Markets off day's highs; broader markets slip in red

Indian equity benchmarks came off day’s highs but trade continued on strong note in late afternoon session with gains of half a per cent each. Buying in Utilities, Banking and FMCG stocks aided the markets, while the broader indices failed to hold the rally and slipped into negative territory. Traders took some support with the private report that the Reserve Bank is expected to go for a 25 basis points (bps) repo rate cut in its policy review meet on August 2 as inflation is likely to have reached a new normal of 4 percent. Banking shares were trading higher despite Moody’s latest report that India's banking system remain most vulnerable among South and Southeast Asia, revising the outlook on several Indian banks to stable or negative from positive. However, some profit booking ahead of the derivatives expiry of the July series pared some gains.

On the global front, European Markets were trading mixed after the US Federal Reserve kept interest rates unchanged and investors reacted to a slew of earnings reports. Asian markets were trading in green. Back home, in scrip specific development, Tamil Nadu Newsprint & Papers (TNPL) was trading jubilantly after the company resumed normal production / operation in the plant from July 27, 2017, pursuant to availability of water.

The BSE Sensex is currently trading at 32543.19, up by 160.73 points or 0.50% after trading in a range of 32473.12 and 32672.66. There were 12 stocks advancing against 19 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 0.22%, while Small cap index was down by 0.46%.

The top gaining sectoral indices on the BSE were Bankex up by 1.10%, Utilities up by 0.28%, FMCG up by 0.27%, Oil & Gas up by 0.06%, and PSU up by 0.02%, while Telecom down by 2.03%, TECK down by 1.15%, IT down by 1.10%, Consumer Durables down by 0.96% and Metal down by 0.73% were the top losing indices on BSE.

The top gainers on the Sensex were HDFC up by 6.05%, HDFC Bank up by 2.34%, Hindustan Unilever up by 1.95%, Asian Paints up by 0.89% and Kotak Mahindra Bank up by 0.70%. On the flip side, Bharti Airtel down by 3.17%, Tata Motors - DVR down by 2.31%, TCS down by 2.24%, Tata Motors down by 1.63% and Sun Pharma down by 1.28% were the top losers.

Meanwhile, revising the outlook on several Indian banks to stable or negative from positive, global credit rating agency Moody’s in its latest report has said that India's banking system remain most vulnerable among South and Southeast Asia. The report further said that capital levels will continue to be weak for most rated public sector banks (PSBs) over the next 12-18 months, as low profitability impinges on their ability to build capital levels through retained earnings.

The rating agency noted that PSBs remain undercapitalized and burdened by bad debts despite receiving Rs 500 billion in capital injections under the 'Indradhanush' plan. Besides, it said that the proposed infusion of additional capital of Rs 200 billion in the two financial years up to March 2019 under the plan also falls short of the amount still required for banks to address solvency challenges and recapitalize themselves.

Moody’s also signalled lowered government support to some extent as it appeared reluctant to increase capital injections into the PSU banks, despite the limited ability of these to access equity markets for the much-needed capital. Indian PSBs have experienced significant asset quality problems and capital shortages over the last three years. In 2015, the government announced its 'Indradhanush' plan to address its own estimate of Rs 1,800 billion shortfall in capital that PSBs would need between 2015 to 2019 to meet Basel III requirements.

The CNX Nifty is currently trading at 10074.50, up by 53.85 points or 0.54% after trading in a range of 10052.35 and 10114.85. There were 23 stocks advancing against 28 stocks declining on the index.

The top gainers on Nifty were HDFC up by 6.11%, Yes Bank up by 4.48%, HDFC Bank up by 2.45%, Indusind Bank up by 2.39% and ACC up by 2.15%. On the flip side, Bharti Airtel down by 3.18%, Tata Motors - DVR down by 2.59%, TCS down by 2.29%, Tech Mahindra down by 2.03% and Tata Motors down by 1.80% were the top losers.

All Asian markets were trading in green; Shanghai Composite increased 2.11 points or 0.06% to 3,249.78, FTSE Bursa Malaysia KLCI increased 3.27 points or 0.19% to 1,769.27, KOSPI Index increased 8.73 points or 0.36% to 2,443.24, Jakarta Composite increased 9.81 points or 0.17% to 5,810.02, Nikkei 225 increased 29.48 points or 0.15% to 20,079.64, Taiwan Weighted increased 89.26 points or 0.86% to 10,508.37 and Hang Seng increased 190.15 points or 0.71% to 27,131.17.

European markets were trading mixed; France’s CAC increased 17.65 points or 0.34% to 5,207.82. On the flip side, Germany’s DAX decreased 45.88 points or 0.37% to 12,259.23 and UK’s FTSE 100 decreased 1.13 points or 0.02% to 7,451.19.