Local equities continue sluggish trend

Local equity benchmarks continued to show a sluggish trend in morning session, with losses of over half a percent. Weakness was visible in the broader markets with the S&P BSE Mid-cap slipped around one percent and the S&P BSE Small-cap indices losing around one third a percent. A level of pressure was seen on frontline stocks, especially Tata Motors, Vedanta and Tata Motors - DVR. Market participants took note of a private report that Indian inflation reversed course and nudged up slightly in January but remained below the central bank's target for a sixth straight month, supporting this week's unexpected move by policymakers to cut rates. Traders paid no heed to a report that after RBI cut its repo rate in its latest bi-monthly policy, Finance Minister Piyush Goyal said that the move will give a boost to the economy by providing affordable credit to small businesses and homebuyers. Traders also ignored a report that with the change in the monetary policy stance to ‘neutral’ from ‘calibrated tightening’ and a benign inflation forecast, the Reserve Bank may deliver more positive surprises on the rate front.

On the global front, Asian markets were trading in red, following the weak cues from Wall Street amid worries about global economic growth after the European Commission lowered its growth forecasts for eurozone. Back home, textile industry stocks were trading mixed amid a private report stated that India's cotton imports are likely to jump 80 percent from a year ago as production could fall to the lowest level in nine years due to low rainfall in key growing region.

The BSE Sensex is currently trading at 36766.01, down by 205.08 points or 0.55% after trading in a range of 36748.77 and 36885.58. There were 8 stocks advancing against 23 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index slipped 0.88%, while Small cap index was down by 0.34%.

The top gaining sectoral indices on the BSE were Realty up by 0.83%, Consumer Durables up by 0.16%, Power up by 0.12% and IT was up by 0.04%, while Auto down by 2.50%, Industrials down by 1.78%, Metal down by 1.46%, Basic Materials down by 1.09% and Healthcare was down by 0.80% were the top losing indices on BSE.

The top gainers on the Sensex were HCL Tech up by 1.01%, Power Grid up by 0.87%, Bajaj Finance up by 0.47%, IndusInd Bank up by 0.40% and Kotak Mahindra Bank was up by 0.32%. On the flip side, Tata Motors down by 17.14%, Tata Motors - DVR down by 15.25%, Vedanta down by 2.05%, ICICI Bank down by 1.88% and SBI was down by 1.58% were the top losers.

Meanwhile, with an aim to facilitating flow of credit to well-rated non-banking financial companies (NBFCs), the Reserve Bank of India (RBI) has decided to reduce risk weights for bank lending to NBFCs. The RBI has decided that rated exposures of banks to all NBFCs, excluding Core Investment Companies (CICs), would be risk-weighted as per the ratings assigned by the accredited rating agencies, in a manner similar to that for corporates. Exposures to CICs will continue to be risk-weighted at 100%. Guidelines in this regard will be issued by the end of February 2019.

RBI stated that under extant guidelines on Basel III Capital Regulations, exposures/claims of banks on rated as well as unrated Non-deposit Taking Systemically Important Non-Banking Financial Companies (NBFC-ND-SIs), other than Asset Finance Companies (AFCs), Non-Banking Financial Companies - Infrastructure Finance Companies (NBFCs-IFC) and Non-Banking Financial Companies - Infrastructure Development Fund (NBFCs-IDF), have to be uniformly risk-weighted at 100%.

Besides, the RBI has decided to harmonise major categories of NBFCs engaged in credit intermediation, Asset Finance Companies (AFC), Loan Companies, and Investment Companies, into a single category.  Meanwhile, it added that the proposed merger of existing categories would reduce to a large extent the complexities arising from multiple categories and also provide the NBFCs greater flexibility in their operations. It will cover 99% of the NBFCs by number.

The CNX Nifty is currently trading at 11004.40, down by 65.00 points or 0.59% after trading in a range of 11000.90 and 11041.20. There were 14 stocks advancing against 36 stocks declining on the index.

The top gainers on Nifty were Bharti Infratel up by 2.13%, Tech Mahindra up by 1.27%, BPCL up by 1.21%, Titan Company up by 1.06% and Power Grid was up by 1.06%. On the flip side, Tata Motors down by 17.34%, Indiabulls Housing Finance down by 4.51%, Grasim Industries down by 3.69%, JSW Steel down by 2.51% and Eicher Motors was down by 2.16% were the top losers.

All Asian markets were trading in red; Nikkei 225 slipped 424.80 points or 2.05% to 20,326.48, Jakarta Composite dropped 27.26 points or 0.42% to 6,509.20, KOSPI fell 26.50 points or 1.2% to 2,176.92, Straits Times trembled 4.44 points or 0.14% to 3,196.20 and Hang Seng decreased 163.01 points or 0.58% to 27,827.20.