Benchmarks add gains; Sensex above 34,000 mark

Indian equity benchmarks added gains and continued their trade in green in morning session on account of buying in frontline blue chip counters. The rupee opened lower against the US dollar. Oil markets remained tense on concerns of a military escalation in Syria, but prices were some way off Wednesday’s 2014 highs as bulging American supplies weighed. Investors are eyeing macro data due later in the day. The sentiments were upbeat after a foreign brokerage report highlighted that FDI inflows have increased by 34% to an average of $10.2 billion quarterly since the NDA-government assumed power in 2014. The report added that India remains a preferred destination for global investors. Separately, an American conservative public policy think tank, the Heritage Foundation in its latest annual Index of Economic Freedom 2018 has placed Indian economy at 130th position with economic freedom score of 54.5. The country has jumped up 13 places in the last one year. The country in 2017 was ranked 143rd among 180 countries with a score of 52.6 points. The street shrugged off a study published in RBI’s monthly bulletin that India’s social sector spending remains woefully below peers, including Latvia and Iceland, in terms of GDP. The social sector expenditure primarily constitutes health and education in India. The conclusion is based on an analysis of 17 countries, including India, with respect to their social sector expenditure as percent of GDP (2016).

Meanwhile, buying was visible in select aviation stocks after the International Air Transport Association (IATA) said that India is on track to register 50 straight months of double-digit domestic air passenger growth in October 2018 as the near term outlook remains bright.  IATA also said that it continues to expect India to surpass the UK as the world’s third largest origin-destination market by the mid-2020s. However, oil marketing companies like Indian Oil Corporation (IOC), Hindustan Petroleum Corporation HPCL) and Bharat Petroleum Corporation (BPCL) extended yesterday losses on reports that these companies will have to absorb the increase in fuel prices up to Rs 1 per litre following the government’s decision not to reduce excise duty on fuels amid rising international crude oil prices. Oil markets also remained tense on concerns of a military escalation in Syria. Higher crude oil price is always a concern for country like India which imports more than 80% of oil requirement.

Separately, banking stocks are under pressure on report that the recent crisis in the country’s banking system has impacted investor sentiments, leading to some slowdown in the investment flow. The crisis, however, gives an opportunity to improve the overall processes and to build up a strong system. Most of the sugar stocks were under pressure on report that the food ministry has no immediate plans to give subsidy to sugarcane growers for bailing out cash-starved sugar mills, and it asked factories to export 2 million tonnes sweetener, even at loss, to liquidate surplus stock and improve domestic prices.

Traders were seen buying in IT, TECK and Consumer Durables stocks, while selling was witnessed in Oil & Gas, PSU and Metal sector stocks. In scrip specific development, Monsanto India was trading in red as the Delhi High Court yesterday said that Monsanto Technologies’ patents on Bt cotton seed varieties Bollgard and Bollgard II were not valid and dismissed its claims against Nuziveedu Seeds on this count, a finding that will likely have far-reaching consequences for the agriculture sector.

On the global front, Asian markets were trading mostly in red on escalating Middle East tensions. China’s commerce ministry said that the country is well prepared and will not hesitate to fight back if the United States escalates its trade spat with Beijing, adding Chinese President Xi Jinping’s pledge to cut import tariffs is not a concession. Back home, the BSE Sensex and NSE Nifty were trading above the psychological 34,000 and 10,400 levels, respectively. The market breadth on BSE was positive in the ratio of 1143:983, while 111 scrips remained unchanged.

The BSE Sensex is currently trading at 34012.63, up by 72.19 points or 0.21% after trading in a range of 33924.88 and 34032.18. There were 12 stocks advancing against 19 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.17%, while Small cap index was up by 0.22%.

The top gaining sectoral indices on the BSE were IT up by 2.67%, TECK up by 2.11%, Consumer Durables up by 0.53%, Capital Goods up by 0.24% and Industrials up by 0.21%, while Oil & Gas down by 0.84%, PSU down by 0.75%, Metal down by 0.73%, Telecom down by 0.68% and Realty down by 0.44% were the top losing indices on BSE.

The top gainers on the Sensex were TCS up by 3.13%, Infosys up by 2.59%, Wipro up by 1.19%, Tata Motors up by 1.18% and ICICI Bank up by 1.13%.

On the flip side, Dr. Reddy’s Lab down by 1.87%, SBI down by 1.61%, Sun Pharma down by 1.33%, Adani Ports & Special Economic Zone down by 0.94% and Bharti Airtel down by 0.88% were the top losers.

Meanwhile, credit ratings agency, Crisil Ratings in its latest report has said that the Reserve Bank of India’s (RBI) recent decision to relax provisioning norms for banks and permitting them to spread mark-to-market (MTM) losses on investments incurred in the third and fourth quarters of FY18 across four quarters, will provide the much-needed breather of Rs 27,000 crore to banks by reducing their provisioning burden for the fourth quarter of fiscal 2018.

According to the report, profitability of banks has come under intense pressure as provisioning requirements have been rising with ageing of non-performing assets (NPAs), withdrawal of various restructuring schemes prior to February 2018 causing an increase in NPAs, and massive spike in bond yields since September 2017 leading to significant MTM losses in their gilt investments. It also noted that accounting for the MTM losses over four quarters would mean nearly Rs 8,000 crore provisioning relief including write-backs for banks in the last quarter of fiscal 2018. It added that another relief worth Rs 19,000 crore, in the form of lower provisioning or write-back, would also ensue because the RBI has permitted banks to achieve 50 percent provisioning on accounts referred to NCLT by June 2018 instead of March as stipulated earlier.

However, the ratings agency has stated that in fiscal 2018-19, operating profitability of banks should stabilise on the back of incremental credit growth and lower interest reversals after reduction in fresh slippages to NPAs but overall, bottomlines will remain under pressure because of high provisioning burden stemming from the large stock of NPAs. Besides, it pointed out that in the current fiscal, recoveries are expected from the resolution of few large accounts under the IBC, especially from the steel sector. It said “that should provide some offset to the high provisioning requirements”.

The CNX Nifty is currently trading at 10433.70, up by 16.55 points or 0.16% after trading in a range of 10395.25 and 10433.75. There were 20 stocks advancing against 30 stocks declining on the index.

The top gainers on Nifty were HCL Tech up by 3.84%, TCS up by 3.32%, Infosys up by 2.58%, Tech Mahindra up by 2.12% and Wipro up by 1.37%.

On the flip side, BPCL down by 2.62%, HPCL down by 2.08%, Dr. Reddy’s Lab down by 2.06%, Indian Oil Corporation down by 1.61% and Lupin down by 1.55% were the top losers.

The Asian markets were trading mostly in red; Hang Seng decreased 97.54 points or 0.32% to 30,800.17, Jakarta Composite decreased 58.1 points or 0.91% to 6,302.84, Taiwan Weighted decreased 34.51 points or 0.31% to 10,939.51, Nikkei 225 decreased 22.53 points or 0.1% to 21,664.57, Shanghai Composite decreased 16.33 points or 0.51% to 3,191.75 and FTSE Bursa Malaysia KLCI decreased 3.23 points or 0.17% to 1,866.66.

On the other hand, KOSPI Index increased 8.08 points or 0.33% to 2,452.30.