Benchmarks trade flat with positive bias

Indian equity benchmarks continued their flat trade with positive bias in morning session on account of buying in frontline blue chip counters. The rupee headed for more weakness as it opened down at 64.90 against the dollar. The American currency found more traction among banks and importers. Foreign Portfolio Investors (FPIs) net sold off shares worth Rs 850.35 crore in the previous trading session, according to provisional data. Domestic Institutional Investors (DIIs) purchased equities worth a net Rs 1,437.24 crore. Oil prices witnessed a decline, weighed down by the rebound of the US dollar further away from three-year lows hit last week.

Traders got some solace as rating agency India Ratings and Research revised the outlook on infrastructure sector to stable for the next fiscal on signs of improvement in projects. The agency added that the infrastructure sector is showing signs of stability, although pockets of stress still linger. The outlook for telecom has been revised to negative-to-stable from negative. The outlooks for thermal power, oil and gas, power, ports and airports remain unchanged. Investors took note that the Reserve Bank of India (RBI) has set up a five-member expert panel to look into the reasons for high divergence observed in asset classification and provisioning by banks. Separately, Information Technology (IT) stocks are reacting positively to the rupee’s depreciation. Besides, the National Association of Software and Solutions Companies (NASSCOM) has forecasted India’s IT industry will grow at 7-9 percent in the next financial year 2018-19 as against 7.8 percent in 2017-18, despite of multiple global headwinds and uncertainties in the software services space.

Meanwhile, mixed reactions were witnessed in sugar stocks on ICRA’s report that a raft of government measures earlier this month has come as a relief for sugar mills and sugarcane farmers alike. These include increase in import duty on raw and white sugar to 100%, and restriction on sugar sales by imposition of stockholding limits for February and March. The twin government moves are expected to prop up falling sales realizations, support the profitability of mills by enabling them to tide over the supply glut, and keep their credit profiles stable. The market may remain volatile this week as traders may roll over positions in the Futures & Options (F&O) segment from the near month i.e. February 2018 series to next month i.e. March 2018 series. The near month February 2018 derivatives contracts will expire on Thursday i.e. February 22, 2018.

Traders were seen buying in IT, TECK and FMCG stocks, while selling was witnessed in Metal, Healthcare and Basic Materials sector stocks. In scrip specific development,  Coal India was trading under pressure as the private sector will soon be able to mine coal and sell it to power plants, steel mills and other users, ending the decades-old monopoly of state-run company and its affiliates, marking a long-expected reform aimed at boosting investment and output. The move could lower prices and imports while introducing better technology, apart from saving on foreign exchange and improving energy security. Punjab National Bank (PNB) was trading in red. Trouble is mounting for PNB with the Central Bureau of Investigation (CBI) widening the probe into the Rs 11,400 crore fraud at the lender to include the top brass.

On the global front, Asian markets were trading mostly in green. Back home, the BSE Sensex and NSE Nifty were trading above the psychological 33,700 and 10,350 levels respectively. The market breadth on BSE was negative in the ratio of 1040:1187, while 108 scrips remained unchanged.

The BSE Sensex is currently trading at 33751.07, up by 47.48 points or 0.14% after trading in a range of 33702.50 and 33911.36. There were 13 stocks advancing against 18 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 0.22%, while Small cap index was down by 0.02%.

The top gaining sectoral indices on the BSE were IT up by 1.73%, TECK up by 1.40%, FMCG up by 0.47%, Telecom up by 0.09% and Capital Goods up by 0.06%, while Metal down by 1.65%, Healthcare down by 0.96%, Basic Materials down by 0.87%, PSU down by 0.77% and Oil & Gas down by 0.56% were the top losing indices on BSE.

The top gainers on the Sensex were TCS up by 1.76%, Dr. Reddy’s Lab up by 1.30%, Infosys up by 1.24%, Kotak Mahindra Bank up by 1.02% and ITC up by 0.99%.

On the flip side, Sun Pharma down by 3.57%, Coal India down by 1.27%, Tata Steel down by 1.07%, Yes Bank down by 1.00% and Axis Bank down by 0.98% were the top losers.

Meanwhile, the Reserve Bank of India (RBI) has decided to constitute a five-member committee under the chairmanship of YH Malegam, a former RBI board member, in order to look into the reasons for high divergence observed in asset classification and provisioning in the credit portfolio of banks. Apart from this, the expert committee will check the factors leading to rising incidence of fraud in the banking system and also will look into role and effectiveness of various types of audits conducted in banks in mitigating the incidence of divergence and frauds. 

The development assumes importance as it comes just a week after the biggest banking scam worth Rs 11,400 crore was disclosed by Punjab National Bank (PNB), alleging that diamond importer Nirav Modi and his uncle Mehul Chokshi's group firms connived with two of the bank's employees to fraudulently receive multiple Letter of Undertakings (LoUs) to seek loans against them. Besides, the central bank has said that as part of ongoing efforts for strengthening of the supervisory framework in the country, it has been issuing necessary instructions to banks from time to time on a variety of issues of prudential supervisory concern, in.cluding the management of operational risks inherent in the functioning of banks.

The RBI further stated that the risks arising from the potential malicious use of the SWIFT infrastructure, created by banks for their genuine business needs, has always been a component of their operational risk profile. Therefore, it had confidentially cautioned and alerted banks of such possible misuse, at least on three occasions since August 2016, advising them to implement the safeguards detailed in the RBI's communications, for pre-empting such occurrences. However, it added that the banks have been at varying levels in implementation of such measures.

The CNX Nifty is currently trading at 10361.45, up by 1.05 points or 0.01% after trading in a range of 10349.60 and 10426.10. There were 19 stocks advancing against 31 stocks declining on the index.

The top gainers on Nifty were Tech Mahindra up by 3.40%, HCL Tech up by 2.65%, TCS up by 1.78%, Dr. Redd’ys Lab up by 1.28% and Eicher Motors up by 1.12%.

On the flip side, Sun Pharma down by 4.17%, Hindalco down by 3.74%, BPCL down by 2.48%, Bajaj Finance down by 2.35% and Vedanta down by 1.92% were the top losers.

The Asian markets were trading mostly in green; Nikkei 225 increased 1.92 points or 0.01% to 21,927.02, FTSE Bursa Malaysia KLCI increased 2.35 points or 0.13% to 1,858.34, KOSPI Index increased 11.36 points or 0.47% to 2,426.48, Taiwan Weighted increased 284.77 points or 2.73% to 10,705.86 and Hang Seng increased 297.63 points or 0.96% to 31,171.26.

On the other hand, Jakarta Composite decreased 20.32 points or 0.3% to 6,642.56.

Shanghai Stock Exchange was closed on account of National holiday.