Key gauges trim losses to trade flat

Local equity benchmarks trimmed some of their losses in morning session, but still continued to trade below neutral lines, as traders started taking some optimism with Union minister Arun Jaitley’s statement that the country has adequate reserves to stem any undue volatility in the foreign exchange market. Nevertheless, the government was closely tracking the ‘unsettled international environment’ to address any potentially adverse fallout of it. Utilities, IT and Auto counters were on the priority list of the buyers. A level of pressure was seen on frontline stocks, especially Vedanta and Kotak Mahindra Bank. Some support came with Prime Minister Narendra Modi’s statement that the new agriculture export policy will be unveiled soon to boost farm income as the government is on track to achieve the target of doubling farmers’ income by 2022. However, traders remained cautious with India Ratings’ report that if the steep decline in the household savings rate, which has fallen to 16.3% from 23.6% between fiscals 2012 and 2017 continues, it may pose a serious challenge to overall growth and the macroeconomic stability.

On the global front, Asian markets were trading in red, after Chinese internet giant Tencent reported a fall in quarterly profit - a disappointing result that weighed on the tech space stateside. Beside, a growth slowdown in China also contributed to losses across global markets, after a slew of soft Chinese economic data out earlier this week. Back home, the government data showed that the trade deficit expanded to $18.02 billion in July as against $16.60 billion last month as oil imports surged 57.41% to $12.35 billion. The exports shrank to $25.77 billion as against $27.70 billion in previous month and July imports reached $43.79 billion as against $44.30 billion in the month of June.

The BSE Sensex is currently trading at 37818.11, down by 33.89 points or 0.09% after trading in a range of 37644.97 and 37854.86. There were 19 stocks advancing against 12 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index gained 0.04%, while Small cap index was up by 0.32%.

The top gaining sectoral indices on the BSE were Utilities up by 0.95%, IT up by 0.77%, Auto up by 0.73%, Healthcare up by 0.72% and TECK was up by 0.58%, while Metal down by 1.73%, Realty down by 1.23%, Consumer Durables down by 0.64%, Energy down by 0.63%, Basic Materials was down by 0.61% were the top losing indices on BSE.

The top gainers on the Sensex were Axis Bank up by 1.90%, Sun Pharma up by 1.85%, ICICI Bank up by 1.61%, Infosys up by 1.22% and Maruti Suzuki was up by 0.92%. On the flip side, Vedanta down by 3.30%, Kotak Mahindra Bank down by 2.83%, Tata Steel down by 1.36%, Wipro down by 1.23% and HDFC was down by 1.15% were the top losers.

Meanwhile, in a bid to contain rising non-performing assets (NPAs) in the country’s banking system, the Reserve Bank of India (RBI) has started scrutiny of 200 large accounts to assess level of stress and provisioning done against them by respective banks. The RBI is examining if the banks have followed prudential norms in respect of these stressed assets. It is also assessing classification, provisioning and debt recast in respect of those loans. This is a part of regular annual inspection of book of the banks that the central bank undertakes each year after the closure of the financial year. This exercise comes at a time when gross NPAs in the banking system has risen to around Rs 10.3 lakh crore, or 11.2 percent of advances, compared to Rs 8 lakh crore, or 9.5 percent of total loan, as on March 31, 2017.

After the annual inspection previous year, many lenders, including Axis Bank, Bank of India and Yes Bank, were caught for under-reporting of NPAs. The lenders started reporting divergences since June last year for having under-reported NPAs in FY16. This was followed by a second round of disclosures, starting October, of under-reporting in FY17 by a few lenders.

Private sector lenders, which were reputed for their caution on the asset quality front vis-a-vis the poorly governed state-owned peers, were the worst hit in this exercise. Among others, mid-sized private sector lender Yes Bank was found to have under-reported gross NPAs by a whopping Rs 11,000 crore in the two fiscals, while the third largest lender Axis Bank was found to have a divergence of over Rs 14,000 crore and ICICI Bank had over Rs 5,000 crore on these accounts for FY16 alone.

In most cases, this led to a shooting up of NPAs and an ensuing jump in provisions against dud assets. This eroded their bottomlines, and led to a sell-off in the stock causing erosion of wealth for investors. Last year, RBI had jerked the rules to make it compulsory for lenders to disclose under-reporting of bad assets. Before this there was a massive book clean-up through the asset quality review (AQR) in the previous year.

The CNX Nifty is currently trading at 11427.15, down by 7.95 points or 0.07% after trading in a range of 11376.95 and 11437.90. There were 30 stocks advancing against 20 stocks declining on the index.

The top gainers on Nifty were GAIL India up by 4.50%, Bajaj Finance up by 2.40%, Cipla up by 2.23%, Axis Bank up by 1.94% and Sun Pharma was up by 1.93%. On the flip side, Vedanta down by 3.32%, Kotak Mahindra Bank down by 2.96%, Hindalco down by 2.37%, Indiabulls Housing Finance down by 2.30% and Wipro was down by 1.63% were the top losers.

All Asian markets were trading in red; Straits Times declined 16.60 points or 0.52% to 3,217.52, Hang Seng lost 87.21 points or 0.32% to 27,236.38, Shanghai Composite slipped 23.66 points or 0.88% to 2,699.60 Jakarta Composite dropped 30.06 points or 0.52% to 5,786.53, KOSPI fell 20.93 points or 0.94% to 2,237.98, Taiwan Weighted decreased 37.04 points or 0.35% to 10,679.71 and Nikkei 225 was down by 20.74 points or 0.09% to 22,183.48.