Benchmarks continue weak trade in morning session

Indian equity benchmarks continued their weak trade in morning session on account of selling in frontline blue chip counters. Besides, oil prices extended gains to hit their highest level in nearly two weeks amid worries over tensions in the Middle East. Prime Minister Benjamin Netanyahu said that Israel could act against Iran itself, not just its allies in the Middle East, after border incidents in Syria brought the Middle East foes closer to direct confrontation. Sentiments remained dampened as 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. The index stood at 53.2 for the fourth quarter (Q4) of 2017-18 as against 65.3 in the October-December period. Separately, foreign investors have pulled out so far this month a staggering $1 billion or Rs 6,850 crore from equities during February 1-16 from the Indian stock market in the wake of sell-offs globally. This is against the total inflow of over Rs 13,780 crore by Foreign Portfolio Investors (FPIs) in January.

Investors remained cautious with 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. Banking stocks were under pressure on reports that the exposure of Indian banks in the alleged fraud involving jeweller Nirav Modi, his relatives and associated companies may touch Rs 20,000 crore, almost twice the initial estimate. The amount cited above would include bonafide credit to related firms that now risks being classified as bad debt given that the promoters have been accused of fraud. The amount involved was initially pegged at Rs 11,300 crore.

Traders were seen selling in Capital Goods, Metal and PSU sector stocks. In scrip specific development, Bhushan Steel is locked at upper circuit limit as investors cheered developments surrounding its takeover bid. Tata Steel emerged as the highest bidder for Bhushan Steel with a surprise bid of Rs 35,000 crore. JSW Steel, which was the favourite till the end of the race, was second placed with a bid of Rs 29,700 crore. Bhushan Steel is one of the 12 large corporate accounts identified by the Reserve Bank of India that accounted for almost 25 percent of exposure to bad loans for the entire banking sector. KPR Mill was trading in green ahead of board meeting to consider share buyback this week. A meeting of board of directors is scheduled to be held on February 22 to consider the proposal for buy-back of the fully paid-up equity shares.

On the global front, Asian markets were trading in green as sentiment improved gradually from a recent shakeout that stemmed from fears of creeping inflation and higher borrowing costs. Buoyant sales of cars and electronics led Japan’s exports to a 14th straight month of growth in January but manufacturers’ business confidence slid - highlighting fears of the rising yen disrupting an export-led recovery. Back home, the BSE Sensex and NSE Nifty were trading below the psychological 33,900 and 10,450 levels respectively. The market breadth on BSE was negative in the ratio of 749:1610 while 111 scrips remained unchanged.

The BSE Sensex is currently trading at 33891.89, down by 118.87 points or 0.35% after trading in a range of 33789.92 and 34122.96. There were 9 stocks advancing against 22 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 0.62%, while Small cap index was down by 0.57%.

The top losing sectoral indices on the BSE were Capital Goods down by 1.09%, Metal down by 0.96%, PSU down by 0.84%, Consumer Durables down by 0.77% and Industrials down by 0.66%, while there were no gainers on BSE sectoral front.

The top gainers on the Sensex were ITC up by 0.45%, Infosys up by 0.43%, Tata Motors up by 0.39%, NTPC up by 0.34% and TCS up by 0.33%.

On the flip side, Tata Steel down by 3.97%, Bharti Airtel down by 1.87%, Larsen & Toubro down by 1.56%, SBI down by 1.51% and IndusInd Bank down by 1.37% 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 10412.50, down by 39.80 points or 0.38% after trading in a range of 10379.05 and 10489.35. There were 17 stocks advancing against 33 stocks declining on the index.

The top gainers on Nifty were Bharti Infratel up by 1.40%, Vedanta up by 0.92%, Ambuja Cement up by 0.78%, Ultratech Cement up by 0.69% and GAIL India up by 0.68%.

On the flip side, Tata Steel down by 4.15%, Bharti Airtel down by 1.97%, Indiabulls Housing Finance down by 1.93%, Tech Mahindra down by 1.77% and Larsen & Toubro down by 1.74% were the top losers.

The Asian markets were trading in green; FTSE Bursa Malaysia KLCI increased 16.09 points or 0.88% to 1,854.37, KOSPI Index increased 16.63 points or 0.69% to 2,438.46, Jakarta Composite increased 60.47 points or 0.92% to 6,652.05 and Nikkei 225 increased 374.02 points or 1.72% to 22,094.27.

Shanghai, Hong Kong and Taiwan Stock Exchange were closed on account of National holiday.