Benchmarks continue firm trade in morning session

Indian equity benchmarks continue their firm trade in the morning session on account of buying in frontline blue chip counters. The rupee opened higher against dollar on account of selling of American currency by banks and exporters. Foreign Portfolio Investors stood net sellers in domestic equity markets on Friday and sold shares worth Rs 989.73 crore with gross purchases and gross sales of Rs 4528.64 crore and Rs 5512.37 crore, respectively. Traders took support from Niti Aayog Vice Chairman Arvind Panagariya’s statement that resolution of bad loans in the banking system is on right track and will open the door to rapid credit expansion and growth. Terming the non-performing assets (NPAs) or bad loans problem as a legacy issue, he said that even after three years of the NDA government taking charge, it has not gone away. Some support also came with domestic brokerage report that the Indian economy is at the cusp of entering its strongest growth phase and a full blown bull market is yet to play out with the wide-based Nifty expected to touch 11,500 in 2018. The report highlighted that an economy enters the strongest phase of growth when stocks, bonds and commodities all rally together. The consumption and exports are boosting economic growth in the country. However, PSU Banking stocks were under pressure on report that the banking regulator is examining whether auditors at these state-run lenders followed RBI guidelines on write-downs, provisioning and NPAs. The RBI has questioned scores of auditors at 27 PSBs on the process and logic they had used to compute and report write-downs at the lenders.

Traders were seen piling up position in Realty, Metal and Consumer Durables sector stocks. In scrip specific development, Divi’s Laboratories was trading in green on receiving environment clearance for modernization of its bulk drug unit in Visakhapatnam which will entail a cost of Rs 100 crore. Suzlon Energy was trading firm as the company turned profitable in the quarter ended June 2017. The company has reported net profit of Rs 63.7 crore in the quarter ended June 2017 (Q1FY18) against the loss of Rs 257 crore, in the same quarter last fiscal.

On the global front, Asian markets were trading mostly in green, while Nikkei was down despite second-quarter Japan GDP surprising to the upside. Japan’s second quarter surged an unexpected 4.0% on year as investment in plant and equipment lifted sentiment for the sixth straight quarter of expansion. Back home, the BSE Sensex and NSE Nifty were trading above the psychological 31,400 and 9,750 levels respectively. The market breadth on BSE was positive in the ratio of 1685:457, while 65 scrips remained unchanged.

The BSE Sensex is currently trading at 31451.40, up by 237.81 points or 0.76% after trading in a range of 31298.90 and 31468.05. There were 22 stocks advancing against 9 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 1.67%, while Small cap index was up by 1.97%.

The top gaining sectoral indices on the BSE were Realty up by 2.77%, Metal up by 2.25%, Consumer Durables up by 2.15%, Basic Materials up by 1.73% and Power up by 1.73%, while there were no loosing indices. 

The top gainers on the Sensex were Cipla up by 5.79%, Tata Steel up by 2.91%, HDFC up by 2.90%, Adani Ports & Special Economic Zone up by 2.76% and Power Grid up by 1.65%.

On the flip side, Dr. Reddy’s Lab down by 0.82%, Bharti Airtel down by 0.59%, SBI down by 0.59%, Larsen & Toubro down by 0.55% and Kotak Mahindra Bank down by 0.51% were the top losers.

Meanwhile, the outgoing Vice Chairman of Niti Aayog, Arvind Panagariya has applauded the measures taken for the resolution of bad loans in the banking system and has said that resolution of bad loans in the banking system is on 'right track' and will ‘open the door’ to rapid credit expansion and growth. He said that “Now we are on absolutely right track. Once we solve the NPAs issue, it will open up also the door to faster credit expansion. If this is done, this problem of twin balance sheet issue (over-leveraged companies and bad-loan-encumbered banks) will get addressed at the result of this.” He added that banks will now be better equipped to lend and on the sides of borrowers there will be greater appetite.

Panagariya termed the non-performing assets (NPAs) or bad loans problem as a ‘legacy issue’, and said that even after three years of the NDA government taking charge, it has not gone away. As part of its strategy to rein in the unacceptable level of NPAs, Reserve Bank of India recently identified 12 accounts for Insolvency and Bankruptcy Code (IBC) proceedings with each of them having over Rs 5,000 crore of outstanding loans, accounting for 25 per cent of total NPAs of banks.

He further talking on the issue of merger of a weak bank with a strong bank said that consolidation of public sector banks (PSBs) is necessary, also because the pool of talented people who have the specialisation of running the banking business is limited one. The finance ministry has sought help of NITI Aayog and global consultancy firms to examine the possibility of next round of consolidation of PSU banks with an aim to create a few lenders of global size and scale.

The CNX Nifty is currently trading at 9789.60, up by 78.80 points or 0.81% after trading in a range of 9752.10 and 9793.55. There were 36 stocks advancing against 15 stocks declining on the index.

The top gainers on Nifty were Cipla up by 5.86%, Adani Ports & Special Economic Zone up by 3.31%, Tata Steel up by 2.98%, HDFC up by 2.93% and Eicher Motors up by 2.81%.

On the flip side, BPCL down by 2.26%, Bosch down by 1.87%, Dr. Reddy’s Lab down by 1.06%, Kotak Mahindra Bank down by 0.62% and Bharti Airtel down by 0.59% were the top losers.

The Asian markets were trading mostly in green; FTSE Bursa Malaysia KLCI increased 3.56 points or 0.2% to 1,770.52, KOSPI Index increased 14.82 points or 0.64% to 2,334.53, Shanghai Composite increased 19.22 points or 0.6% to 3,227.76, Jakarta Composite increased 23.19 points or 0.4% to 5,789.33 and Hang Seng increased 289.7 points or 1.08% to 27,173.21.

On the other hand, Nikkei 225 decreased 190.16 points or 0.96% to 19,539.58 and Taiwan Weighted decreased 85.03 points or 0.82% to 10,244.54.