Benchmarks make cautious start to F&O expiry day

Indian equity benchmarks have made a cautious start and are trading slightly in red in early deals ahead of F&O series expiry later in the day amid weak global cues. However, downside remained capped, as some solace came after Arvind Subramanian, chief economic adviser (CEA) in the finance ministry, has suggested that measures such as privatisation, selective capital infusion into viable banks, and taking stressed loans off the balance sheet of banks will make the record bailout of state-owned banks, announced by finance minister Arun Jaitley, even more effective.

Global cues remained sluggish with most of the Asian counters trading in red at this point of time following the weakness in US markets overnight with investors assessing earnings and economic data for indications of broadening growth that may sustain gains in global equities. The US markets in the last session went through their worst day in two months, with Dow losing 100 points from its record peak.

Back home, steel stocks shine, as India imposed anti-dumping duty on some cold-rolled flat products of stainless steel from China, the US, South Korea and the European Union, to curb the influx of cheaper imports and help local producers. The duty, which will be in effect until 10 December 2020, exempts certain grades of stainless steel. However, aviation stocks remained under pressure despite reports that Airlines in India carried 95.83 lakh passengers in September, up 16.34% from last September. The January to September passenger traffic was also higher compared to the previous year.

The BSE Sensex is currently trading at 32963.84, down by 78.66 points or 0.24% after trading in a range of 32835.06 and 33074.91. There were 16 stocks advancing against 14 stocks declining on the index, while one stock remained unchanged.

The broader indices were trading in green; the BSE Mid cap index gained 0.03%, while Small cap index was up by 0.20%.

The top gaining sectoral indices on the BSE were PSU up by 1.62%, Metal up by 1.61%, Oil & Gas up by 1.53%, Capital Goods up by 1.46% and Basic Materials was up by 0.74%, while Power down by 0.34%, FMCG down by 0.21%, Healthcare down by 0.20%, Consumer Durables down by 0.18% and Utilities down by 0.14% were the top losing indices on BSE.

The top gainers on the Sensex were Larsen & Toubro up by 2.10%, SBI up by 2.09%, Tata Steel up by 1.52%, Mahindra & Mahindra up by 1.07% and ONGC up by 0.99%. On the flip side, HDFC down by 2.02%, Power Grid down by 1.99%, Asian Paints down by 1.63%, HDFC Bank down by 1.37% and ICICI Bank down by 1.23% were the top losers.

Meanwhile, terming government’s plan to infuse Rs 2.11 lakh crore in public sector banks (PSBs) as ‘significant credit positive’, global rating agency, Moody's Investors Service has said that it will help to address the problem of weak capitalisation. It also said that the quantum of the plan is large enough to comprehensively address these banks' weak capitalisation levels and is a significant credit positive as weak capitalisation is the main credit weakness for most rated public sector banks.

For the 11 rated PSBs, Moody’s estimates that PSBs external capital requirements over the next two years would be around Rs 70,000-95,000 crore, factoring in the two main drivers of their capital needs - the need to comply with Basel III requirements, and for conservative recognition and provisioning of their asset quality problems. It said even if only the recapitalisation bonds and the already announced budgetary support are factored in, the announced capital infusion by the government should be able to comfortably address the capital requirements of the PSBs.

The inability of most of the PSU banks to access the equity capital markets has also been a key constraint on their capital levels. With much greater visibility now on these banks receiving adequate capital from the government, they may also accordingly regain market access. Moody’s further said there is significant scope for the government to reduce its current shareholdings in these banks and still maintain majority ownership.

The government had used the recapitalisation bond route to recapitalise public sector banks. The US-based agency has said that those instruments typically had relatively long maturities and didn’t have much market liquidity. A similar structure this time would have some negative implications for the banks’ liquidity and profitability profiles. It expects that all rated PSBs would get enough capital to satisfy their Basel III capital requirements as well as adequately address their asset quality challenges. It added that while the extent of improvement may vary but it expects the capitalisation profiles of all rated PSBs to improve.

The CNX Nifty is currently trading at 10280.10, down by 15.25 points or 0.15% after trading in a range of 10271.85 and 10294.20. There were 27 stocks advancing against 22 stocks declining on the index, while one stock remained unchanged.

The top gainers on Nifty were HPCL up by 3.23%, BPCL up by 3.15%, Hindalco up by 2.21%, Larsen & Toubro up by 2.14% and SBI up by 2.02%. On the flip side, Indiabulls Housing down by 5.23%, HCL Tech. down by 2.21%, Power Grid down by 2.15%, HDFC down by 2.01% and Asian Paints down by 1.47% were the top losers.

Asian markets were trading mostly in red; Hang Seng decreased 45.72 points or 0.16% to 28,257.17, Taiwan Weighted shed 11.33 points or 0.11% to 10,739.24, FTSE Bursa Malaysia KLCI slipped 2.34 points or 0.13% to 1,736.71 and KOSPI Index was down by 1.04 points or 0.04% to 2,491.46.

On the flip side, Jakarta Composite increased 10.75 points or 0.18% to 6,036.18, Shanghai Composite gained 15.55 points or 0.46% to 3,412.45 and Nikkei 225 was up by 37.47 points or 0.17% to 21,745.09.