Benchmarks manage to trade above water in early deals

Indian equity benchmarks pared most of their gains and are somehow managing to trade tad above their neutral lines in the early deals on Monday. Traders are getting some support with a private report stating that India is likely to emerge as the third-largest economy in the world in just over a decade from now, surpassing Japan and Germany. Traders also took note of a report that in an effort to ease current liquidity crunch, the RBI allowed banks to use government securities equivalent to their incremental credit to non-banking lenders for a three-month period starting October 20 to meet their liquidity coverage ratio (LCR) needs. However, gains remained capped with the Reserve Bank of India’s (RBI) report showing that India’s forex reserves declined by $5.14 billion during the week ended October 12, when the rupee slipped to 74 and beyond against the US dollar. The RBI’s weekly statistical supplement showed that overall forex reserves decreased to $394.46 billion from $399.60 billion reported for the week ended October 5.

On the global front, most of the Asian markets are trading in green terrain at this point of time as Chinese stocks swung higher for a second session and helped offset geopolitical concerns over Saudi Arabia, Italy and Brexit. The US markets ended mostly lower on Friday as concerns about rising interest rates and tension between the US and Saudi Arabia continued to weigh on the markets.

Back home, stocks related to oil and gas space remained in focus on report that petrol and diesel prices were cut in the range of 27-30 paise across metro cities on Monday (October 22, 2018), for the fifth consecutive day in a row. In the national capital, petrol is priced at Rs 81.44 per litre, 30 paise down from Sunday's price of Rs 81.74. In scrip specific developments, NTPC edged higher on planning to start biomass co-firing at its thermal power stations and Alembic Pharmaceuticals added on its JV clearing first USFDA inspection at its Gujarat facility.

The BSE Sensex is currently trading at 34,353.59, up by 37.96 points or 0.11% after trading in a range of 34,353.12 and 34,748.69. There were 11 stocks advancing against 20 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index declined 0.41%, while Small cap index was down by 0.84%.

The few gaining sectoral indices on the BSE were Bankex up by 0.34%, FMCG up by 0.24% and Healthcare was up by 0.15%, while Telecom down by 1.63%, Oil & Gas down by 1.00%, Realty down by 0.93%, Consumer Durables down by 0.89% and Metal was down by 0.85% were the top losing indices on BSE.

The top gainers on the Sensex were Adani Ports & SEZ up by 2.07%, HDFC Bank up by 1.60%, ITC up by 0.95%, HDFC up by 0.79% and SBI up by 0.69%. On the flip side, Yes Bank down by 3.45%, Bharti Airtel down by 2.56%, ONGC down by 1.71%, Tata Motors - DVR down by 1.25% and TCS down by 0.92% were the top losers.

Meanwhile, welcoming the Reserve Bank of India’s decision to incentivise banks to enhance their lending to non-banking finance companies (NBFCs), the industry chamber, Associated Chambers of Commerce and Industry of India (ASSOCHAM) has stated that this step will help NBFCs in tackling liquidity crunch. The RBI allowed the banks to use government securities equivalent to their incremental credit to NBFCs for a three-month period to meet their liquidity coverage ratio requirements. The provision will allow banks to free up Rs 50,000-60,000 crore of liquidity which banks can lend to NBFCs till December 31.

ASSOCHAM also said this shall also send a message that the recent developments do not indicate any systemic problem but it is merely a case of sentiments having gone wrong after one of the big NBFCs defaulted. It added that the whole issue of asset liability mismatch is more relevant in case of long-term lending companies like the housing finance companies and infra financing NBFCs.

The industry chamber further said a typical NBFC model is a retail lending model with short tenures of 2-5 years and small ticket sizes where asset liability mismatch is not a concern. NBFCs have shown impressive growth for the last few years maintaining a high capital adequacy ratio which is higher than the minimum prescribed levels. It noted that this growth has also been healthy as reflected in better asset quality. However, provision of a dedicated refinance window, especially, for the large number of small and medium sized NBFCs is very important to ensure future growth.

The CNX Nifty is currently trading at 10,307.75, up by 4.20 points or 0.04% after trading in a range of 10,289.70 and 10,408.55. There were 21 stocks advancing against 29 stocks declining on the index.

The top gainers on Nifty were Indiabulls Housing up by 4.31%, Adani Ports & SEZ up by 1.89%, Bajaj Finance up by 1.71%, HCL Tech up by 1.46% and HDFC Bank up by 1.44%. On the flip side, Yes Bank down by 3.49%, Bharti Airtel down by 2.78%, Indian Oil Corporation down by 2.40%, Tech Mahindra down by 2.39% and BPCL down by 2.31% were the top losers.

Asian markets are trading mostly in green; Nikkei 225 gained 80.04 points or 0.35% to 22,612.12, Taiwan Weighted jumped 61.70 points or 0.62% to 9,980.96, Straits Times rose 10.41 points or 0.34% to 3,072.92, Hang Seng increased 612.58 points or 2.34% to 26,173.98, KOSPI added 2.70 points or 0.13% to 2,158.96 and Shanghai Composite was up by 106.40 points or 4% to 2,656.87. On the flip side, Jakarta Composite was down by 7.36 points or 0.13% to 5,829.93.