Benchmarks continue to trade in green

Indian equity benchmarks continued their modest trade in green in morning session on account of buying in frontline counters. Traders took some encouragement with credit rating agency Fitch’s report that the recent recapitalization plan announced by the government for public sector banks will provide substantial funds to the lenders to address the capital shortages that has a major negative impact on their ratings. Some support also came after Department of Industrial Policy and Promotion (DIPP) Secretary Ramesh Abhishek expressed hope that India’s ranking is likely to improve significantly in the World Bank’s ease of doing business report, as they have worked very hard. The government’s optimism regarding the improvement in India’s rank comes on the back of reforms taken to improve the efficiency in granting construction permits, starting a business and resolving insolvency.

Investors took note of Niti Aayog CEO Amitabh Kant’s statement who pitched for channeling insurance and pension funds for financing infrastructure projects as also for a complete re- examination of the Viability Gap Funding (VGF) scheme. Separately, the government think-tank Niti Aayog has recommended strategic disinvestment of 34 sick public sector units so far. The Prime Minister’s Office (PMO) had asked the think- tank to look into the viability of sick state-run companies. The government has budgeted to raise Rs 72,500 crore through stake sale in PSUs in the current fiscal.

Traders were seen piling up position in Industrials, Capital Goods and Power stock, while selling was witnessed in Telecom, Oil & Gas and Bankex sector stocks. In scrip specific development, non-banking finance company L&T Finance was trading in green on reporting 45% jump in net profit in the second quarter, aided by expansion in fee income. During the quarter ended September, consolidated profit grew to Rs 360 crore. Yes Bank was trading in red as a sharp increase in provisions due to a Reserve Bank of India’s direction to recognize some loans as non-performing, moderated the bank’s profits. The bank reported a 25% jump in net profit for the second quarter ended September 2017 mainly due to a rapid growth in advances and a rise in fee income.

On the global front, Asian markets were trading mostly in green. Japan’s core consumer prices marked a ninth straight month of annual gains in September but failed to accelerate from the previous month, underscoring the central bank’s huge task as it struggles to meet an ever-elusive 2% inflation target. Back home, the BSE Sensex and NSE Nifty were trading above the psychological 33,200 and 10,300 levels respectively. The market breadth on BSE was positive in the ratio of 1412:825, while 121 scrips remained unchanged.

The BSE Sensex is currently trading at 33213.41, up by 66.28 points or 0.20% after trading in a range of 33169.48 and 33270.62. There were 21 stocks advancing against 10 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.51%, while Small cap index was up by 0.68%.

The top gaining sectoral indices on the BSE were Industrials up by 0.95%, Capital Goods up by 0.94%, Power up by 0.79%, Utilities up by 0.77% and FMCG up by 0.76%, while Telecom down by 3.54%, Oil & Gas down by 0.66%, Bankex down by 0.63%, Energy down by 0.62% and TECK down by 0.60% were the top losing indices on BSE.

The top gainers on the Sensex were Adani Ports & Special Economic Zone up by 5.56%, Kotak Mahindra Bank up by 2.05%, ITC up by 1.56%, Cipla up by 1.39% and Tata Motors - DVR up by 1.30%.

On the flip side, Bharti Airtel down by 3.89%, Wipro down by 1.67%, SBI down by 1.59%, Hindustan Unilever down by 1.11% and ICICI Bank down by 1.07% were the top losers.

Meanwhile, global rating agency, Fitch ratings in its latest report has said that the government’s Rs 2.1 lakh crore recapitalisation plan for public sector banks (PSBs) is positive for banks’ ratings. It also highlighted that the move will provide substantial funds to the lenders to address the capital shortages that have a major negative influence on the viability ratings of the banks. It also noted that Indian banks’ viability ratings would come under more pressure if their capital shortage problem is not addressed.

As per the report, the government’s plan is to provide capital to all banks that need it, which carries some risk of encouraging moral hazard. However, it said that the size of capital allocations is to be determined by performance, which suggests the largest share will go to stronger banks, while some banks particularly smaller, struggling ones could still be swept up into the government’s consolidation agenda. The report further said that recapitalisation bond if issued by the government could affect its target to reduce central fiscal deficit to 3.2 per cent of GDP this year.

Adding further, Fitch ratings  has enlightened that the recapitalisation plans could make this target more difficult to achieve if recapitalisation bonds are to be issued by the central government, which might mean expenditure cuts elsewhere. It indicated that recapitalisation bonds would still imply contingent liabilities for the government if they are instead issued by quasi-government institutions. It also mentioned that from a sovereign rating perspective, the additional pressure on fiscal balances could be more than offset by the beneficial impact recapitalisation may have in eventually helping to return the banking sector to health, which would support the longer-term economic outlook and reduce uncertainty.

The CNX Nifty is currently trading at 10349.00, up by 5.20 points or 0.05% after trading in a range of 10336.85 and 10366.15. There were 31 stocks advancing against 19 stocks declining on the index.

The top gainers on Nifty were Adani Ports & Special Economic Zone up by 5.38%, Bajaj Finance up by 3.33%, Kotak Mahindra Bank up by 2.06%, Aurobindo Pharma up by 1.88% and ITC up by 1.58%.

On the flip side, Yes Bank down by 6.69%, Bharti Infratel down by 5.19%, HPCL down by 3.98%, Bharti Airtel down by 3.94% and Indian Oil down by 2.50% were the top losers.

The Asian markets were trading mostly in green; Shanghai Composite increased 8.08 points or 0.24% to 3,415.65, FTSE Bursa Malaysia KLCI increased 10.47 points or 0.6% to 1,747.27, KOSPI Index increased 14.12 points or 0.57% to 2,494.75, Hang Seng increased 231.29 points or 0.82% to 28,433.67 and Nikkei 225 increased 245.15 points or 1.13% to 21,984.93.

On the other hand, Taiwan Weighted decreased 16.51 points or 0.15% to 10,718.25 and Jakarta Composite decreased 3.38 points or 0.06% to 5,992.47.