Bourses remain under pressure

Indian equity benchmarks remained under pressure in late afternoon session, with Sensex and Nifty extending losses to around 290 and 100 points respectively, tracking weak European markets. In line with larger peers, the broader markets too added losses in late noon deals, while Oil & Gas index declined the most, followed by PSU and Utilities. Besides, losses led by major industry leaders such as ICICI Bank and Tata Motors too weighed on the domestic sentiments. Sentiments remained pessimistic with the report highlighting that government debt rose 1.7% to over Rs 76.94 lakh crore in the January-March period of 2017-18 fiscal over the previous quarter. The debt was Rs 75.66 lakh crore as of December 2017. The market participants overlooked Finance Secretary Hasmukh Adhia’s statement that Goods and Services Tax (GST) has entered a ‘smooth phase’ within a year of its rollout, with ‘pretty good’ tax compliance and the efforts will now be to simplify tax return forms.

On the sectoral front, banking stocks were trading in red terrain, as the Reserve Bank of India (RBI) in its latest ‘June 2018 Financial Stability Report’ estimated that bad loans of scheduled commercial banks (SCBs) are likely to surge to 12.2% by March 2019 from 11.6% level seen in March 2018, while cement stocks were also trading lower, despite domestic credit rating agency, ICRA’s latest report stating that domestic cement output is likely to register a growth of 6% in the financial year 2019.

On the global front, European markets were trading in red, as trade worries persist after the US House of Representatives overwhelmingly passed a bill to tighten foreign investment rules amid concerns over China’s unfair trade and intellectual property practices. Asian markets were also trading in red. Back home, in scrip specific development, HCL Technologies gained after the company signed a definitive agreement to acquire Wolfsburg-based IT and engineering services provider, H&D International Group.

The BSE Sensex is currently trading at 35203.97, down by 286.07 points or 0.81% after trading in a range of 35203.30 and 35618.85. There were 4 stocks advancing against 27 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 1.68%, while Small cap index was down by 2.35%.

The lone gaining sectoral index on the BSE was IT up by 0.05%, while Oil & Gas down by 3.61%, PSU down by 2.94%, Utilities down by 2.67%, Power down by 2.65% and Industrials down by 2.35% were the top losing indices on BSE.

The top gainers on the Sensex were HDFC Bank up by 0.86%, Hindustan Unilever up by 0.71%, Coal India up by 0.64% and TCS up by 0.24%. On the flip side, ICICI Bank down by 4.13%, Tata Motors - DVR down by 2.59%, Tata Motors down by 2.33%, Larsen & Toubro down by 2.21% and Power Grid Corporation down by 2.12% were the top losers.

Meanwhile, indicating continuous stress in the banking sector due to the gross non-performing advances (GNPA), the Reserve Bank of India (RBI) in its latest ‘June 2018 Financial Stability Report’ has said that bad loans of scheduled commercial banks (SCBs) are likely to surge to 12.2% by March 2019 from 11.6% level seen in March 2018. The reports also noted that declining profitability added pressure on SCBs’ regulatory capital ratios, while the provision coverage ratio has increased.

According to the report, 11 public sector banks under prompt corrective action framework (PCA PSBs) are expected to experience a worsening of their GNPA ratio from 21.0% in March 2018 to 22.3% by March 2019, with six PCA PSBs likely experiencing capital shortfall relative to the required minimum CRAR of 9%. It also pointed that the system-level capital to risk-weighted assets ratio (CRAR) may come down from 13.5% to 12.8% during the period.

However, the report further highlighted that the government’s capital augmentation plan will help in addressing the potential capital shortfall and will also drive credit growth at healthier banks. Besides, the report said that the Reserve Bank’s PCA framework, by preventing further capital erosion at weaker banks, is intended to help strengthen these banks to a point of resilience from where they can restart normal operations. Further it added that governance reforms - If undertaken promptly and well - would not only improve the financial performance of the banking sector but also help reduce operational risks.

The CNX Nifty is currently trading at 10670.25, down by 98.90 points or 0.92% after trading in a range of 10658.80 and 10785.50. There were 9 stocks advancing against 41 stocks declining on the index.

The top gainers on Nifty were Tech Mahindra up by 3.43%, Bharti Infratel up by 1.52%, Dr. Reddy’s Lab up by 0.87%, HDFC Bank up by 0.85% and Hindustan Unilever up by 0.66%. On the flip side, HPCL down by 7.86%, BPCL down by 6.68%, Indian Oil Corporation down by 6.56%, ICICI Bank down by 3.92% and Zee Entertainment down by 3.42% were the top losers.

All Asian markets were trading in red; Nikkei 225 declined 70.23 points or 0.32% to 22,271.77, Hang Seng dropped 525.14 points or 1.85% to 28,356.26, Taiwan Weighted slipped 41.14 points or 0.38% to 10,701.03, Shanghai Composite plunged 31.64 points or 1.12% to 2,812.87, KOSPI decreased 8.89 points or 0.38% to 2,342.03, Straits Times fell 24.86 points or 0.76% to 3,256.01and Jakarta Composite was down by 33.41 points or 0.58% to 5,792.24.

All European markets were trading in red; UK’s FTSE 100 fell 15.78 points or 0.21% to 7,522.14, France’s CAC decreased 28.03 points or 0.53% to 5,253.26 and Germany’s DAX was down by 82.01 points or 0.67% to 12,152.33.