Markets trade flat; IT, TECK stocks major losers

Indian equity benchmarks traded flat in late morning session amid weak Asian markets. The markets were under pressure by index heavyweights Infosys, Hindustan Unilever and Cipla. Some anxiety spread among the investors with the private report stating that India's foreign exchange reserves are expected to hit $400 billion by September, driven by robust capital inflows and weak credit offtake. On the sectoral front, pharma companies’ shares were trading lower with the report that Indian Pharmaceutical Alliance, the lobby group that represents large Indian drug makers on Friday called the Draft Pharmaceutical Policy 2017 as damaging further slowing down growth and profitability of the industry. Meanwhile, leading bourse BSE has asked market participants to exercise greater caution against unsolicited SMSes providing stock trading tips as regulators step up the vigil to prevent investors from being duped.

On the global front, Asian markets were trading mostly in red, as investors digested the ouster of White House chief strategist Steve Bannon by U.S. President Donald Trump and the start of joint military drills by the U.S. and South Korea today. Back home, in scrip specific development, Blue Star traded jubilantly after the company won prestigious Mechanical, Electrical and Plumbing (MEP) orders of over Rs 500 crore for Sands Infinit, SmartCity Kochi; My Home Divija, Hitec City, Hyderabad; Tower A, Ritz-Carlton, Mumbai; and others.

The BSE Sensex is currently trading at 31521.07, down by 3.61 points or 0.01% after trading in a range of 31458.26 and 31641.81. There were 17 stocks advancing against 14 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.02%, while Small cap index was up by 0.10%.

The top gaining sectoral indices on the BSE were Metal up by 1.35%, Bankex up by 0.53%, Consumer Durables up by 0.51%, PSU up by 0.51% and Basic Materials up by 0.44%, while IT down by 0.83%, TECK down by 0.71%, Power down by 0.21%, Healthcare down by 0.21% and Utilities down by 0.11% were the top losing indices on BSE.

The top gainers on the Sensex were Coal India up by 1.93%, ICICI Bank up by 1.52%, Axis Bank up by 1.42%, ONGC up by 1.24% and Tata Steel up by 0.96%. On the flip side, Infosys down by 3.17%, Cipla down by 1.22%, Hindustan Unilever down by 1.16%, Lupin down by 0.98% and Adani Ports & SEZ down by 0.83% were the top losers.

Meanwhile, Reserve Bank of India (RBI) governor Urijit Patel has said that public sector banks (PSBs) will require a higher recapitalization to resolve the non-performing assets (NPAs) issue in a time-bound manner as bad loans at 9.6 percent of the system is not acceptable. He noted that since the balance sheet of most state-run banks are not healthy enough to take large haircuts, which is need for any bad loan resolution, the other option is recapitalization.

Observing that Gross NPA ratio of the banking system was 9.6% of total lending and stressed advances ratio at 12% as of March 2017, he said the persistently high ratio in the past few years was a matter of concern. Besides, he pointed out that as much as 86.5 percent of gross NPAs are accounted by large borrowers that are defined as borrowers with aggregate exposure of Rs 5 crore and above. He also highlighted the need for swift time bound resolution or liquidation of stressed assets will be critical for de-logging the balance sheet and for efficient reallocation of bank capital.

Adding further, RBI governor has said that government and the RBI are in discussion to prepare a package of measures to enable state-run banks to shore up the necessary capital in a time bound manner. He noted that the measures will include a combination of capital raising from market, dilution of government holding, additional capital infusion by government, merger with strategic fit and sale of non-core assets. He also said that government and the RBI have been working together to comprehensively address the NPA issue through a multi-pronged approach.

The CNX Nifty is currently trading at 9846.10, up by 8.70 points or 0.09% after trading in a range of 9827.45 and 9884.35. There were 31 stocks advancing against 18 stocks declining on the index, while 2 stocks remained unchanged.

The top gainers on Nifty were Coal India up by 2.03%, Axis Bank up by 1.48%, ICICI Bank up by 1.47%, Vedanta up by 1.31% and Tech Mahindra up by 1.17%. On the flip side, Infosys down by 3.17%, Hindustan Unilever down by 1.21%, Cipla down by 1.19%, Asian Paints down by 0.94% and Adani Ports & SEZ down by 0.88% were the top losers.

Asian markets were trading mostly in red; Nikkei 225 decreased 62.91 points or 0.32% to 19,407.50, Jakarta Composite decreased 31.29 points or 0.53% to 5,862.55, FTSE Bursa Malaysia KLCI decreased 3.2 points or 0.18% to 1,773.02 and KOSPI Index decreased 2.23 points or 0.09% to 2,356.14.

On the flip side, Taiwan Weighted increased 5.06 points or 0.05% to 10,326.39, Shanghai Composite increased 11.91 points or 0.36% to 3,280.64 and Hang Seng increased 147.7 points or 0.55% to 27,195.27.