Firm trade persists on Dalal Street

Firm trade persisted on Dalal Street in late afternoon session, despite weak cues from European markets. Heavy buying at Energy, IT and Oil & Gas counters helped the markets to hold their gains, while Reliance Industries emerged as top gainer on the BSE. Sentiments remained upbeat with Union Commerce and Civil Aviation Minister Suresh Prabhu’s statement that India has potential to be a $5 trillion economy in the next 7-8 years. Traders were seen taking note of a private report stating that Indian billionaires saw their fortunes swell by Rs 2,200 crore a day last year, with the top 1 percent of the country's richest getting richer by 39 percent as against just 3 percent increase in wealth for the bottom-half of the population. But, upside remained capped, amid India Ratings and Research’s latest report stating that the cumulative fiscal deficit of Indian states is expected to rise following the announcement of farm support packages ahead of national elections due by May. The aggregate budget deficit of Indian states is estimated to increase to 3.2 percent of gross domestic product (GDP) in the next financial year beginning April, compared with 2.8 percent estimated for the current year.

On the global front, European markets were trading in red, as UK retail sales decreased in December, marking the worst decline in over one-and-a-half years, after a surge in the previous month. The figures from the Office for National Statistics showed that the seasonally adjusted retail sales including auto fuel decreased 0.9 percent from November, when they grew 1.3 percent. Asian markets were trading in green, as Chinese GDP data came in line with estimates and signs that the US and China are closing in on a trade truce helped ease global growth worries. China's GDP grew a seasonally adjusted 1.5 percent sequentially in the fourth quarter of 2018, in line with expectations and down from 1.6 percent in the third quarter. On an annualized basis, GDP expanded 6.4 percent - again matching forecasts and down from 6.5 percent in the three months prior. Separately, industrial production climbed 5.7 percent on year in December, topping forecasts for 5.3 percent and up from 5.4 percent in November.

The BSE Sensex is currently trading at 36640.89, up by 254.28 points or 0.70% after trading in a range of 36351.77 and 36701.03. There were 14 stocks advancing against 17 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 0.28%, while Small cap index was down by 0.46%.

The top gaining sectoral indices on the BSE were Energy up by 2.70%, IT up by 1.01%, Oil & Gas up by 0.88%, TECK up by 0.74% and Healthcare up by 0.60%, while Telecom down by 1.06%, Auto down by 0.86%, Realty down by 0.83%, Consumer Disc down by 0.50% and Industrials down by 0.46% were the top losing indices on BSE.

The top gainers on the Sensex were Reliance Industries up by 4.25%, Sun Pharma up by 2.61%, Bajaj Finance up by 2.09%, Infosys up by 1.89% and Kotak Mahindra Bank up by 1.70%. On the flip side, Hero MotoCorp down by 3.07%, Yes Bank down by 2.27%, Maruti Suzuki down by 1.82%, Tata Motors down by 1.20% and Tata Motors - DVR down by 1.08% were the top losers.

Meanwhile, expressing worries, credit rating agency, India Ratings and Research (Ind-Ra) in its latest report has said that non-performing asset recognition is likely to get prolonged till the next fiscal year on the back of the recent Reserve Bank guidelines on delivery of bank credit. The report also noted that the implementation of the new guidelines can put at risk Rs 5.24 trillion debt in FY19, which could result in an increase in potential stress.

According to the report, the implementation will require a rollover of Rs 4.10 trillion of working capital loans in FY20. Out of this, Rs 1.90 trillion is likely to face a ‘high or very high rollover risks’ owing to weak operating cash flows and a high proportion of rollover requirement vis--vis debt outstanding at FY19. Further, over Rs 1.21 trillion debt (a part of the Rs 4.10 trillion) is likely to emanate from corporates rated 'AA-' and above. Ind-Ra also pointed out that the working capital- intensive sectors may get hit with the new guidelines, while export-oriented sectors are likely to remain unaffected.

Further, the ratings agency said that the burden of cash management is likely first shift to borrowers on the implementation of the new RBI guidelines on the loan system for the delivery of bank credit and this will necessitate borrowers to install systems and processes to manage surplus cash and tie-up their working capital loan components (especially rollovers) with banks in a timely manner.

The CNX Nifty is currently trading at 10977.50, up by 70.55 points or 0.65% after trading in a range of 10885.75 and 10987.45. There were 22 stocks advancing against 27 stocks declining, while 1 stock remain unchanged on the index.

The top gainers on Nifty were Reliance Industries up by 4.56%, Bajaj Finance up by 2.38%, Bajaj Finserv up by 2.31%, Sun Pharma up by 2.29% and GAIL India up by 2.02%. On the flip side, Hero MotoCorp down by 3.47%, Yes Bank down by 2.34%, Wipro down by 2.31%, Bharti Infratel down by 2.09% and Maruti Suzuki down by 1.94% were the top losers.

Asian markets were trading in green; Nikkei 225 surged 53.26 points or 0.26% to 20,719.33, Hang Seng increased 105.73 points or 0.39% to 27,196.54, KOSPI rose 0.33 points or 0.02% to 2,124.61, Jakarta Composite soared 2.67 points or 0.04% to 6,450.83, Taiwan Weighted strengthened 53.34 points or 0.54% to 9,889.40, Shanghai Composite gained 10.54 points or 0.41% to 2,606.55 and Straits Times was up by 6.82 points or 0.21% to 3,231.16.

European markets were trading mostly in red; France’s CAC fell 11.59 points or 0.24% to 4,864.34, Germany’s DAX lost 51.74 points or 0.46% to 11,153.80, while UK’s FTSE 100 was up by 10.61 points or 0.15% to 6,978.94.