Local equities pare initial gains to trade flat

Local equity benchmarks pared initial gains to trade flat in the morning deals, both Sensex and Nifty were trading below their crucial 36,000 and 10,800 marks, respectively. Traders remained cautions with SBI Research report stating that Modi government may announce a holistic or selective farm loan waiver, however, it could be the ‘worst solution’ to alleviate farmers’ distress. However, losses remained capped with Export-Import (Exim) Bank report that India’s merchandise shipments is expected to rise by 7 per cent to $82.39 billion during the third quarter this fiscal. Non-oil exports are projected to increase by 7.2 per cent to $71.45 billion. Besides, Commerce and Industry Minister Suresh Prabhu stated that he will hold bilateral discussions on trade issues with US Commerce Secretary Wilbur Ross on February 14. Both the ministers would meet as part of the bilateral commercial dialogue.

On the global front, Asian markets were trading in red, putting the region on course to end a broadly positive week on a sour note, as traders took a step back and their profits off the table. Back home, NITI Aayog chief executive Amitabh Kant stated that India’s exports need to increase significantly if the country has to become a $5-trillion economy by 2025. Kant also noted that the private sector will play a major role in pushing the country’s economy towards the ambitious $5-trillion target.

The BSE Sensex is currently trading at 35932.81, up by 3.17 points or 0.01% after trading in a range of 35813.85 and 36019.02. There were 15 stocks advancing against 16 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index gained 0.26%, while Small cap index was up by 0.14%.

The top gaining sectoral indices on the BSE were Telecom up by 2.69%, Oil & Gas up by 0.85%, Realty up by 0.78%, Basic Materials up by 0.68% and TECK was up by 0.66%, while Capital Goods down by 0.54%, Consumer Durables down by 0.31%, Industrials down by 0.20%, Utilities down by 0.12% and Power was down by 0.05% were the top losing indices on BSE.

The top gainers on the Sensex were Bharti Airtel up by 4.34%, Asian Paints up by 2.06%, Infosys up by 1.32%, Yes Bank up by 0.97% and Tata Motors - DVR was up by 0.83%. On the flip side, Bajaj Auto down by 1.34%, Maruti Suzuki down by 0.96%, HDFC down by 0.86%, Larsen & Toubro down by 0.85% and Power Grid was down by 0.85% were the top losers.

Meanwhile, the government is considering additional capital infusion of up to Rs 30,000 crore in public sector banks (PSBs).  It is expected that final decision will come in the next few weeks. The government is considering additional capital infusion as PSBs have been unable to raise required funds from the markets so far on account of subdued market conditions. As part of the capital infusion plan announced by the Finance Ministry in October 2017, the government envisaged that PSBs would raise Rs 58,000 crore from the stock markets by March 2019 to meet Basel III norms.

Besides, non-performing assets of many banks have seen a spurt in the first two quarters of current financial year (FY19), putting stress on their bottomlines. Though, the banks have got a breather in respect of Capital Conservation Buffer (CCB), a part of Basel III norms. The RBI, at its last board meeting, deferred the requirement to meet the CCB target by one year, leaving about Rs 37,000 crore in the hands of banks. In spite of this relaxation, banks need more funds to meet global capital norms called Basel III as the RBI has retained the capital to risk weighted assets ratio (CRAR) at 9%, the shortfall could be around Rs 30,000 crore.

With a view to support credit growth, the government had decided to take a massive step to capitalise PSBs in a front-loaded manner. This entailed mobilisation of capital to the tune of about Rs 2,11,000 crore over the next two years - through budgetary provisions of Rs 18,139 crore, recapitalisation bonds of Rs1,35,000 crore, and the balance through raising of capital by banks from the market while diluting government equity estimated at Rs 58,000 crore. As per this plan, the remaining capital infusion is about Rs 42,000 crore. Earlier this year, in order to improve their financial health, the government had pumped in Rs 11,336 crore into five PSBs - PNB, Allahabad Bank, Indian Overseas Bank, Andhra Bank and Corporation Bank.

The CNX Nifty is currently trading at 10785.15, down by 6.40 points or 0.06% after trading in a range of 10752.10 and 10815.75. There were 22 stocks advancing against 28 stocks declining on the index.

The top gainers on Nifty were Bharti Airtel up by 4.27%, Indian Oil Corporation up by 2.77%, Asian Paints up by 2.02%, Grasim Industries up by 1.84% and Ultratech Cement was up by 1.45%. On the flip side, Bajaj Auto down by 1.59%, HCL Tech down by 1.56%, Maruti Suzuki down by 1.09%, Larsen & Toubro down by 1.00% and HDFC was down by 0.99% were the top losers.

All Asian markets were trading in red; Nikkei 225 slipped 403.96 points or 1.85% to 21,412.23, Jakarta Composite dropped 3.78 points or 0.06% to 6,173.94, Straits Times trembled 37.98 points or 1.22% to 3,073.10, KOSPI fell 33.09 points or 1.58% to 2,062.46, Shanghai Composite declined 14.98 points or 0.57% to 2,619.07, Hang Seng decreased 398.87 points or 1.5% to 26,125.48 and Taiwan Weighted was down by 95.15 points or 0.97% to 9,763.61.