Benchmarks trade slightly in green in early deals

Indian equity benchmarks made a positive start and are trading marginally in green in early deals on Tuesday. Sentiments remained up-beat with report stating that the Reserve Bank came out with draft guidelines on loan system for delivery of bank credit to improve discipline among larger borrowers enjoying working capital facility from the banking system. Meanwhile, the recent amendments in the bankruptcy resolution framework will help reduce timelines, enhance transparency and improve realisations. However, gains remain capped as investors await crucial economic data on consumer inflation and industrial output for direction. India’s retail inflation likely to jump further in May to a four-month high, primarily driven by a surge in energy prices. Traders remain concerned after President Donald Trump has taken a swipe at India along with the world’s other top economies and accused New Delhi of charging 100 percent tariff on some of the US’ goods, as he threatened to cut trade ties with countries who are robbing America.

On the global front, Asian markets were trading mixed at this point of time as investors awaited monetary policy announcements by three major central banks and the most crucial House of Commons votes on Brexit. The US markets ended mostly higher on Monday, as traders looked ahead to the historic summit between President Donald Trump and North Korean leader Kim Jong Un on Tuesday.

Back home, steel and power related stocks remained in focus with Union minister Piyush Goyal’s statement that the government was looking at opening auctions of coal mines to the steel and power sectors, and that a robust framework was being worked out for commercial mining. In scrip specific development, Welspun Corp advanced on bagging order for supply of 33 KMT of Pipes in US market and Arrow Greentech was up on inking agreement with Versarien Pic.

The BSE Sensex is currently trading at 35556.26, up by 72.79 points or 0.21% after trading in a range of 35479.07 and 35567.82. There were 21 stocks advancing against 10 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index gained 0.29%, while Small cap index was up by 0.39%.

The top gaining sectoral indices on the BSE were Healthcare up by 1.20%, IT up by 0.52%, TECK up by 0.38%, Industrials up by 0.35% and Consumer Durables was up by 0.35%, while Metal down by 0.32%, Realty down by 0.14%, Utilities down by 0.14%, Basic Materials down by 0.08% and Power was down by 0.05% were the top losing indices on BSE.

The top gainers on the Sensex were Dr. Reddys Lab up by 2.41%, Wipro up by 1.34%, Adani Ports up by 1.24%, Sun Pharma up by 1.09% and TCS up by 0.99%. On the flip side, Coal India down by 0.63%, Tata Steel down by 0.54%, Maruti Suzuki down by 0.53%, Hindustan Unilever down by 0.43% and Power Grid Corporation down by 0.36% were the top losers.

Meanwhile, in an effort to improve discipline among larger borrowers with working capital facility from the banking system, the Reserve Bank of India has came out with draft guidelines on loan system for delivery of bank credit. The Central Bank has said that the draft stipulates a minimum level of ‘loan component’ in fund based working capital finance and a mandatory Credit Conversion Factor (CCF) for the undrawn portion of cash credit/ overdraft limits availed by large borrowers.

As per the guidelines, in respect of borrowers having aggregate fund based working capital limit of Rs 150 crore and above from the banking system, a minimum level of ‘loan component’ of 40% shall be effective from October 1, 2018.  Accordingly, for such borrowers, the outstanding ‘loan component’ must be equal to at least 40% of the sanctioned fund based working capital limit, including ad hoc credit facilities. Hence, for such borrowers, drawings up to 40% of the total fund based working capital limits shall only be allowed from the ‘loan component’. Drawings in excess of the minimum 'loan component' threshold may be allowed in the form of cash credit facility. The RBI stated that the 40% loan component will be revised to 60% with effect from April 01, 2019.

On sharing of working capital finance, the draft note has said that the ground rules for sharing of cash credit and loan components may be laid down by the consortium, wherever formed. It further said that the amount and tenor of the working capital demand loan (WCDL) may be fixed by banks in consultation with the borrowers, subject to the tenor being not less than seven days. It added that banks may decide to split the loan component with different maturity periods as per the need of the borrowers. Also, from April 1, 2019, the undrawn portion of cash credit/ overdraft limits sanctioned to the aforesaid large borrowers, irrespective of whether unconditionally cancellable or not, will attract a credit conversion factor of 20%.

The CNX Nifty is currently trading at 10803.10, up by 16.15 points or 0.15% after trading in a range of 10789.40 and 10816.80. There were 29 stocks advancing against 20 stocks declining on the index, while 1 stock remained unchanged.

The top gainers on Nifty were Lupin up by 2.38%, Dr. Reddys Lab up by 2.37%, HCL Tech. up by 1.32%, Wipro up by 1.19% and Cipla up by 1.11%. On the flip side, Vedanta down by 1.06%, Indiabulls Housing down by 0.87%, Coal India down by 0.82%, Hindalco down by 0.78% and Tata Steel down by 0.71% were the top losers.

Asian markets are trading mixed, Shanghai Composite increased 14.03 points or 0.46% to 3,066.82, Hang Seng gained 88.3 points or 0.28% to 31,152.00 and Nikkei 225 was up by 96.87 points or 0.42% to 22,900.91.

On the flip side, Taiwan Weighted decreased 30.28 points or 0.27% to 11,118.95, FTSE Bursa Malaysia KLCI shed 7.57 points or 0.43% to 1,768.23 and KOSPI Index was down by 3.23 points or 0.13% to 2,466.92.