Benchmarks continue weak trade; Sensex below 33,000 mark

Indian equity benchmarks continued their weak trade in morning session on account of selling in frontline counters amid volatility ahead of expiry of October derivative contracts later today. The rupee opened higher against dollar on account of selling of American currency by banks and corporate. Foreign Institutional Investors (FIIs) on Wednesday bought shares worth Rs 3,582.5 crore, the highest amount of investment in a single day since June 13, 2017. However, domestic institutional investors preferred to book some profits yesterday as they have been infusing money and supporting the market. They sold shares worth Rs 155.71 crore, as per provisional data available on the NSE. The sentiments were dampened after on Wednesday Chief Economic Adviser Arvind Subramanian said that bad loans and stressed assets in Indian Banks are estimated at Rs 10 lakh crore ($153.49 billion). The government announced a Rs 2.11 lakh crore recapitalization plan for its state-owned banks over the next two years, in a bid by Prime Minister Narendra Modi to tackle a major drag on the economy that has frustrated his attempts to boost growth.

Separately, a recent poll showed that India’s economy will likely grow at its slowest pace in four years this fiscal year, as a currency ban and the new Goods and Services Tax (GST) have disrupted business activity and dampened consumer demand. The poll enlightened that Asia’s third-largest economy will grow at 6.7 percent in the fiscal year ending March 2018, the slowest since the new methodology of measuring gross domestic product (GDP) was introduced in the 2014-15 fiscal year. The downside was capped, as some solace came after Arvind Subramanian, chief economic adviser (CEA) in the finance ministry, has suggested that measures such as privatization, 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.

Meanwhile, PSU banking stocks were under pressure as the government’s capital infusion for public sector banks means that consolidation of these lenders is now on the back burner and could be delayed to after elections in 2019. Select steel stocks were buzzing 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.

Traders were seen piling up position in Capital Goods, Oil & Gas and Metal stock, while selling was witnessed in Telecom, Power and FMCG sector stocks. In scrip specific development, Polaris Consulting & Services was locked at upper circuit after the IT Company told stock exchanges that its board would meet on October 31 to consider delisting of its equities. The company said it will appoint a SEBI registered merchant banker for carrying out due diligence as required in terms of Regulation of the SEBI delisting Regulations. Shares of Jaiprakash Associates plunged after the Supreme Court on Wednesday declined to allow the company to hive-off the rights of multi-crore six-lane Yamuna Expressway connecting Greater Noida with Agra in Uttar Pradesh. However, the court extended the time from October 27 to November 5 for Jaiprakash Associates to deposit Rs 2,000 crore.

On the global front, Asian markets were trading mostly in red. South Korea’s economy clocked its fastest growth in seven years last quarter, as global demand for the country’s electronics more than offset the impact of regional geopolitical strains on trade and boosted expectations for an imminent interest rate rise. Gross domestic product rose 1.4 percent in the third quarter from the previous quarter. Back home, the BSE Sensex and NSE Nifty were trading below the psychological 33,000 and 10,300 levels respectively. The market breadth on BSE was negative in the ratio of 1056:1127, while 110 scrips remained unchanged.

The BSE Sensex is currently trading at 32950.14, down by 92.36 points or 0.28% after trading in a range of 32835.06 and 33074.91. There were 14 stocks advancing against 17 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.06%, while Small cap index was up by 0.30%.

The top gaining sectoral indices on the BSE were Capital Goods up by 1.67%, Oil & Gas up by 1.38%, Metal up by 1.21%, PSU up by 0.77% and Industrials up by 0.68%, while Telecom down by 0.59%, Power down by 0.38%, FMCG down by 0.35%, TECK down by 0.33% and Bankex down by 0.22% were the top losing indices on BSE.

The top gainers on the Sensex were Larsen & Toubro up by 2.45%, Cipla up by 1.42%, Kotak Mahindra Bank up by 1.29%, Coal India up by 1.19% and Tata Steel up by 1.10%.

On the flip side, ICICI Bank down by 2.21%, HDFC down by 2.08%, Power Grid down by 1.93%, Hindustan Unilever down by 1.12% and Asian Paints down by 1.07% were the top losers.

Meanwhile, a day after government announced a Rs 2.11 lakh crore recapitalisation plan for state-run banks to boost growth, Chief Economic Adviser Arvind Subramanian has said that India ideally should have 5-7 large banks, both public sector and private sector that are able to compete domestically and be competitive globally. Citing example of China, he said that there are four big banks which are now amongst biggest in the world.

Talking about the recapitalisation, Subramanian has stated it must be selective and incentive based, directing it to those banks where the bank for buck in terms of new credit creation will be maximum. He also said that since all banks must maintain a minimum capital adequacy, one possibility would be to recapitalise the unviable banks only to the extent necessary to finance their current balance sheet size while explicitly not providing for their growth.

CEA further said that the interest burden of recapitalisation bonds on the government would be around Rs 9,000 crore though they will not have any inflationary implications for the economy. He also believes that adding bonds would help bring down bad loans in the banks and strengthen their balance sheet and prop up credit growth. Further, he noted that first, the true fiscal cost of issuing the Rs 1.35 lakh crore recapitalisation bonds is the interest payment of about Rs 8,000-9,000 crore. However, he said that cost can be offset by the confidence impact of addressing the critical economic bottleneck, thereby increasing credit supply, private investment and growth. 

The CNX Nifty is currently trading at 10277.95, down by 17.40 points or 0.17% after trading in a range of 10271.85 and 10294.20. There were 27 stocks advancing against 23 stocks declining on the index.

The top gainers on Nifty were BPCL up by 3.09%, HPCL up by 2.57%, Larsen & Toubro up by 2.43%, Yes Bank up by 2.34% and Indian Oil up by 2.01%.

On the flip side, Indiabulls Housing Finance down by 3.61%, HCL Tech. down by 3.35%, Power Grid down by 2.27%, ICICI Bank down by 2.19% and HDFC down by 2.06% were the top losers.

The Asian markets were trading mostly in red; Hang Seng decreased 31.1 points or 0.11% to 28,271.79, Taiwan Weighted decreased 12.1 points or 0.11% to 10,738.47, FTSE Bursa Malaysia KLCI decreased 2.75 points or 0.16% to 1,736.30 and KOSPI Index decreased 0.24 points or 0.01% to 2,492.26.

On the other hand, Jakarta Composite increased 8.06 points or 0.13% to 6,033.49, Shanghai Composite increased 15.42 points or 0.45% to 3,412.32 and Nikkei 225 increased 47.95 points or 0.22% to 21,755.57.