Benchmarks trade with traction in early deals

Indian equity benchmarks made a gap-up opening and are trading with traction with frontline gauges recapturing their crucial 35,100 (Sensex) and 10,550 (Nifty) levels. Traders took encouragement with report that India’s trade deficit declined to a five-month low in September even as exports contracted, providing some respite from the rising gap that has sparked concern about the current account deficit (CAD). Trade deficit declined to $13.98 billion in September from $17.39 billion in August following slower growth in imports. Besides, exports were pegged at $27.95 billion in September, down 2.15% from a year ago, while imports rose 10.45% to $41.9 billion, lowest in five months.

Global cues too remained supportive with most of the Asian markets trading in green at this point of time, as moves in Treasury yields remained muted for a second session. The US markets ended lower on Monday as tech companies continued to slide. Besides, US- Saudi trade tension weighed down on investors’ sentiments.

Back home, stocks related to non-bank financial companies (NBFCs) were in focus with Moody’s Investors Service’s statement that Indian NBFCs will be significantly impacted if the liquidity distress in the country’s capital markets, triggered by the default in September 2018 of IL&FS, prolongs for an extended period of time. In scrip specific developments, PNB surged on planning to sell non-core assets worth Rs 8,600 crore during FY19 and Trident was up on reporting over 2 fold jump in Q2 net profit.

The BSE Sensex is currently trading at 35120.83, up by 255.73 points or 0.73% after trading in a range of 34913.06 and 35132.57. There were 26 stocks advancing against 4 stocks declining on the index, while 1 stock remained unchanged.

The broader indices were trading in green; the BSE Mid cap index surged 1.01%, while Small cap index was up by 1.42%.

The top gaining sectoral indices on the BSE were Basic Materials up by 1.40%, Consumer Discretionary Goods & Services up by 1.23%, Auto up by 1.22%, Industrials up by 1.13% and Realty was up by 1.11%, while there were no losers on the BSE sectoral front.

The top gainers on the Sensex were Asian Paints up by 2.56%, Indusind Bank up by 2.35%, Mahindra & Mahindra up by 2.33%, Adani Ports up by 2.10% and ICICI Bank up by 1.72%. On the flip side, Wipro down by 0.73%, Kotak Mahindra Bank down by 0.53%, TCS down by 0.34% and Power Grid Corporation down by 0.21% were the few losers.

Meanwhile, expressing concerns over economic growth, global rating agency Moody’s Investors Service in its latest report has stated that non-bank financial companies (NBFCs) are likely to be impacted significantly if the liquidity situation in the country's capital markets, triggered by Infrastructure Leasing & Financial Services (IL&FS) default, continues to remain tight. Also, this will be negative for the broader economy and structured finance sector. Infrastructure Leasing & Financial Services (IL&FS) and its subsidiaries are facing liquidity crisis and has defaulted on debt repayment. The default by IL&FS has also impacted other NBFCs and also mutual fund players.

According to the report, liquidity tightness could lead to sharply higher financing costs for Non-bank financial institutions (NBFIs), or even difficulty in rolling over their liabilities, because these companies have relied heavily on market borrowing to fund asset growth. Any effects on the NBFIs will spill over to the broader economy mainly through the credit channel because NBFIs are a material provider of credit for the economy, with outstanding loans/Gross Domestic Product (GDP) at end March 2018 registering 13% versus banking system loans/GDP of 52%.

As a result, Moody’s said a slowdown in credit growth provided by NBFIs will dampen overall consumption and economic growth. The report said NBFIs' liquidity management practices suggests that these companies are capable of coping with multi-week liquidity distress, but a prolonged period of liquidity stress will severely weaken the NBFIs' credit standings. It added that there will not be a significant impact on the credit quality of the country's structured finance sector, nor performance of asset-backed securities (ABS).

The CNX Nifty is currently trading at 10577.70, up by 65.20 points or 0.62% after trading in a range of 10525.30 and 10583.75. There were 36 stocks advancing against 14 stocks declining on the index.

The top gainers on Nifty were Ultratech Cement up by 2.85%, Indusind Bank up by 2.43%, Mahindra & Mahindra up by 2.18%, Asian Paints up by 2.10% and Adani Ports up by 1.96%. On the flip side, Bharti Infratel down by 1.43%, HCL Tech down by 0.88%, BPCL down by 0.71%, HPCL down by 0.64% and Hindalco down by 0.63% were the top losers.

Asian markets are trading mostly in green; Nikkei 225 gained 43.16 points or 0.19% to 22,314.46, Taiwan Weighted rose 24.11 points or 0.24% to 9,925.23, Jakarta Composite gained 7.13 points or 0.12% to 5,734.39 and KOSPI was up by 0.37 points or 0.02% to 2,145.49.

On the flip side, Straits Times decreased 12.34 points or 0.41% to 3,033.63, Hang Seng dropped 48.87 points or 0.19% to 25,396.19 and Shanghai Composite was down by 3.86 points or 0.15% to 2,564.24.