Benchmarks extend gains in morning session

Indian equity benchmarks extended their gains in morning session on account of buying tracking positive global cues. The rupee opened lower against the dollar as the American unit came in a few notches higher overseas amid foreign capital outflow. The street is expecting that as promised in the previous Budgets, corporate tax rates are expected to come down on competitive pressure from global economies who have already reduced the tax rate which is closer to 20%. Sentiments remained up-beat with Reserve Bank of India in its latest edition of the Financial Stability Report enlightened that while the stress in the banking sector remains elevated, it appears to be bottoming out. Some support also came with Chairman of the Economic Advisory Council to the Prime Minister (EAC-PM) Bibek Debroy’s statement that India is expected to be a $6.5-7 trillion economy by 2030, and at the current exchange rate it would touch $ 10 trillion by 2035-40. He said that India will be remarkably different country as the size of its economy will enhance the country's role in global affairs. The street shrugged off the IMF report that India’s financial sector is facing considerable challenges with high non-performing assets and slow deleveraging and repair of corporate balance sheets testing the resilience of the banking system and holding back growth.

Meanwhile, investors took note of Finance minister Arun Jaitley’s statement that depositors’ money in public sector banks will be protected and there is no need to create any fear psychosis, as he hit out at the previous UPA government for non-performing loans. Jaitley added that 7-8% growth has become the new normal for the country and the recent decline in growth was due to the structural reforms by the government. Separately, CRISIL report highlighted that warehousing cost for consumer durables and FMCG is likely to reduce by 25-50% mainly on the back of the implementation of the Goods and Services Tax (GST) regime even as states like Haryana and Assam are set to emerge as new hubs. Consequently, the number of warehouses for consumer durables company could reduce to 10-12 from a typical 25-30 and to 30-35 from 45-50 for FMCG companies.

Traders were seen piling up position in Telecom, Realty and Power sector stocks. In scrip specific development, DB Realty and Unitech were trading in green after yesterday all accused in 2G case were acquitted by a special court. Former telecom minister A Raja and DMK MP Kanimozhi were acquitted by a special court in the 2G spectrum scam case. Others acquitted in the case are former telecom secretary Siddharth Behura, Raja’s erstwhile private secretary R K Chandolia, Swan Telecom promoters Shahid Usman Balwa and Vinod Goenka, Unitech MD Sanjay Chandra and three top executives of Reliance Anil Dhirubhai Ambani Group (RADAG) -- Gautam Doshi, Surendra Pipara and Hari Nair.

On the global front, Asian markets were trading mostly in green. Japanese Prime Minister Shinzo Abe’s cabinet endorsed a record $860 billion budget for fiscal 2018, opting to keep the economy on a sustained recovery with aggressive monetary stimulus and putting fiscal reforms on the back burner again. Back home, the BSE Sensex and NSE Nifty were trading above the psychological 33,900 and 10,450 levels respectively. The market breadth on BSE was positive in the ratio of 1578:702, while 137 scrips remained unchanged.

The BSE Sensex is currently trading at 33916.35, up by 160.07 points or 0.47% after trading in a range of 33767.73 and 33917.71. There were 22 stocks advancing against 9 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.53%, while Small cap index was up by 0.87%.

The top gaining sectoral indices on the BSE were Telecom up by 1.12%, Realty up by 1.07%, Power up by 0.99%, Capital Goods up by 0.99% and Utilities up by 0.93%, while there were no losers on BSE.

The top gainers on the Sensex were ONGC up by 2.13%, SBI up by 2.08%, Bharti Airtel up by 2.03%, Tata Motors - DVR up by 1.77% and Maruti Suzuki up by 1.53%.

On the flip side, Bajaj Auto down by 0.60%, Coal India down by 0.54%, Power Grid down by 0.54%, IndusInd Bank down by 0.45% and Dr. Reddy’s Lab down by 0.35% were the top losers.

Meanwhile, the International Monetary Fund’s (IMF) Executive Board after discussing the Financial System Stability Assessment (FSSA) of India, has flagged a persistent risk to India’s banking system. In its report it has said that India's financial sector is facing considerable challenges with high non-performing assets and slow deleveraging and repair of corporate balance sheets testing the resilience of the banking system and holding back growth.

IMF said that India’s key banks appear resilient, but the system is subject to considerable vulnerabilities. Further noting that the country's financial system is undergoing a gradual structural shift, with a greater role for non-bank intermediaries and higher recourse to market funding for large corporate, it said that financial system assets equal about 136 percent of GDP, close to 60 percent of which reflect banks’ assets. It added that the state retains an important footprint in the system via ownership of large financial institutions, captive government financing, and directed credit to priority sectors.

The multilateral institution urged the Indian government to consider privatizing weak public sector banks (PSBs) by selling their viable assets rather than merging them with stronger banks, since that would undermine the viability of the acquirer. It also recommended increasing the central bank’s independence, expanding other financial regulators’ resources, introducing a risk-based solvency regime, and enhancing safety net measures such as deposit insurance and emergency liquidity assistance to improve financial stability.

The FSSA conducted jointly by a team of the IMF and the World Bank, aims at having a very comprehensive and in-depth view of the financial system in countries with big systemic financial systems. The last FSSA for India was done in 2011. The stress tests conducted by IMF experts covered the 15 largest banks, including 12 PSBs, which account for 71% of the banking sector assets.

The CNX Nifty is currently trading at 10480.60, up by 40.30 points or 0.39% after trading in a range of 10448.25 and 10483.30. There were 31 stocks advancing against 19 stocks declining on the index.

The top gainers on Nifty were Bharti Airtel up by 2.29%, ONGC up by 2.23%, SBI up by 1.91%, Maruti Suzuki up by 1.46% and GAIL India up by 1.20%.

On the flip side, Lupin down by 0.92%, Bajaj Auto down by 0.80%, HCL Tech. down by 0.74%, Coal India down by 0.52% and Power Grid down by 0.42% were the top losers.

The Asian markets were trading mostly in green; FTSE Bursa Malaysia KLCI increased 0.46 points or 0.03% to 1,751.67, Shanghai Composite increased 4.42 points or 0.13% to 3,304.48, KOSPI Index increased 9.15 points or 0.38% to 2,438.98, Taiwan Weighted increased 18.46 points or 0.18% to 10,507.43, Nikkei 225 increased 22.14 points or 0.1% to 22,888.24 and Hang Seng increased 78.52 points or 0.27% to 29,445.58.

On the other hand, Jakarta Composite decreased 11.3 points or 0.18% to 6,172.09.