Benchmarks make optimistic start on Thursday

Indian equity benchmarks made an optimistic start and are trading in fine fettle in early deals on Wednesday, with frontline gauges recapturing their crucial 34,300 (Sensex) and 10,550 (Nifty) levels ahead of WPI inflation numbers and Balance of trade figure for the month of January to be released later in the day. Traders took some encouragement with private report stating that the RBI’s revised framework for quicker and time-bound resolution of stressed assets is a long-term positive for banks. The report stated that the new framework has the potential to bring about a big change in the approach of banks to monitor their exposures and resolution of NPAs.

Global cues too remained supportive with Asian markets rallying at this point of time following strong overnight gains in the U.S. and Europe, though trading in much of the region remained slow ahead of the Lunar New Year holiday. The U.S. markets edged higher on Wednesday, as traders shrugged off bigger than expected increase in consumer prices in the month of January.

Back home, steel related stocks remained on buyers’ radar on report that India has initiated a review of the anti-dumping duty on flat base steel wheels from China to take a call on the need for continued imposition of the duties in force. Stocks related to mining space too remained in focus on report that with the cancellation of iron ore mining leases in Goa, the Supreme Court has once again stepped into the space vacated by executive failure and legislative lethargy. But the courts cannot compensate for the lack of sound policy and its effective implementation.

The BSE Sensex is currently trading at 34323.93, up by 167.98 points or 0.49% after trading in a range of 34194.67 and 34324.70. There were 23 stocks advancing against 8 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index gained 0.67%, while Small cap index was up by 0.40%.

The top gaining sectoral indices on the BSE were Metal up by 1.56%, Basic Materials up by 0.91%, Realty up by 0.84%, Energy up by 0.68% and Industrials was up by 0.64%, while Consumer Durables down by 0.28% was the sole losing index on BSE.

The top gainers on the Sensex were Adani Ports up by 2.23%, ICICI Bank up by 2.21%, Yes Bank up by 1.69%, SBI up by 1.41% and Tata Motors - DVR up by 1.39%. On the flip side, Axis Bank down by 1.37%, Asian Paints down by 1.13%, Hero MotoCorp down by 1.09%, Hindustan Unilever down by 0.63% and Sun Pharma down by 0.57% were the top losers.

Meanwhile, days after the Reserve Bank of India (RBI) notified a revised framework for expeditious resolution of bad loans, credit ratings agency, Crisil Ratings in its latest report has stated that the Central Bank’s revised framework is a long-term positive for banks and has the potential to bring about a big change in the approach of banks to monitor exposures and resolution of Non-Performing Assets (NPAs). It believes that the upshot of the strong statement of intent by RBI will be structural streamlining, standardising and harmonising of the resolution process leading to greater transparency, credibility and efficiency.

According to the report, the RBI is establishing an ecosystem where NPAs would get recognised on time and their resolutions will be structurally quicker than before, by mandating weekly information on large delinquent accounts, by directing that a resolution plan be scripted immediately after default, and by setting stringent timelines for referring an account to the Insolvency and Bankruptcy Code process. It added that independent credit evaluation of the residual debt in resolution plans, and minimum investment grade rating for any upgrade of NPAs, will improve investor and other stakeholder confidence over the long term.

Crisil also said that in order to resolve the stressed assets situation, several steps such as corporate debt restructuring (CDR), sustainable structuring of stressed assets (S4A), strategic debt restructuring (SDR) were conceived in recent years, but to limited success. It highlighted that the RBI’s move has come at the right hour because the asset quality pressures are near their peak and it will improve the ability of banks to transit to the new regime. Besides, the Central Bank had discontinued programmes for banks to restructure their defaulted loans such as CDR, S4A, SDR, among others, and made the Insolvency and Bankruptcy Code as the main tool to deal with defaulters.

The CNX Nifty is currently trading at 10560.15, up by 59.25 points or 0.56% after trading in a range of 10518.65 and 10560.60. There were 35 stocks advancing against 15 stocks declining on the index.

The top gainers on Nifty were Vedanta up by 2.72%, ICICI Bank up by 2.15%, Bharti Infratel up by 2.14%, Hindalco up by 2.08% and Adani Ports up by 2.03%. On the flip side, Hero MotoCorp down by 0.98%, Asian Paints down by 0.98%, Axis Bank down by 0.96%, Aurobindo Pharma down by 0.81% and Sun Pharma down by 0.70% were the top losers.

Asian markets are trading in green; FTSE Bursa Malaysia KLCI increased 6.51 points or 0.35% to 1,841.44, Jakarta Composite gained 10.39 points or 0.16% to 6,604.79 and Nikkei 225 up by 397.13 points or 1.88% to 21,551.30.