Markets hit fresh record closing highs; eke out slender gains

Extending winning streak for fourth straight day, Indian equity benchmarks once again settled at fresh record closing high levels, though gains remained minimal with traders turning cautious ahead of the corporate results season kicking in this week. Markets traded mostly in green during the day with traders taking some support from report that the Commerce and Industry Ministry is mulling incentives for States that play a proactive role in promoting exports as it will help boost economic growth. However, markets entered into red in noon deals with sentiments turning down-bear with report that Moody’s Investors Service and its Indian arm ICRA in a joint report have flagged anxiety about the growing delinquencies in the affordable housing segment, which are expected to continue in the calendar year 2018. Sentiments also remained dampened with the rating agency Crisil attributing the continuing slowdown to the after-effects of the demonetisation exercise, the Goods and Services Tax (GST) implementation and weakness in agriculture, rating agency, CRISIL in its latest report has maintained its projection of India's economic growth in 2018-19 to 7.6 percent on the low base.

Recovery in last leg of trade mainly helped markets to end at fresh record closing high levels with traders taking some solace with report that the government’s revenue collection continued its rising trend, mainly on account of income tax mop-up from individuals. India’s net direct tax collections, which are made up of personal and corporate taxes, rose to Rs 6.56 lakh crore during the April-December period of the financial year 2018. The collection indicates that 67% of the annual budget target of direct taxes (Rs 9.8 lakh crore) has been achieved.

Firm opening in European counters too provided some support to domestic markets amid investors eyeing the release of a number of economic reports out of the euro zone. The unemployment rate in the euro zone fell as expected in November. Asian markets exhibited mixed trend, while the yen stole the currency spotlight and jumped after the Bank of Japan’s slight reduction to its bond purchases reminded investors that it will eventually normalize policy.

Back home, companies related to FMCG space edged higher with a private report stating that in the next 12 months, consumer goods companies would see a revival, both in volume and margin terms, with an anticipated revival in the rural sector. Cigarette stocks too edged higher despite the Supreme Court staying a Karnataka High Court order quashing 85% pictorial warnings on packs containing such products. However, select stocks in housing loans and banking space remained under pressure after a report flagged concerns about the growing delinquencies in affordable housing segment.

Finally, the BSE Sensex gained 90.40 points or 0.26% to 34,443.19, while the CNX Nifty was up by 13.40 points or 0.13% to 10,637.00.

The BSE Sensex touched a high and a low of 34,488.03 and 34,343.41, respectively and there were 13 stocks on gaining side as against 18 stocks on losing side on the index.

The broader indices ended mixed; the BSE Mid cap index declined 0.40%, while Small cap index was up by 0.08%.

The top gaining sectoral indices on the BSE were Realty up by 2.88%, Energy up by 1.08%, Consumer Durables up by 0.81%, FMCG up by 0.45% and IT was up by 0.32%, while Telecom down by 1.35%, Utilities down by 0.67%, Power down by 0.64%, Healthcare down by 0.63% and Auto was down by 0.39% were the top losing indices on BSE.

The top gainers on the Sensex were Coal India up by 5.63%, Yes Bank up by 2.31%, Wipro up by 2.11%, ITC up by 1.94% and Reliance Industries up by 1.34%. On the flip side, Bharti Airtel down by 1.18%, Adani Ports & SEZ down by 1.13%, Hero MotoCorp down by 0.91%, Sun Pharma down by 0.86% and NTPC down by 0.73% were the top losers.

Meanwhile, even as the government is giving a strong push to the affordable housing segment, the global credit rating agency, Moody’s Investors Service and its Indian arm ICRA in a joint report have flagged anxiety about the growing delinquencies in this segment, which are expected to continue in the calendar year 2018. It pointed out that factors like intensifying competition-- resulting in some easing in lending standards and a higher share of lending to the self-employed segment are the key reasons for the build-up of stress in the segment.

The report has indicated that while asset quality remains robust in the traditional housing segment, the non-performing assets in the affordable housing segment have inched up in recent times to around 1.8% on an average as of September 2017. It noted that the average cum 90+ days past due level for affordable housing was nearly seven times the level observed for traditional housing loan pools. Besides, it highlighted that the government is targeting to ensure that there is a house for all by 2022 and has provided a lot of incentives for the affordable housing segment, including making it as a priority sector lending for banks and huge interest subvention and direct cash subsidy. However, it said that housing loans continue to be seen as the best performing retail loan asset class in the country, demonstrating low and stable delinquencies over the years, in 2018.

The rating agency further said that this is possible because of the underlying collateral, which is self-occupied residential property, absence of steep correction in property prices and moderate loan to value ratios. It noted that introduction of the goods and services tax (GST) in July 2017 and demonetization have placed stress on the small- and medium-sized enterprises (SMEs) sector. It added that the impact of demonetisation and new tax regime implementation will lead to higher delinquencies in asset-backed securities (ABS) for loans against property (LAP) to SMEs. However, it said auto ABS-backed by commercial vehicles loans will remain stable on the back of healthy domestic economic growth.

The CNX Nifty traded in a range of 10,659.15 and 10,603.60. There were 19 stocks in green as against 31 stocks in red on the index.

The top gainers on Nifty were Coal India up by 5.76%, Yes Bank up by 2.37%, ITC up by 1.75%, Wipro up by 1.33% and Reliance Industries up by 1.23%. On the flip side, Zee Entertainment down by 2.22%, Eicher Motors down by 2.01%, Bharti Infratel down by 1.59%, Hindalco down by 1.47% and Bajaj Finance down by 1.46% were the top losers.

European markets were trading in green; UK’s FTSE 100 increased 28.53 points or 0.37% to 7,725.04, Germany’s DAX gained 29.98 points or 0.22% to 13,397.76 and France’s CAC was up by 30.82 points or 0.56% to 5,518.24.

Asian equity markets ended mixed on Tuesday as investors digested earnings guidance from tech heavyweight Samsung Electronics and kept an eye on ongoing talks between South Korea and North Korea, the first formal talk between the two Koreas in more than two years. Chinese shares extended gains after central bank data showed China's foreign exchange reserves increased for the eleventh straight month in December. Further, Japanese shares ended higher, with sentiments lifted by record highs on Wall Street overnight and strong December sales reported by clothing company Fast Retailing at its Uniqlo clothing outlets in Japan. Investors shrugged off the yen's strength against the dollar after the Bank of Japan trimmed the size of its bond-repurchase offer in its latest market operation.