Markets make optimistic start; Sensex reclaims 33,600 mark

Indian equity benchmarks made an optimistic start on Friday, with frontline gauges recapturing their crucial 33,600 (Sensex) and 10,350 (Nifty) levels in early deals, extending their winning streak to seventh straight session. Sentiments remained up-beat with a private report stating that the slowdown in the economy has bottomed out, and going forward, the pace of recovery will depend on initiatives the government takes to boost the growth momentum, especially private investment. Traders also took some encouragement with the Union minister Suresh Prabhu’s statement that the commerce and industry ministry is chalking out a 'proper' business plan based on market research in its bid to promote exports of goods and services. He added that a proper market segmentation is the need of the hour to understand the potential of domestic goods and services. Some support also came with Sebi’s plan to ease takeover rules to speed up the resolution of insolvency proceedings for stressed companies as local lenders seek to recover about Rs 9 lakh crore from entities rendered unviable by the mounting debt pile.

On the global front, Asian markets were trading mostly in red, though the impact of sudden sell-off that sent Chinese equities plunging was slowly receding. The Japanese market too has made a soft start after a holiday as the yen strengthened. The US markets remained closed in last session on account of Thanksgiving Day holiday, unable to give any cues to the other markets.

Back home, President Ram Nath Kovind has approved an ordinance to introduce changes to the Insolvency and Bankruptcy Code which is aimed at tightening the current framework amid rising number of insolvency cases. Stocks related to public sector oil marketing companies (OMCs) remained in focus, as the government has exempted the merger of oil and gas PSUs from the purview of competition watchdog CCI.

The BSE Sensex is currently trading at 33660.46, up by 72.38 points or 0.22% after trading in a range of 33639.98 and 33701.91. There were 23 stocks advancing against 7 stocks declining on the index, while 1 stock remained unchanged.

The broader indices were trading in green; the BSE Mid cap index gained 0.48%, while Small cap index was up by 0.55%.

The top gaining sectoral indices on the BSE were Consumer Durables up by 0.64%, Energy up by 0.63%, IT up by 0.54%, Industrials up by 0.54% and Telecom was up by 0.52%, while Metal down by 0.46% and Realty was down by 0.13% were the only losing indices on BSE.

The top gainers on the Sensex were Bajaj Auto up by 1.30%, Infosys up by 1.02%, Reliance Industries up by 0.84%, Cipla up by 0.83% and Kotak Mahindra Bank up by 0.73%. On the flip side, Hindustan Unilever down by 1.11%, Adani Ports down by 0.76%, Tata Steel down by 0.66%, Asian Paints down by 0.54% and Wipro down by 0.53% were the top losers.

Meanwhile, credit ratings agency, Crisil Ratings in its latest report has said that in India bank credit to the micro, small and medium enterprises (MSME) sector, whose current market size is estimated at around Rs 14 lakh crore, is likely to expand at 11% compound annual growth rate (CAGR) over the next two financial years. It added that this is way faster than the 7% anticipated growth in bank credit to India Inc.

The rating agency said that over the past five fiscals ending 2017, non-banking finance companies recorded a four-fold increase in their credit book to MSMEs. Consequently, their cumulative market share in MSME financing rose to 18% in fiscal 2017 from 8% five years ago. It added that this will rise to over 20% in two years. Lenders have been trying to protect their return on assets by focusing on smaller loans, where yields are higher, and on unsecured loans. For NBFCs, unsecured loans account for 20% of the MSME portfolio as of March 2017. However, the report noted that while competition has intensified and asset quality has weakened, the overall opportunity remains compelling, given the huge under-penetration of formal finance in the MSME segment. Moreover, structural changes such as the goods and services tax will increase transparency in MSME financials.

Crisil Ratings further said that asset quality of MSME loans worsened due to demand side pressure and liquidity issues after note ban. Over the course of fiscal 2017, gross non-performing assets across lenders rose by 70-100 bps. With GST compounding the challenges for MSMEs, especially the unorganised lot, the overall asset quality picture will likely deteriorate before improving. It also said the competitiveness of MSMEs would be determined by the extent of tax avoidance, their position in the value chain, labour cost arbitrage, product offering, local market knowledge and proximity to customer.

The CNX Nifty is currently trading at 10380.45, up by 31.70 points or 0.31% after trading in a range of 10362.25 and 10383.85. There were 38 stocks advancing against 12 stocks declining on the index.

The top gainers on Nifty were Tech Mahindra up by 1.59%, Indusind Bank up by 1.55%, Aurobindo Pharma up by 1.44%, Bajaj Finance up by 1.28% and Bajaj Auto up by 1.21%. On the flip side, Zee Entertainment down by 1.12%, Hindustan Unilever down by 1.01%, Hindalco down by 0.92%, Tata Steel down by 0.81% and Adani Ports down by 0.76% were the top losers.

Asian markets were trading mostly in red; Jakarta Composite decreased 19.78 points or 0.33% to 6,043.47, Shanghai Composite declined 19.64 points or 0.59% to 3,332.28, Nikkei 225 slipped 6.01 points or 0.03% to 22,517.14, FTSE Bursa Malaysia KLCI shed 5.14 points or 0.3% to 1,716.13 and Taiwan Weighted was down by 1.88 points or 0.02% to 10,852.69.

On the flip side, KOSPI Index increased 4.48 points or 0.18% to 2,541.63 and Hang Seng was up by 96.17 points or 0.32% to 29,804.11.