Benchmarks continue firm trade; Nifty holds 11,000 mark

Indian equity benchmarks continued their firm trade in morning session on account of buying in front line blue chip counters. The rupee was trading up against the dollar in the early session after the IMF said India is going to get back the tag of fastest-growing major economy soon. Foreign Portfolio Investors (FPIs) bought shares worth a net Rs 1,567.51 crore yesterday, as per provisional data released by the stock exchanges. Domestic institutional investors (DIIs) sold shares worth a net Rs 461.87 crore. Sentiments remained upbeat after the International Monetary Fund (IMF) in its latest World Economic Outlook (WEO) has projected that India will grow at 7.4% in 2018 as against China’s 6.8%, making it the fastest growing country among emerging economies following last year’s slowdown due to demonetization and the implementation of the Goods and Services Tax (GST). It has also projected a 7.8% growth rate for India in 2019. Separately, as per the survey conducted India has emerged as the fifth most attractive market for investments and the optimism over global economic growth is at a record level. The findings come on a day when the rich and powerful are meeting in Davos for the World Economic Forum’s (WEF) annual summit.

Meanwhile, traders also took some encouragement from report that India has moved up on a global index of talent competitiveness to the 81st position, but remains a laggard among the BRICS nations. Investors took note that India’s oil ministry is pushing for a cut in excise duty on petrol and diesel in the upcoming 2018-19 budget to cushion the impact of rising oil prices on its vast consumer base. Prime Minister Narendra Modi, who faces elections in key states later this year, and a nationwide election in early 2019, has faced pressure over a rise in retail prices of petrol and diesel to a record level.

Traders were seen piling up position in Metal, Basic Materials and IT sector stocks. In scrip specific development, Just Dial was trading in green on reporting yet another quarter of steady growth in the top-line as operational revenues for the classifieds marketplace grew 9.2 per cent to come in at Rs 196.8 crore even as the company was able to significantly improve margins. Nath Bio-Genes (India) was trading in green on announcing the opening of the QIP issue on 22 January 2018. The floor price for the QIP issue is Rs 468.89 per share.

On the global front, the Asian markets were trading mostly in green. The yen ticked up slightly after the Bank of Japan kept monetary policy unchanged as expected but made tweaks to its views on inflation that some trader say pointed to a slightly less pessimistic central bank view on consumer prices. Confidence among Japanese manufacturers jumped in January to an 11-year high, the poll showed, highlighting corporate optimism driven by nearly two years of uninterrupted economic expansion and a buoyant stock market. Back home, the BSE Sensex and NSE Nifty were trading above the psychological 36,000 and 11,000 levels respectively. The market breadth on BSE was positive in the ratio of 1544:920, while 113 scrips remained unchanged.

The BSE Sensex is currently trading at 36036.90, up by 238.89 points or 0.67% after trading in a range of 35863.98 and 36051.86. There were 25 stocks advancing against 6 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 1.03%, while Small cap index was up by 0.63%.

The top gaining sectoral indices on the BSE were Metal up by 3.81%, Basic Materials up by 1.50%, IT up by 1.49%, TECK up by 1.26% and Energy up by 1.25%, while there were no losers on BSE.

The top gainers on the Sensex were Tata Steel up by 3.11%, Infosys up by 2.58%, Dr. Reddy’s Lab up by 1.89%, Coal India up by 1.48% and SBI up by 1.40%.

On the flip side, Asian Paints down by 0.99%, Tata Motors down by 0.65%, Wipro down by 0.41%, Power Grid down by 0.36% and HDFC Bank down by 0.21% were the top losers.

Meanwhile, a joint study carried out by the industry body Associated Chambers of Commerce & Industry of India (ASSOCHAM) and rating agency CRISIL has stated that India’s banking sector will be saddled with gross non-performing assets (GNPAs) worth a staggering Rs 9.5 lakh crore by March-end, up from Rs 8 lakh crore in the year-ago period. It added that the GNPAs will increase to Rs 9.5 lakh crore as on March 31, 2018 i.e. about 10.5 percent of total advances, while stressed assets are expected to be at Rs 11.5 lakh crore.

The report also said that the high level of stressed assets in the banking system however provide enormous opportunity for asset reconstruction companies (ARCs) which are important stakeholders in the NPA resolution process. According to the report, the growth of ARCs is expected to come down significantly to around 12 percent by June 2019, owing to capital constraints, while the assets under management (AUM) are expected to reach at Rs 1 lakh crore, and that is fairly sizable.

With banks are expected to make higher provisioning over and above the provisions made for stressed assets, the report further said that they may sell the assets at lower discounts, thus increasing the capital requirement. It also said since the existing capital base of ARCs will not support in absorbing stressed assets available in the market, they are expected to be a part of the multi-platform business model with co-investors/large funds to bring in capital and stay relevant.

According to the report, recovery prospects are likely to improve with these structural changes. The recovery rate, which is a good indicator of the effectiveness of ARCs is expected to rise from 38 percent earlier to about 44-48 percent. The analysis of 50 stressed assets -- forming nearly 40 percent of the total -- revealed that sectors like metal, construction and power account for nearly 30 percent, 25 percent and 15 percent of the stressed assets respectively, while other sectors contribute to the remaining 30 percent.

The study also said that effective implementation of the Insolvency and Bankruptcy Code (IBC) would be a remedy to the challenge of prolonged litigation and it can help improve the recovery rate of stressed assets’ industry further. The report stated that 2018 would see a structural shift in the stressed assets’ space as increased stringency in banks’ provisioning norms for investments in security receipts is likely to result in more cash purchases.

The CNX Nifty is currently trading at 11046.90, up by 80.70 points or 0.74% after trading in a range of 10994.55 and 11050.05. There were 37 stocks advancing against 13 stocks declining on the index.

The top gainers on Nifty were Hindalco up by 4.59%, Vedanta up by 3.81%, Cipla up by 3.30%, Tata Steel up by 3.19% and Infosys up by 2.63%.

On the flip side, Ambuja Cement down by 1.62%, Zee Entertainment down by 1.49%, Bosch down by 1.35%, Asian Paints down by 0.94% and Wipro down by 0.79% were the top losers.

The Asian markets were trading mostly in green; Taiwan Weighted increased 0.14 points or 0% to 11,231.60, KOSPI Index increased 24.77 points or 0.99% to 2,526.88, Shanghai Composite increased 24.94 points or 0.71% to 3,526.30, Jakarta Composite increased 65.16 points or 1% to 6,565.68, Nikkei 225 increased 292.91 points or 1.23% to 24,109.24 and Hang Seng increased 382.79 points or 1.18% to 32,776.20.

On the other hand, FTSE Bursa Malaysia KLCI decreased 0.84 points or 0.05% to 1,832.31.