in green, following fresh record closing in the US market on strong earnings and higher oil prices, while investors awaited the Japanese and European central bank meetings for clues on their policy outlooks. The Bank of Japan ends its two-day policy meeting on July 20, 2017. It is set to keep policy unchanged.

Back home, in scrip specific development, NR Agarwal Industries gained after the company resumed normal operations in Unit II at Gujarat’s facility. However, due to technical reasons, operations at Unit III of the company shall commence from August 1, 2017.

The BSE Sensex is currently trading at 31994.32, up by 38.97 points or 0.12% after trading in a range of 31928.01 and 32057.12. There were 14 stocks advancing against 17 stocks declining on the index.

The broader indices were trading mixed; the BSE Mid cap index was down by 0.07%, while Small cap index was up by 0.39%.

The top gaining sectoral indices on the BSE were Bankex up by 0.62%, Realty up by 0.59%, Capital Goods up by 0.39%, Energy up by 0.38% and Consumer Durables up by 0.31%, while IT down by 0.43%, Metal down by 0.42%, TECK down by 0.31%, Auto down by 0.26% and Basic Materials down by 0.11% were the top losing indices on BSE.

The top gainers on the Sensex were Axis Bank up by 3.28%, ONGC up by 1.93%, Kotak Mahindra Bank up by 1.63%, Cipla up by 1.53% and Coal India up by 0.96%. On the flip side, Tata Steel down by 1.68%, Asian Paints down by 1.10%, Hero MotoCorp down by 0.92%, Infosys down by 0.67% and TCS down by 0.53% were the top losers.

Meanwhile, the rating agency, CRISIL in its latest report has said that Indian banks are likely to take a haircut of nearly 60 percent, worth Rs 2.4 lakh crore in order to resolve the top 50 Non-performing asset (NPAs) accounts with debt of Rs 4 lakh crore. According to the report, these 50 companies are from the metals (30% of total debt), construction firms (25%), and power (15%) sectors, and account for half of the Rs 8 lakh crore bad loans in the banking system as on March 31, 2017.

The rating agency has said that it would be in the larger interest of the economy to pop the bitter pill of haircut than kick the can down the road. It has estimated that banks have provisioned for about 40 percent of this loan exposure and added that they used the economic value approach to assess the haircuts. The credit rating agency has classified the haircuts into four categories - marginal, where the haircut required is less than 25% of the outstanding; moderate, where the haircut may range between 25% and 50%; aggressive, where the haircut could be between 50% and 75%; and deep, where a haircut of more than 75% may be required to arrive at a sustainable level of debt.

Further, the report noted that a quarter of the debt analysed needs marginal or moderate haircuts, while a third needs aggressive and nearly 40% deep haircuts. It also pointed out that the companies from the power sector would require moderate haircuts, whereas those from the metals and construction sectors would need aggressive ones.  It further stated that a majority of the debt requiring deep haircuts belongs to companies with unsustainable businesses, and asset sales are necessary to recover monies.

Recently, the government has promulgated an ordinance empowering the RBI to issue directions to banks for speedy resolution of stressed assets so that they become viable. The focus now is on optimum debt reduction including through potential transfer of assets to a different management that can bring in the resources needed to scale up cash flows.

The CNX Nifty is currently trading at 9906.15, up by 6.55 points or 0.07% after trading in a range of 9888.55 and 9922.55. There were 22 stocks advancing against 28 stocks declining on the index, while 1 stock remained unchanged.

The top gainers on Nifty were Axis Bank up by 3.28%, ONGC up by 1.99%, Ambuja Cement up by 1.87%, Kotak Mahindra Bank up by 1.85% and Coal India up by 1.18%. On the flip side, Tata Steel down by 1.71%, Bharti Infratel down by 1.30%, Asian Paints down by 1.07%, Hero MotoCorp down by 1.00% and Infosys down by 0.79% were the top losers

Asian markets were trading mostly in green; Shanghai Composite increased 4.79 points or 0.15% to 3,235.77, Jakarta Composite increased 9.29 points or 0.16% to 5,815.98, KOSPI Index increased 9.42 points or 0.39% to 2,439.36, Hang Seng increased 64.14 points or 0.24% to 26,736.30 and Nikkei 225 increased 127.78 points or 0.64% to 20,148.64.

On the flip side, Taiwan Weighted decreased 13.31 points or 0.13% to 10,492.79 and FTSE Bursa Malaysia KLCI decreased 2 points or 0.11% to 1,755.27.