Local equities turn positive in morning deals

Local equity benchmarks pared all their early losses and entered into positive trajectory with frontline gauges recapturing their crucial 10,850 (Nifty) and 36,100 (Sensex) levels. Barring IT and TECK stocks, there was buying across all sectoral indices. Traders were encouraged with a report that the income tax e-returns filed for the April-February period has grown nearly 30% compared with the corresponding period in FY18. While almost 6.4 crore taxpayers filed returns in the first 11 months of the fiscal, the government is expecting 7.6 crore returns to be filed by the end of FY19 against 6.7 crore in FY18. Traders took note of India’s chief economic adviser Krishnamurthy Subramanian’s statement that India’s next government will have to bring in land, labour and financial sector reforms to improve the productivity of the manufacturing sector and boost economic growth.

On the global front, Asian markets were trading mostly in red, as Beijing lowered its growth forecasts for this year and unveiled massive tax cuts to support the stuttering Chinese economy. Back home, a private report stated that aggregate fiscal deficit of 19 states amounted to 25.9% of the budget estimate (BE) in Q3FY19, almost double the average of 13.2% during the last five years. Consequently, fiscal deficit touched 62.5% of BE during 9MFY19 the worst in at least the past eight years.

The BSE Sensex is currently trading at 36107.79, up by 43.98 points or 0.12% after trading in a range of 35926.94 and 36141.07. There were 21 stocks advancing against 10 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index gained 1.00%, while Small cap index was up by 1.68%.

The top gaining sectoral indices on the BSE were PSU up by 1.80%, Oil & Gas up by 1.63%, Basic Materials up by 1.57%, Power up by 1.42% and Metal was up by 1.36%, while IT down by 0.66% and TECK was down by 0.60% were the only losing indices on BSE.

The top gainers on the Sensex were Tata Motors up by 5.94%, Tata Motors - DVR up by 4.44%, Hero MotoCorp up by 1.97%, Coal India up by 1.59% and ONGC was up by 1.58%. On the flip side, Infosys down by 0.78%, Larsen & Toubro down by 0.66%, Hindustan Unilever down by 0.54%, HCL Tech down by 0.50% and HDFC was down by 0.46% were the top losers.

Meanwhile, Crisil, a global analytical company providing ratings, research, and risk and policy advisory services, in its latest report has said that the Reserve Bank of India's (RBI's) move to align risk weights of banks' exposure to non-banking finance companies (NBFCs) with their respective credit ratings would beneficial for both banks and NBFCs. The report mentioned that firstly, the release of capital for banks should increase deployment opportunities for banks. Secondly, it enhances funding access for NBFCs.

So far, banks used to set aside capital assuming 100% risk weight uniformly for most NBFCs, barring specific categories such as asset finance companies (AFCs), infrastructure finance companies (IFCs) including infrastructure debt funds structured as NBFCs (IDF-NBFCs) and housing finance companies. Report stated that the rating based approach for assigning risk weights will lead to capital savings for banks of about Rs 13,000 crore, which will create additional lending headroom of about Rs 1.4 lakh crore for the banking system. Of this, banks could deploy a portion towards higher rated NBFCs given the lower risk weight for these entities.

Moreover, report highlighted that the first half of the current fiscal (FY19), saw a sharp increase in bank credit to NBFCs as bond yields spurted significantly, making market borrowings costlier thus spurring a rush for bank credit. But then the IL&FS default resulted in an increase in negative sentiment towards NBFCs and reduction in funding access for them. Accordingly, NBFCs resorted to higher securitisation, more of retail bond issuances and slowing down business growth to conserve liquidity as measures to meet the challenge. Besides, bank debt to the NBFC sector has logged a compound annual growth rate of 20% in the past decade and reached a high of 55% as of December 2018.

The CNX Nifty is currently trading at 10884.00, up by 20.50 points or 0.19% after trading in a range of 10817.00 and 10889.10. There were 34 stocks advancing against 16 stocks declining on the index.

The top gainers on Nifty were Tata Motors up by 5.93%, HPCL up by 4.25%, Indiabulls Housing Finance up by 3.80%, BPCL up by 3.41% and Indian Oil Corporation was up by 2.80%. On the flip side, Tech Mahindra down by 2.02%, Wipro down by 1.56%, Infosys down by 0.92%, Larsen & Toubro down by 0.81% and Zee Entertainment was down by 0.79% were the top losers.

Asian markets were trading mostly in red, Nikkei 225 slipped 129.25 points or 0.59% to 21,692.79, Jakarta Composite dropped 72.29 points or 1.11% to 6,416.13, Hang Seng decreased 46.94 points or 0.16% to 28,912.65, Taiwan Weighted dropped 41.30 points or 0.4% to 10,308.58 and KOSPI was down by 13.20 points or 0.6% to 2,177.46, Straits Times trembled 10.58 points or 0.33% to 3,240.50. On the other hand, Shanghai Composite was up by 3.42 points or 0.11% to 3,031.00.