Sensex, Nifty back in red on rising WPI inflation

Tracking weak European markets, Indian equity benchmarks came back in red territory in late afternoon session. WPI inflation spread the concerns on street by rising 4-month high to 5.28% in October from 5.13% in September and 3.68% during the corresponding month of the previous year. Domestic sentiments also got hit after the CriSidEx index showed that sentiment among micro and small enterprises (MSEs) dipped marginally in the quarter ended September, compared to the last three months. The CriSidEx index stood at 124 in Q2 FY19, marginally lower than 127 in Q1. Adding more concerns, a private report stated that the overall hiring sentiment for the second half of this financial year has declined by 3% to 92% with persisting currency and oil pricing concerns in the country. The street were in pessimistic mood with another private report stating that the liquidity crisis at non-bank lenders and higher interest rates seem to have rattled chief financial officers (CFOs) of India Inc and resulted in their optimism to slip to a 19-quarter low. Some concerns also came with reports that large-scale cyberattacks, massive incidents of data theft and extreme weather events are the top three risks for India Inc. About 88% of the survey respondents across 19 industries identified cyberattacks as the top-most risk.

On the global front, European markets were trading in red, as Germany's consumer price inflation in October was the highest in over a decade. The final figures from the Federal Statistical Office showed that the consumer price index rose 2.5% year-on-year following a 2.3% increase in September. The street overlooked reports that German investor confidence improved in November, defying expectations for further weakness. According to the survey data from the ZEW, the ZEW Indicator of Economic Sentiment for Germany improved to (-) 24.1 from (-) 24.7 in October. Asian markets were trading in red, as Japan's gross domestic product slipped a seasonally adjusted 0.3% sequentially in the third quarter of 2018. That was in line with expectations following the 0.7% gain in the previous three months.

The BSE Sensex is currently trading at 35019.44, down by 125.05 points or 0.36% after trading in a range of 34986.86 and 35351.88. There were 14 stocks advancing against 17 stocks declining on the index.

The broader indices were trading mixed; the BSE Mid cap index was up by 0.03%, while Small cap index down by 0.33%.

The top gaining sectoral indices on the BSE were Oil & Gas up by 1.46%, PSU up by 1.18%, Telecom up by 0.46%, Power up by 0.39% and Energy up by 0.33%, while IT down by 2.68%, TECK down by 2.29%, Healthcare down by 1.88%, Realty down by 1.43% and Auto down by 0.80% were the top losing indices on BSE.

The top gainers on the Sensex were ONGC up by 3.64%, Asian Paints up by 2.33%, SBI up by 2.16%, Hindustan Unilever up by 2.13% and Maruti Suzuki up by 2.10%. On the flip side, Sun Pharma down by 7.05%, Kotak Mahindra Bank down by 3.19%, TCS down by 2.96%, Infosys down by 2.73% and Mahindra & Mahindra down by 1.87% were the top losers.

Meanwhile, instead of present stricter guidelines which restrict the lending capacity of lenders, the government is of the view that the Reserve Bank of India (RBI) should resort to Basel III norms for capital adequacy in banks. Currently, the RBI applies stricter norms and not those specified under Basel III for capital adequacy, leading banks to set aside higher capital for loans. Besides, the RBI has fixed March 2019 as the deadline to meet capital requirements under the Basel III norms for banks.

The government has been in favour of alignment of the capital adequacy norms with Basel III norms. This assumes significance amidst growing tensions between the RBI and the government, with the Finance Ministry initiating discussion under the never-used-before Section 7 of the RBI Act which empowers the government to issue directions to the RBI Governor.

According to the Basel Committee on Banking Supervision (BCBS) report, core capital requirement for banks as prescribed by the RBI is 1% higher than what Basel III norms recommend. Indian banks as per RBI direction are required to maintain 5.5% Common Equity Tier 1 (CET 1) as against 4.5% required under the Basel III framework. The BCBS report said these higher capital norms translate into additional capital requirement, restricting lending potential and income generation.

As per the report, while the Basel framework requires the application of capital standards to all internationally active banks, these have been made applicable in India to all scheduled commercial banks, including banks which are not internationally active. Meanwhile, India has only four internationally active banks, which have more than 10 per cent of their assets in their overseas book.

The CNX Nifty is currently trading at 10552.55, down by 29.95 points or 0.28% after trading in a range of 10532.70 and 10651.60. There were 22 stocks advancing against 28 stocks declining on the index.

The top gainers on Nifty were HPCL up by 5.99%, BPCL up by 5.15%, ONGC up by 3.96%, Indian Oil Corporation up by 3.36% and UPL up by 2.99%. On the flip side, Sun Pharma down by 7.13%, Tech Mahindra down by 3.95%, HCL Tech down by 3.72%, GAIL India down by 3.46% and Kotak Mahindra Bank down by 3.26% were the top losers.

Asian markets were trading mostly in red; Straits Times decreased 18.95 points or 0.62% to 3,034.65, KOSPI fell 3.18 points or 0.15% to 2,068.05, Shanghai Composite lost 22.64 points or 0.86% to 2,632.24 and Hang Seng fell 138.44 points or 0.54% to 25,654.43. On the flip side, Taiwan Weighted increased 16.04 points or 0.16% to 9,791.88, Nikkei 225 gained 35.96 points or 0.16% to 21,846.48 and Jakarta Composite was up by 44.54 points or 0.76% to 5,879.74.

All European markets were trading in red; UK’s FTSE 100 dipped 66.55 points or 0.95% to 6,987.21, France’s CAC decreased 69.99 points or 1.39% to 5,031.86 and Germany’s DAX was down by 137.70 points or 1.21% to 11,334.52.