Benchmarks end flat on penultimate session of F&O expiry

Indian equity benchmarks ended the choppy day of trade almost flat, as traders remained on sidelines ahead of November derivatives expiry on Thursday. Markets traded lackluster throughout the session with report that the International Monetary Fund (IMF) has cautioned India it should not rely on global financial markets to finance its current account deficit (CAD) when it goes above 3% of gross domestic product (GDP). The Fund basically advised India to rely more on stable sources of foreign inflow - foreign direct investment (FDI). Investors remained concerned with Minister of State for Agriculture Parshottam Rupala’s statement that Union Government, at present, is not considering any loan waiver Scheme for farmers, as such, waivers may impact the credit culture of a State by incentivising the defaulters, even if they are in a position to repay the loan, and thus, create/amplify the moral hazard by discouraging those borrowers who have been regular in repaying their loans. Anxiety also persisted with a private report stating that India’s low trade-to-gross domestic product (GDP) ratio, favourable demographics, high commodity imports and pro-reform government will shield it to a large extent should trade tensions escalate and lead to a global economic slowdown.

Though, traders took some solace with Prime Minister Narendra Modi’s statement that India is emerging as a global manufacturing and start-up hub and many of the Made-in-India products, including cars and smartphones, are today exported to nations from whom the country used to import. Market participants also took some support with Chairman of the PHD Chamber of Commerce and Industry, Anil Khaitan’s statement that India needs to focus on exports and regulatory reform to propel the Indian economy forward. Local gauges also get some support with a private poll stating that India will remain the fastest-growing major economy this year supported by increased government spending ahead of next year’s general election, but rising oil prices pose the biggest downside risk.

On the global front, European markets were trading mostly in red in early deals on Wednesday, as investors awaited a key meeting between the European Commission and President Donald Trump and digested fresh earnings. Asian markets ended mixed, as optimism about corporate earnings results and China’s stimulus plan were offset by speculation that the Bank of Japan may not make immediate changes to its monetary policy.

Back home, PSU banking stocks exhibited mixed trend with the minister of state for finance Shiv Pratap Shukla’s statement, citing data from the Reserve Bank of India, that the gross bad loans of public sector banks (PSBs) hit 15% of advances in 2017-18, while the gross non-performing assets (NPA) ratio for PSBs stood at 14.6% in 2017-18. Shares of cement majors ended lower as investors reacted to an order, which upheld Rs 6,300 crore penalty imposed by Competition Commission of India (CCI).

Finally, the BSE Sensex rose 33.13 points or 0.09% to 36,858.23, while the CNX Nifty was down by 2.30 points or 0.2% to 11,132.00.

The BSE Sensex touched a high and a low of 36,947.18 and 36,803.15, respectively and there were 15 stocks advancing against 16 stocks declining on the index.

The broader indices ended mixed; the BSE Mid cap index slipped 0.12%, while Small cap index was up by 0.23%.

The top gaining sectoral indices on the BSE were Metal up by 0.82%, Basic Materials up by 0.24%, Oil & Gas up by 0.18%, Energy up by 0.17% and Bankex was up by 0.14%, while Power down by 1.52%, Realty down by 1.32%, Telecom down by 1.11%, Utilities down by 1.08% and Consumer Durables was down by 0.98% were the top losing indices on BSE.

The top gainers on the Sensex were SBI up by 1.78%, Adani Ports & SEZ up by 1.53%, Tata Steel up by 1.49%, Vedanta up by 1.30% and ONGC up by 1.21%. On the flip side, NTPC down by 4.01%, Axis Bank down by 2.59%, Power Grid Corporation down by 1.49%, Asian Paints down by 1.45% and Bharti Airtel down by 1.28% were the top losers.

Meanwhile, Minister of State for Finance Shiv Pratap Shukla stated that the government has asked the Reserve Bank of India (RBI) for views as well as suggestions regarding the possibility of merger among public sector banks (PSBs) in a bid to achieve synergy and scale operation. He also said that there is no timeline has been fixed for merger of the PSBs.

Shukla has highlighted that last year, the government has constituted an Alternative Mechanism (AM) comprised of three ministers, to facilitate consolidation among the PSBs to create strong and competitive banks to meet the credit needs of a growing economy, absorb shocks, and have the capacity to raise resources without depending unduly on the state exchequer. Besides, it said that the proposals received from banks for in-principle approval to formulate schemes of amalgamation shall be placed before the institution although there is no proposal for consideration before it.

The minister has stated the government has sought comments of respective state governments and sponsor banks on a roadmap for amalgamation of Regional Rural Banks (RRBs) within a state with a view to enable Regional Rural Banks (RRBs) to minimize their overhead expenses, optimize the use of technology, enhance the capital base and area of operation and increase their exposure.

He further said that the roadmap has been prepared in consultation with National Bank for Agricultural and Rural Development (NABARD) and proposes to bring down the number of RRBs to 38 from the present 56. He added that it is expected that the proposed amalgamation of RRBs will bring about better scale-efficiency, higher productivity, robust financial health, improved financial inclusion and greater credit flow to rural areas.

The CNX Nifty traded in a range of 11,157.15 and 11,113.25. There were 21 stocks in green as against 28 stocks in red, while 1 stock remained unchanged on the index.

The top gainers on Nifty were Indiabulls Housing Finance up by 3.80%, Bajaj Finserv up by 1.79%, SBI up by 1.69%, UPL up by 1.56% and Adani Ports & SEZ up by 1.52%. On the flip side, NTPC down by 4.10%, Lupin down by 2.92%, HCL Tech down by 2.68%, Ultratech Cement down by 2.61% and Axis Bank down by 2.59% were the top losers.

European markets were trading in red; UK’s FTSE 100 dropped by 55.88 points or 0.73% to 7,653.17 and Germany’s DAX shed 39.36 points or 0.31% to 12,650.03 and France’s CAC was down by 2.81 points or 0.05% to 5,431.38.

Asian equity markets ended mixed on Wednesday on fears that the Bank of Japan will scale back stimulus next week. Investors also looked ahead to a key meeting between US President Donald Trump and European Commission President Jean-Claude Juncker for directional cues. Meanwhile, encouraging earnings results from the US and hopes that China will boost fiscal support for its economy helped support underlying sentiment. Japanese shares extended gains for a second day running as commodity-related steel and metal firms rallied on promises of more stimulus from Beijing.