Local equities extend losses to continue weak trade

Local equities extended losses to continue their weak trade in the morning session, with cut of over half a percent, tailing weak global cues. Capital Goods, Realty, Utilities and Industrials counters witnessed notable losses, while IT and Healthcare sectors edged higher. Investors were on the back-foot as a report stated that meeting the fiscal deficit target of 3.3 per cent of GDP for the current fiscal could be a challenge for the government, given the shortfall in GST collections, rising expenditure and slowing factory output. Sentiment on the street also weakened with Central Statistics Office’s (CSO) report that Industrial production in November grew at just 0.5 per cent compared to 8.1 percent in October. Factory output had grown by 8.5 per cent in November 2017. The last low was in June 2017, when IIP growth contracted by 0.3 per cent. Traders failed to get solace with Asian Development Bank’s (ADB) report that the Indian economy would grow at 7.3 per cent in FY19. On the back of strong investment and GST stabilisation, the growth would improve to 7.6 per cent in FY20. Besides, Finance minister Arun Jaitley also hinted at greater support to farmers to recover from distress and listed steps initiated by the current regime to improve the lot of the middle class and the poor.

On the global front, Asian markets were trading in red, as China trade data started trickling in and as investors looked to key corporate earnings later in the week to take the pulse of a cooling global economy. Back home, Commerce and industry minister Suresh Prabhu stated that the government will soon come out with a new industrial policy that will link India with the global supply-chain and will be mutually beneficial.

The BSE Sensex is currently trading at 35770.92, down by 238.92 points or 0.66% after trading in a range of 35735.24 and 36124.94. There were 4 stocks advancing against 27 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index slipped 0.63%, while Small cap index was down by 0.48%.

The few gaining sectoral indices on the BSE were IT up by 0.29%, TECK up by 0.21% and Healthcare was up by 0.16%, while Capital Goods down by 1.50%, Realty down by 1.14%, Utilities down by 1.08%, Industrials down by 1.02% and Metal was down by 0.98% were the top losing indices on BSE.

The top gainers on the Sensex were Yes Bank up by 4.27%, Infosys up by 2.26%, Sun Pharma up by 1.08% and Hindustan Unilever was up by 0.05%. On the flip side, Larsen & Toubro down by 2.06%, IndusInd Bank down by 1.90%, Vedanta down by 1.63%, Axis Bank down by 1.59% and HDFC was down by 1.41% were the top losers.

Meanwhile, with an aim to reduce the burden of public sector banks (PSBs), the Reserve Bank of India (RBI) has deferred the implementation of the last tranche of Capital Conservation Buffer (CCB) by a year. This move will leave about estimated Rs 37,000 crore capital in the hands of banks. This will help PSBs increase lending by over Rs 3.5 lakh crore by leveraging ten times of the capital.

The Central Bank deferred the implementation of the last tranche of 0.625 percent of CCB from March 31, 2019 to March 31, 2020.  As a result, minimum capital conservation ratios of 2.5 percent will be applicable from on March 31, 2020. Currently, the CCB of banks stands at 1.875 percent of the core capital.

The RBI further highlighted that the pre-specified trigger for loss absorption through conversion or write-down of additional tier 1 instruments will remain at 5.5 percent of risk-weighted asset (RWA) and will rise to 6.125 percent of RWAs on March 31, 2020. However, it decided to retain the capital adequacy ratio or CRAR at 9 percent.

Besides, the CCB is the capital buffer that banks have to accumulate in normal times to be used for offsetting losses during periods of stress. It was introduced after the 2008 global financial crisis to improve the ability of banks to withstand adverse economic conditions.

The CNX Nifty is currently trading at 10720.05, down by 74.90 points or 0.69% after trading in a range of 10709.10 and 10808.00. There were 7 stocks advancing against 43 stocks declining on the index.

The top gainers on Nifty were Yes Bank up by 4.04%, Infosys up by 2.28%, Bharti Infratel up by 1.73%, Sun Pharma up by 0.84% and Dr Reddy's Lab up by 0.40%. On the flip side, GAIL India down by 2.38%, Larsen & Toubro down by 2.06%, IndusInd Bank down by 1.87%, Vedanta down by 1.60% and Axis Bank down by 1.58% were the top losers.

All Asian markets were trading in red; Hang Seng decreased 382.11 points or 1.43% to 26,285.16, Taiwan Weighted dropped 73.40 points or 0.75% to 9,686.00, Straits Times trembled 13.50 points or 0.42% to 3,185.15, Jakarta Composite dropped 54.88 points or 0.86% to 6,306.59, KOSPI fell 14.44 points or 0.7% to 2,061.13 and Shanghai Composite declined 14.24 points or 0.56% to 2,539.59.