Indices continue to rally; Sensex inches towards 37000 mark

Indian equity benchmarks continued their northward journey in early noon session with Sensex inching towards 37000 level ahead of the expiry of July Futures and Options (F&O) contracts later in the day. Investors took some encouragement with Commerce and Industry Minister Suresh Prabhu’s statement that India's exports are expected to touch $350 billion in 2018-19. Some support also came in with a private report stating that India will remain the fastest-growing major economy this year supported by increased government spending ahead of next year's general election. Meanwhile, the US has indicated that it will consider a waiver to India from its 25% additional tariff on steel, provided the country offers an acceptable proposal to lower the volume of its supplies of the metal to the world’s biggest economy.

Besides, stocks related to steel sector were in focus as a private report stated that prices of steel-making raw materials are likely to move in a narrow range during the financial year 2018-19 due to increased supply pressure from major producing countries. On the BSE sectoral front, PSU stocks were gaining the most, followed by Bankex and FMCG. While, Nifty PSU Bank, Nifty Fin service, Nifty Bank stocks were on a buying spree. Meanwhile, broader indices were also trading in green. Amongst the Mid cap stocks, Shriram Transport Finance and Petronet LNG stocks were gaining the most and amongst the Small cap stocks Edelweiss Financial Service and DHFL were gaining.

On the global front, Asian markets were trading mostly in green, as some relief came in after the United States and Europe agreed to negotiations to ease barriers on trade. Back home, investors took note of a report which stated that the demand for credit from companies in the manufacturing and services sectors is moving up, in tandem with economic growth showing clear signs of gathering steam. In scrip specific development, REC jumped on getting approval to incorporate SPV as wholly owned subsidiary and L&T rose on reporting 36% rise in Q1 consolidated net profit.

The BSE Sensex is currently trading at 36990.17, up by 131.94 points or 0.36% after trading in a range of 36894.82 and 37026.18. There were 22 stocks advancing against 9 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index rose 0.69%, while Small cap index up by 0.40%.

The top gaining sectoral indices on the BSE were PSU up by 1.54%, Bankex up by 1.11%, FMCG up by 0.52%, Auto up by 0.51%, and Basic Materials up by 0.50%, while Capital Goods down by 0.52%, Metal down by 0.32%, TECK down by 0.21%, IT down by 0.13% and Consumer Disc down by 0.04% were the top losing indices on BSE.

The top gainers on the Sensex were SBI up by 4.83%, ICICI Bank up by 3.10%, Tata Motors up by 1.75%, Tata Motors - DVR up by 1.31% and Bharti Airtel up by 1.15%. On the flip side, Asian Paints down by 1.57%, Larsen & Toubro down by 1.42%, Kotak Mahindra Bank down by 1.20%, Hero MotoCorp down by 0.61% and Wipro down by 0.51% were the top losers.

Meanwhile, Global credit rating agency, Moody’s Investors Services in its latest report has said that the government’s decision to infuse Rs 11,336 crore in public sector banks (PSBs) including fraud-hit Punjab National Bank (PNB), is credit positive and will help these lenders meet the regulatory capital requirements. It mentioned that PNB will get the maximum amount at Rs 2,816 crore, followed by Corporation Bank, which will see infusion of about Rs 2,555 crore. The others are Indian Overseas Bank (Rs 2,157 crore), Andhra Bank (Rs 2,019 crore) and Allahabad Bank (Rs 1,790 crore). The infusion is part of the Rs 65,000 crore that the government proposes to infuse into 21 PSBs this financial year.

According to the report, these banks' common equity tier 1 (CET1) ratios were the weakest among all PSBs as of March-end, and were at the risk of breaching the minimum regulatory capital requirement of 5.5 percent under the Basel III norms. It expects these lenders' CET1 ratios to be above 5.5 percent after the new capital infusion. It also said that the additional capital will also lower the risk of Andhra Bank and PNB breaching the write-down trigger on outstanding Basel III-compliant additional tier 1 (AT1) securities. It indicated that as of FY18, Andhra Bank disclosed Rs 2,200 crore of Basel III-compliant AT1 securities and PNB Rs 5,300 crore.

Rating agency further said that based on the contractual terms of the Basel III AT1 securities, the value of the security will be automatically written down should the bank's CET1 ratio fall below 5.5 per cent before March 31, 2019. Post that date, the trigger value steps up to 6.125 percent. It expects the five banks to have losses in FY19, albeit somewhat smaller than their losses for FY18. It pointed out that the losses are due to the elevated credit costs as the banks continue to provide for their large stock of non-performing loans. As such, depending on their financial performance during the rest of the year, it said that these banks may require additional capital support from the government to meet the minimum regulatory thresholds.

The CNX Nifty is currently trading at 11162.25, up by 30.25 points or 0.27% after trading in a range of 11129.85 and 11179.60. There were 31 stocks advancing against 19 stocks declining on the index.

The top gainers on Nifty were SBI up by 4.65%, ICICI Bank up by 3.31%, Eicher Motors up by 2.83%, Lupin up by 2.26% and Indiabulls Housing up by 1.85%. On the flip side, Larsen & Toubro down by 1.63%, Asian Paints down by 1.59%, Tech Mahindra down by 1.50%, Bharti Infratel down by 1.39% and Kotak Mahindra Bank down by 1.09% were the top losers.

Asian markets trade mostly in green; Taiwan Weighted increased 44.82 points or 0.41% to 11,010.61, Jakarta Composite surged 13.94 points or 0.23% to 5,947.83, KOSPI soared 13.02 points or 0.57% to 2,286.05 and Straits Times was up by 8.69 points or 0.26% to 3,335.52.

On the flip side, Hang Seng decreased 284.75 points or 0.99% to 28,636.15, Shanghai Composite declined 16.71 points or 0.58% to 2,886.94 and Nikkei 225 was down by 27.38 points or 0.12% to 22,586.87.