Benchmarks trade under pressure in early deals

Indian equity benchmarks have made a pessimistic start and are trading with a cut of around one third of a percent in early deals on Thursday. Traders remained cautious with the US think-tank National Bureau of Economic Research’s (NBER) report that the November 2016 demonetisation impacted economic activity in the country in the immediate aftermath, affecting the Gross Domestic Product (GDP) numbers for that fiscal, while the measure's impact had dissipated by the summer of the following year. Traders also remain concerned about the World Bank’s latest report stating that India lost a staggering $86.1 billion, equivalent to over 4% of its GDP, owing to distortions in the power sector in 2016. It added that although India has achieved 100 per cent village electrification earlier this year, 178 million Indians still remain unconnected to the grid as per figures for 2017.

Global cues remained sluggish with all the Asian counters trading in red at this point of time following the overnight sell-off on Wall Street. Investors are also cautious ahead to the Bank of Japan’s monetary policy decision due later in the day. The US markets ended lower on Wednesday after the Federal Reserve raised interest rates for the fourth time in 2018 and signaled a milder path of increases over the next year.

Back home, agriculture related stocks remained buzzing with Crisil expressing concerns on an over 5% dip in sowing for winter crops, which account for the bulk 40% of the nation's annual agricultural output, amid reports of rising rural distress. Insurance sector stocks remained in focus with Moody’s Investors Service’s statement that the new regulations for re-insurance in India are credit-positive. It said they will improve Indian insurers’ access to a broader reinsurance base, which will support their management of underwriting risk and performance.

The BSE Sensex is currently trading at 36368.70, down by 115.63 points or 0.32% after trading in a range of 36213.73 and 36378.14. There were 11 stocks advancing against 20 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index gained 0.31%, while Small cap index was up by 0.45%.

The top gaining sectoral indices on the BSE were Healthcare up by 0.39%, Realty up by 0.36%, Consumer Disc up by 0.33%, Consumer Durables up by 0.21% and Auto was up by 0.16%, while Metal down by 1.17%, Telecom down by 0.77%, Power down by 0.71%, Utilities down by 0.61% and Energy was down by 0.44% were the top losing indices on BSE.

The top gainers on the Sensex were Yes Bank up by 2.14%, Asian Paints up by 1.90%, Mahindra & Mahindra up by 0.90%, Sun Pharma up by 0.68% and Axis Bank up by 0.62%. On the flip side, Vedanta down by 2.13%, NTPC down by 1.47%, Bharti Airtel down by 1.21%, HDFC down by 1.14% and Adani Ports & SEZ down by 1.09% were the top losers.

Meanwhile, in order to meet global capital risk norms called Basel III, Economic Affairs Secretary Subhash Chandra Garg has said that the government is considering additional capital infusion in public sector banks (PSBs). The infusion will be over and above Rs 1.35 lakh crore capital infusion announced by the government for the PSBs in October 2017.

This additional capital infusion would be done through recapitalisation bonds as has been the practice since October 2017. This does not have any impact on the fiscal position of the government as recap bonds are part of below the line items. The government is considering additional capital infusion of up to Rs 30,000-40,000 crore in PSBs as they have been unable to raise required funds from the markets. As part of the capital infusion plan announced by the Finance Ministry, the government envisaged that PSBs would raise Rs 58,000 crore from the stock markets by March 2019 to meet Basel III norms. However, banks have been unable to raise enough funds from the markets so far, due to subdued market conditions.

The government had decided to take a massive step to capitalise PSBs 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 Rs 1,35,000 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, the government pumped in Rs 11,336 crore into five PSBs - PNB, Allahabad Bank, Indian Overseas Bank, Andhra Bank and Corporation Bank - to improve their financial health.

The CNX Nifty is currently trading at 10931.85, down by 35.45 points or 0.32% after trading in a range of 10880.05 and 10935.10. There were 17 stocks advancing against 33 stocks declining on the index.

The top gainers on Nifty were Yes Bank up by 2.12%, Indiabulls Housing up by 1.99%, Asian Paints up by 1.94%, Ultratech Cement up by 0.84% and Sun Pharma up by 0.68%. On the flip side, Hindalco down by 2.64%, Vedanta down by 2.08%, NTPC down by 1.47%, Bharti Airtel down by 1.30% and HDFC down by 1.29% were the top losers.

All the Asian markets are trading in red; Nikkei 225 tumbled 566.42 points or 2.70% to 20,421.50, Straits Times slipped 1.35 points or 0.04% to 3,057.30, Hang Seng declined 291.07 points or 1.13% to 25,574.32, Taiwan Weighted shed 66.94 points or 0.68% to 9,716.27, KOSPI fell 22.54 points or 1.08% to 2,056.30, Jakarta Composite dipped 41.05 points or 0.66% to 6,135.04 and Shanghai Composite was down by 20.83 points or 0.82% to 2,528.73.