Sensex, Nifty remain in red despite RBI cutting repo rate

Extending their losses, Indian equity benchmarks continued to trade in negative territory in late afternoon session, even though RBI reduced repo rate by 25 basis points from 6.25% to 6% in its latest credit and monetary policy review, for the first time in this fiscal year. Sentiments remained downbeat as finance minister Arun Jaitley cautioned that the fiscal deficit of states may rise this year, with states likely to tap the markets to raise funds to finance farm debt waivers. Traders paid no heed to the report stating that India along with Indonesia, Malaysia, Thailand, the Philippines and Vietnam is more attractive to FDIs as compared to other emerging markets and flows to these nations are expected to surge to around $240 billion by 2025.

On the global front, European markets were trading in red despite higher US and Asian peers as Apple's third-quarter earnings topped forecasts and the dollar extended its bounce from 15-month lows against its main rivals. However, semiconductor firms' shares were a bright spot in early deals in a lackluster trade, weighed down by a fall among mining stocks and banks.

Back home, in scrip specific development, Bank of Baroda surged after the bank raised Rs 500 crore through issue and allotment of the bonds. The bank has allotted 8.60% - BASEL III Compliant AT I Bonds -Series VIII (Unsecured, Perpetual). The bank has issued 5,000 bonds of face value of Rs 10 lakh each. The issues opened on August 1, 2017 and closed on the same day.

The BSE Sensex is currently trading at 32493.43, down by 81.74 points or 0.25% after trading in a range of 32477.05 and 32686.48. There were 9 stocks advancing against 22 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 0.42%, while Small cap index was down by 0.09%.

The top gaining sectoral indices on the BSE were Energy up by 0.65%, Consumer Durables up by 0.40%, Utilities up by 0.15% and Oil & Gas up by 0.06%, while Metal down by 0.84%, Capital Goods down by 0.74%, FMCG down by 0.72%, Industrials down by 0.62% and IT down by 0.59% were the top losing indices on BSE.

The top gainers on the Sensex were NTPC up by 3.58%, Hero MotoCorp up by 2.21%, Reliance Industries up by 1.50%, Lupin up by 1.37% and Adani Ports & SEZ up by 0.66%. On the flip side, Dr. Reddy’s Lab down by 1.56%, Tata Motors down by 1.52%, Power Grid Corporation down by 1.52%, Sun Pharma down by 1.24% and Larsen & Toubro down by 0.96% were the top losers.

Meanwhile, in order to write down non-performing loans and to meet rising Basel III requirements, the public sector banks (PSU) may need at least Rs 1.9 trillion additional capital over the next two years. Credit rating agency, S&P Global Ratings in its latest report has also noted that the lack of capital will put restriction on the lenders' ability while making haircuts on these loans.

The rating agency said that weak profitability along with rising capital demands from Basel III implementation will also continue to pressure the capitalisation of many of PSU banks and further suggested to look for alternate sources to increase their capitalisation. The report is also expecting that the government's commitment of support to PSU banks will remain in place.

As per the report, Indian PSU banks face difficulties to raise funds from the equity capital markets due to low equity valuations, overcrowding in the market, and regulations. Besides, it said that amid rising risk of default on additional Tier-1 capital instruments, PSU banks would also find it hard to raise money via the issuance of these instruments.

Furthermore, S&P mentioned that weak PSU banks would continue to lose market share to the better-performing private sector banks & profitable PSU banks and non-bank finance institutions or domestic debt capital markets, adding that the banking sector may witness consolidation over time as public sector banks with lower capitalisation and internal generation of capital could become takeover targets.

The CNX Nifty is currently trading at 10092.70, down by 21.95 points or 0.22% after trading in a range of 10082.80 and 10137.85. There were 18 stocks advancing against 33 stocks declining on the index.

The top gainers on Nifty were NTPC up by 3.72%, Hero MotoCorp up by 2.06%, ACC up by 1.85%, Lupin up by 1.72% and Ambuja Cement up by 1.55%. On the flip side, Indiabulls Housing Finance down by 1.80%, Dr. Reddy’s Lab down by 1.51%, Tata Motors down by 1.49%, Power Grid Corporation down by 1.49% and Sun Pharma down by 1.18% were the top losers.

Asian markets were trading mostly in green; KOSPI Index increased 4.67 points or 0.19% to 2,427.63, FTSE Bursa Malaysia KLCI increased 6.19 points or 0.35% to 1,771.32, Jakarta Composite increased 10.57 points or 0.18% to 5,815.78, Hang Seng increased 67.15 points or 0.24% to 27,607.38, Taiwan Weighted increased 81.98 points or 0.79% to 10,519.27 and Nikkei 225 increased 94.25 points or 0.47% to 20,080.04. On the flip side, Shanghai Composite decreased 7.58 points or 0.23% to 3,285.06.

All European markets were trading in red; UK’s FTSE 100 decreased 22.13 points or 0.3% to 7,401.53, France’s CAC decreased 14.29 points or 0.28% to 5,112.74 and Germany’s DAX decreased 12.41 points or 0.1% to 12,238.88.