Local equities trade flat with positive bias

Local equity benchmarks were trading flat with positive bias in morning session, on fresh buying by investors after a sharp drop on global crude oil prices and strengthening rupee. Some comfort came with a report that Corporate India has announced deals worth $74.8 billion in the January-June period, registering a 90 percent jump over last year, largely driven by big ticket consolidations. The markets took support from a report that the Indian government on July 16 invited Omani companies to invest in India and benefit from Make in India programme aimed to encourage manufacturing. However, gains remain capped on report that the International Monetary Fund (IMF) has cut India’s GDP growth forecast by 10 basis points to 7.3% in the year 2019 and by 30 basis points to 7.5% in 2020, as the international body expects the central bank to tighten the monetary policy faster. Meanwhile, the Centre has increased the official maximum load carrying capacity of heavy vehicles, including trucks, by 20-25% besides scrapping the mandatory annual renewal of fitness certificates for freight carriers.

On the global front, Asian markets were trading mostly in red, weighed by a sharp decline in crude oil prices as Libyan ports reopened, while the dollar steadied ahead of Federal Reserve Chairman Jerome Powell’s first congressional testimony. Back on domestic turf, in scrip specific development, Orissa Bengal Carrier gained on getting approval for loan facility from HDFC Bank. Besides, Glenmark Pharma rises on getting approval from USFDA for Colesevelam Hydrochloride.

The BSE Sensex is currently trading at 36357.61, up by 33.84 points or 0.09% after trading in a range of 36261.78 and 36470.76. There were 20 stocks advancing against 10 stocks declining, while 1 stock remained unchanged on the index.

The broader indices were trading in green; the BSE Mid cap index gained 0.66%, while Small cap index was up by 0.22%.

The top gaining sectoral indices on the BSE were Oil & Gas up by 1.36%, Energy up by 0.87%, PSU up by 0.68%, Metal up by 0.58% and Basic Materials was up by 0.57%, while FMCG down by 0.49%, IT down by 0.24%, TECK down by 0.19% and Power was down by 0.02% were the top losing indices on BSE.

The top gainers on the Sensex were ICICI Bank up by 1.79%, Tata Motors up by 1.75%, Adani Ports & SEZ up by 1.49%, Sun Pharma up by 1.30% and Wipro was up by 1.20%. On the flip side, Hindustan Unilever down by 2.73%, NTPC down by 1.06%, Kotak Mahindra Bank down by 0.92%, Indusind Bank down by 0.77% and Bharti Airtel was down by 0.59% were the top losers.

Meanwhile, rating agency Moody’s Investor Service in its latest report has warned that interest costs on loan against property (LAP) are set to rise on account of the hardening rates and will adversely affect small business, which are already reeling under note-ban and goods and services tax (GST) impact. It further said that the hike in interest rates by the Reserve Bank of India (RBI) and hardening of yields since late-2017 have led to an increase in the cost of borrowing for non-banking lenders, which will prompt them to hike the rates at which LAP are extended to small and medium enterprises (SMEs).

It can be noted that the LAP is one of the most sought-after routes by SME promoters for short term finance as they can raise money through pledging of property which serves as a collateral for lenders. The agency stated that it expects delinquencies on LAP portfolios, but added this will not pinch hard as the loans have low loan to value ratios and are 'secured' with properties as collaterals. The legislative amendments in 2016, which lets the non-banking finance companies recover money under the Sarfaesi Act will also help restrict losses.

Improvements in the property registration systems also lower the administrative and legal hurdles lenders face in limiting their losses during default. Apart from that, the asset backed securities (ABS) include structural features non-amortising cash reserves, substantial excess spread and the possibility to extend the life of the loans and consequently, the principal repayment schedule that can mitigate the risks posed by higher interest rates.

The CNX Nifty is currently trading at 10946.85, up by 10.00 points or 0.09% after trading in a range of 10925.60 and 10989.65. There were 30 stocks advancing against 19 stocks declining, while 1 stock remained unchanged on the index.

The top gainers on Nifty were HPCL up by 3.44%, IOC up by 2.67%, ICICI Bank up by 1.87%, GAIL India up by 1.73% and Tata Motors was up by 1.55%. On the flip side, Hindustan Unilever down by 2.70%, Bajaj Finance down by 1.14%, IndusInd Bank down by 1.03%, Bharti Airtel down by 0.99% and NTPC was down by 0.96% were the top losers.

Asian market were trading mostly in red; Taiwan Weighted slipped 43.62 points or 0.40% to 10,773.83, Jakarta Composite declined 42.23 points or 0.72% to 5,862.93, Hang Seng lost 283.79 points or 1% to 28,255.87, KOSPI fell 0.08 points to 2,301.91 and Shanghai Composite was down by 28.29 points or 1.02% to 2,785.75.

On the other side, Straits Times gained 14.66 points or 0.45% to 3,247.45 and Nikkei 225 was up by 195.55 points or 0.86% to 22,792.90.