Benchmarks make pessimistic start; Sensex below 34,000 mark

Indian equity benchmarks have made a pessimistic start and are trading in red terrain in early deals, as traders remained concerned with report that an index mapping the country’s short-term financial conditions has plunged over 12 points for the fourth quarter of the current fiscal ending March 31, as compared to the previous quarter. Sentiments also remained dampened on report that in lieu of the ongoing fraudulent transaction scam involving Punjab National Bank, the ASSOCHAM demanded that the government to reduce its stake in banks to less than 50. Meanwhile, the government’s chief economic advisor Arvind Subramanian underlined the need for more privatization in the banking sector.

On the global front, Asian markets are rallying at this point of time led by Japanese Nikkei which edged higher by over one and a half percent, as the country posted a merchandise trade deficit of 943.417 billion yen in January, an improvement of 13.6 percent from a year earlier. The US markets ended mixed on Friday with the benchmarks paring most of their early gains, as political news sparked late-session turbulence.

Back home, banking stocks continued to remain under pressure for yet another day after Enforcement Directorate reportedly told that PNB fraud is bigger than Rs 11,000 crore. Apart from PNB, Union Bank, Axis Bank, Allahabad Bank and SBI Overseas Bank are involved in the fraud. Steel stocks lost sheen on report that India’s export of finished steel shrank by over 30 per cent to 0.616 million tonnes (MT) during January 2018. Stocks related to coal sector remained buzzing on report that the country’s coal import increased by 12.4 per cent to 18.49 MT in January, against 16.44 MT in the same month of the previous fiscal.

The BSE Sensex is currently trading at 33886.77, down by 123.99 points or 0.36% after trading in a range of 33880.22 and 34122.96. There were 6 stocks advancing against 25 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index gained 0.73%, while Small cap index was down by 0.59%.

The lone gaining sectoral index on the BSE was Telecom up by 0.02%, while PSU down by 0.94%, Capital Goods down by 0.84%, Metal down by 0.83%, Realty down by 0.81% and Industrials was down by 0.65% were the top losing indices on BSE.

The top gainers on the Sensex were ICICI Bank up by 0.39%, ITC up by 0.17%, Infosys up by 0.12%, Power Grid Corporation up by 0.08% and HDFC was up by 0.06%. On the flip side, Tata Steel down by 2.97%, SBI down by 1.40%, Axis Bank down by 1.20%, Mahindra & Mahindra down by 1.12% and Larsen & Toubro was down by 0.95% were the top losers.

Meanwhile, citing the fraudulent transactions of Rs 11,300 crore at Punjab National Bank (PNB) and the closure of Bank of Baroda’s South Africa branch, the Government of India’s Chief Economic Advisor (CEA) Arvind Subramanian has said that the private sector’s participation in public sector banking (PSBs) and better external regulations are key to reforming the industry.

Subramaniam said there were three reasons for greater privatisation. The first one is that public sector ownership serves as a handicap in bank recruitments, human resources procurement and governance, especially when they need more freedom to compete with private sector lenders. The second reason is that the decision making in Indian government is almost paralysed due to the four ‘C’s -- courts, CBI, CVC and CAG. The third argument is that the private sector has been a creator of wealth at least in the past three-and-a-half years.

Arvind Subramanian has proposed that the banking sector should follow five ‘R’s to straighten itself out: recognition, resolution, recapitalisation, reform and regulation, as the twin balance sheet problem was holding up bank’s growth in India. He added that recognition is identifying stressed assets to avoid NPA and secondly resolution means to pass the Bankruptcy code. Talking about recapitalization, he said there might be need for more resources, though the government has earmarked Rs 2.10 lakh crore.

The CNX Nifty is currently trading at 10405.15, down by 47.15 points or 0.45% after trading in a range of 10400.45 and 10489.35. There were 14 stocks advancing against 36 stocks declining on the index.

The top gainers on Nifty were Bharti Infratel up by 1.34%, Ambuja Cement up by 0.64%, GAIL India up by 0.58%, UltraTech Cement up by 0.58% and ICICI Bank was up by 0.37%. On the flip side, Tata Steel down by 3.66%, Zee Entertainment down by 2.21%, Bajaj Finance down by 1.67%, Cipla down by 1.60% and SBI was down by 1.58% were the top losers.

Asian markets are trading mostly in green; FTSE Bursa Malaysia KLCI increased 15.72 points or 0.86% to 1,854.00, KOSPI Index gained 19.14 points or 0.79% to 2,440.97, Jakarta Composite surged 57.4 points or 0.87% to 6,648.98 and Nikkei 225 up by 340.76 points or 1.57% to 22,061.01.