Geo-political worries drag benchmarks lower in early deals

Indian equity benchmarks have made a negative start on Friday as geo-political worries resurfaced with North Korea’s new provocative move of firing another ballistic missile over Japan. Sentiments also remained dampened with SBI research report stating that country’s GDP is likely to remain below 6 percent in the second quarter of 2017-18 owing to muted agriculture growth and sluggish performance of manufacturing and mining sector. Meanwhile, a United Nations report has said that effects of demonetisation and rollout of the Goods & Services Tax regime on the informal sector and reduction in pace of credit creation may affect India’s growth prospects and the country unlikely to serve as the “growth pole’’ for the global economy in the near future.

Global cues too remained somber with Asian counters trading mostly in red at this point of time, as traders reacting negatively to the latest North Korean provocation, as it fired missile over Japan after UN sanctions. The US markets made a mixed closing in the last session and while the Dow climbed to a new record closing high, the Nasdaq and S&P 500 ended in negative territory.

Back home, textile stocks remained in focus, as the Textile Commissioner has said that country’s technical textile market has huge growth potential and it is expected to grow at 12 per cent per annum to reach $23 billion (Rs 1,50,000 crore) in 2020. Meanwhile, the market breadth indicating the overall health of the market was weak, with 658 shares gaining and 1,241 shares declining, while a total of 81 shares were unchanged.

The BSE Sensex is currently trading at 32191.46, down by 50.47 points or 0.16% after trading in a range of 32140.86 and 32245.28. There were 10 stocks advancing against 21 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index shed 0.43%, while Small cap index was down by 0.44%.

The few gaining sectoral indices on the BSE were Telecom up by 1.24%, TECK up by 0.59% and IT was up by 0.54%, while Power down by 1.32%, Utilities down by 0.90%, Realty down by 0.89%, Healthcare down by 0.78% and Basic Materials was down by 0.71% were the top losing indices on BSE.

The top gainers on the Sensex were ONGC up by 3.51%, Infosys up by 1.25%, Coal India up by 1.04%, Bharti Airtel up by 0.92% and Adani Ports & SEZ up by 0.60%. On the flip side, Power Grid down by 1.73%, Sun Pharma down by 1.38%, Axis Bank down by 1.11%, Cipla down by 1.04% and Dr. Reddy’s Lab down by 0.89% were the top losers.

Meanwhile, credit ratings agency, Crisil Ratings in its latest report has estimated the gross non-performing assets (NPAs) in the banking system to increase by 1 percentage point to 10.5% of advances as of March 2018, up from 9.5% as of March 2017. It said that about two-thirds of the overall stressed assets in the banking system has already been recognised by banks as NPAs as on March 31, 2017. It also estimates the total amount of stressed loans, which includes NPAs and standard assets that are under pressure currently and could deteriorate into NPAs, to be at Rs 11.5 trillion or 14% of the system and added that infrastructure, power, engineering, and construction sectors contribute bulk of the stressed assets.

Crisil Ratings has said that the assets under pressure mostly comprise not-yet-recognised bad loans (recognised as NPA in one bank, but not in others), restructured standard accounts, and stressed assets structured under the Reserve Bank of India resolution schemes such as SDR (strategic debt restructuring), 5:25 refinancing and S4A (Scheme for Sustainable Structuring of Stressed Assets). It also said that faster resolution of stressed accounts through the Insolvency and Bankruptcy Code and various structuring schemes, is critical to improving the asset quality of banks. The report, however, said over the medium-term, a big increase in stressed loans is unlikely on factors like higher commodity prices, lower interest rates, improved capital structure, and efficiency gains for corporates.

The rating agency further said that with the majority of stressed assets now recognised as NPAs, rest of the corporate loan portfolio of banks can be expected to perform better over the medium-term. It also said there will be asset quality deterioration in loans to small businesses and farmers, which are impacted due to introduction of the goods and services tax and demonetisation, and debt waivers, respectively. But it said this is unlikely to put pressure on bank balance-sheets the way large exposures are doing. The agency expects that fresh NPA creation will decelerate this fiscal, but the overall stock would continue to rise because slippages would still outpace recoveries.

The CNX Nifty is currently trading at 10058.60, down by 28.00 points or 0.28% after trading in a range of 10044.50 and 10083.90. There were 14 stocks advancing against 37 stocks declining on the index.

The top gainers on Nifty were ONGC up by 3.70%, Bharti Infratel up by 2.96%, Infosys up by 1.22%, Coal India up by 1.00% and Bharti Airtel up by 0.76%. On the flip side, Power Grid down by 2.10%, Sun Pharma down by 1.54%, Vedanta down by 1.49%, Tata Power down by 1.47% and BPCL down by 1.35% were the top losers.

Asian markets were trading mostly in red; Shanghai Composite decreased 10.79 points or 0.32% to 3,360.63, Jakarta Composite slipped 5.35 points or 0.09% to 5,846.66, KOSPI Index shed 4.28 points or 0.18% to 2,373.38, FTSE Bursa Malaysia KLCI dipped 2.83 points or 0.16% to 1,778.54 and Taiwan Weighted was down by 2.48 points or 0.02% to 10,551.09.

On the flip side, Hang Seng increased 84.22 points or 0.3% to 27,861.42 and Nikkei 225 was up by 92.01 points or 0.46% to 19,899.45.