Benchmarks trade flat in early noon session

Indian benchmarks traded mixed in early noon session, with Sensex gaining 15 points, while Nifty was down by 3 points. Selling in frontline blue chip stocks such as HDFC, Kotak Mahindra Bank, ONGC and TCS restricted the markets to go up.  Bankex, Capital Goods and Metal stocks were amongst the top gainers on the BSE sectoral space. Traders were getting some encouragement with Domestic ratings agency India Ratings expecting the interim budget to announce an income support scheme for the poor which may at least cost the Centre Rs 1.5 trillion per annum or 0.7 percent of the GDP for the Centre and states combined and is better than any farm loan waivers. However, Market participants remain concerned with a report that the United States and China launch a critical round of trade talks amid deep differences over US demands for structural economic reforms from Beijing that will make it difficult to reach a deal before a March 2 US tariff hike.

On the global front, Asian markets were trading mostly in green, as investors awaited Federal Reserve policy guidance and the outcome of high-level trade talks between the US and China, while drawing relief from Apple’s earnings. Back on street, Realty stocks remained in focus as the realty industry is not expecting much from the interim budget being presented Friday saying given the elections the entire exercise will be to woo the voters. Besides, Axis Bank gained on reporting over 2-fold jump in its net profit at Rs 1,680.85 crore for the quarter ended December 31, 2018 as compared to Rs 726.44 crore for the same quarter in the previous year.

The BSE Sensex is currently trading at 35607.30, up by 14.80 points or 0.04% after trading in a range of 35526.79 and 35850.41. There were 15 stocks advancing against 16 stocks declining on the index.

The broader indices were trading in green and red; the BSE Mid cap index lost 0.13%, while Small cap index was up by 0.54%.

The top gaining sectoral indices on the BSE were Bankex up by 1.06%, Capital Goods up by 0.65%, Metal up by 0.58%, Industrials up by 0.56% and Consumer Durables was up by 0.32%, while Realty down by 1.17%, FMCG down by 0.69%, Oil & Gas down by 0.61%, Utilities down by 0.30%, Power was down by 0.26% were the top losing indices on BSE.

The top gainers on the Sensex were Bajaj Finance up by 3.96%, Axis Bank up by 3.94%, ICICI Bank up by 3.78%, Tata Steel up by 2.80% and HCL Tech up by 2.72%. On the flip side, HDFC down by 2.04%, Kotak Mahindra Bank down by 1.96%, ONGC down by 1.38%, TCS down by 1.31% and HDFC Bank was down by 1.08% were the top losers.

Meanwhile, S&P Global Ratings has warned that corporate activities which are designed to support the Indian government's budgetary coffers-- such as share buyback -- by public sector undertakings (PSUs) are 'credit negative' for such entities. In the previous three months, 10 PSUs have announced or executed buybacks for a cumulative amount of Rs 15,000 crore, which will count towards the Centre’s disinvestment target of Rs 80,000 crore for 2019-20.

The US-based rating agency has stated that the impact on the respective companies can vary depending on the size of cash outflow. It also noted that extracting cash from state-owned enterprises (SOEs) decreases their financial flexibility in a stress scenario, which -- at least over the short term -- is credit negative at the firm level. It said while extraction of existing excess capital in the form of dividends generally has an impact only on the short-term business of SOEs as dividends are discretionary and can be scaled back if future profitability is low.

S&P further said 'in contrast, we believe that debt-funded share buybacks, mergers or acquisitions have longer-term implications. Further, reduced government linkages to divested firms may lower the likelihood of government support in a stress scenario.' It noted that the share buybacks announced so far, including the Rs 4,000-crore offering at Oil and Natural Gas Corporation (ONGC) are manageable within the credit profiles of respective PSUs. However, it said that the risk of a large and disruptive payout increases as the government runs out of time on its SOE stake sale target for the financial year.

The CNX Nifty is currently trading at 10648.95, down by 3.25 points or 0.03% after trading in a range of 10622.40 and 10710.20. There were 24 stocks advancing against 26 stocks declining on the index.

The top gainers on Nifty were Axis Bank up by 4.12%, Bajaj Finance up by 3.80%, ICICI Bank up by 3.79%, Tata Steel up by 3.02% and HCL Tech was up by 2.69%. On the flip side, Indiabulls Housing down by 3.94%, HPCL down by 2.74%, HDFC down by 2.21%, JSW Steel down by 2.10% and Kotak Mahindra Bank was down by 2.03% were the top losers.