Benchmarks trade with traction in early deals on Friday

Indian equity benchmarks made a gap-up opening and are trading with traction in early deals on Friday with frontline gauges surpassing their crucial 38,000 (Sensex) and 11,400 (Nifty) levels. Sentiment remained up-beat with a private report that the Reserve Bank of India's (RBI) $5 billion plan to swap rupees for dollars with domestic banks will help achieve its twin objectives of pushing interest rates down while also preventing a sharp appreciation in the rupee. Traders took note of the RBI’s statement that financial sector regulators discussed ways to address challenges pertaining to the quality of credit ratings and other issues concerning the economy. It added that the sub-committee reviewed the major developments on the global and domestic fronts that impinge on the financial stability of the country. Meanwhile, Niti Aayog Vice Chairman Rajiv Kumar has underlined the need to mobilise funds from all sources especially corporates to achieve the Sustainable Development Goals (SDGs). Kumar further said the focus should be on conscious capitalism wherein corporates go beyond chasing bottomline and focus on ensuring maximum social return.

Global cues too remained supportive with all the Asian counters are trading in green at this point of time, as investors digested new developments on the US-China trade front and reacted to a vote from lawmakers that could potentially delay the U.K.’s exit from the European Union. The US markets ended mostly lower on Thursday as investors continued to weigh global trade tensions and concerns about slowing economic growth.

Back home, stocks related to banking sector remained on buyers’ radar with ICRA’s report that after four years of consecutive losses, the state run banks are likely to report a profit of Rs 23,000-37,000 crore in the next financial year, with their gross non-performing loans declining to 8.1-8.4 percent by March 2020. Insurance industry stocks edged higher with IRDAI data showing that India’s life insurance industry witnessed a rise of 32.7 per cent in its collective new premium income at Rs 18,209.50 crore during February 2019.

The BSE Sensex is currently trading at 38007.31, up by 252.42 points or 0.67% after trading in a range of 37760.23 and 38020.42. There were 22 stocks advancing against 9 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index gained 0.71%, while Small cap index was up by 0.66%.

The top gaining sectoral indices on the BSE were Bankex up by 1.67%, Consumer Durables up by 1.21%, PSU up by 0.86%, Realty up by 0.74% and IT was up by 0.71%, while FMCG down by 0.59%, Telecom down by 0.34% and Metal was down by 0.24% were the few losing indices on BSE.

The top gainers on the Sensex were Kotak Mahindra Bank up by 3.81%, SBI up by 2.03%, ICICI Bank up by 1.68%, Indusind Bank up by 1.62% and Power Grid Corporation up by 1.52%. On the flip side, Hindustan Unilever down by 1.58%, Coal India down by 1.42%, ITC down by 0.80%, Bharti Airtel down by 0.48% and Tata Steel down by 0.29% were the top losers.

Meanwhile, rating agency ICRA in its latest report has stated that Public Sector Banks (PSBs) are likely to report net profit of Rs 23,000-37,000 crore in the next fiscal year 2019-20, after four years of consecutive losses. The net profit may be supported by fall in gross non-performing assets (GNPAs). It added that GNPAs and net NPAs (NNPAs) of PSBs are likely to decline to 8.1-8.4% and 3.5-3.6% by March 2020, as against 10.3% and 5.3-5.4%, estimated for March 2019 and 10.9% and 6.3% as on December 31, 2018. However, it said overall profitability will remain weak with return on net worth (RoNW) of 4-6.3%.

The report said with reducing fresh slippages, the credit provisions are expected to decline, and the rating agency expect 14 PSBs in base case and 11 PSBs in the stress case to report profits during FY20, as compared to only five PSBs that are likely to report profits in FY19. In the first nine month of FY19, the net losses stood at Rs 42,900 crore and are expected to increase to Rs 65,000 crore during FY19 as compared to Rs 85,400 crore during FY18. The overall fresh slippages for PSBs are estimated to decline to Rs 2.5 trillion (4.5%) during FY19 and are expected to decline further to Rs 1.3-1.6 trillion (2.1-2.7%) during FY20.

ICRA said compared to PSBs, the performance of the private banks (PVBs) remained strong with year-on-year growth of 18.7% in advances as compared to 4.2% for PSBs as on December 31, 2018, and around 64% share in incremental credit growth during the trailing 12 months (TTM). With improved capital position, it said PSBs are expected to pursue credit growth and pose challenges to PVBs on both the lending and the deposit side and the market share gains are expected to slow down for PVBs, going forward. Besides, the deposit mobilisation to match high credit growth continues to remain a challenge for private banks. It added that with PSBs expected to chase credit and deposit growth next year, it may be difficult for banks to cut lending rates as the competition for deposits is expected to heighten.

The CNX Nifty is currently trading at 11420.60, up by 77.35 points or 0.68% after trading in a range of 11370.80 and 11424.50. There were 43 stocks advancing against 7 stocks declining on the index.

The top gainers on Nifty were Kotak Mahindra Bank up by 4.30%, Titan Co up by 2.22%, SBI up by 2.00%, UPL up by 1.75% and ICICI Bank up by 1.74%. On the flip side, Hindustan Unilever down by 1.54%, Coal India down by 1.25%, Bharti Airtel down by 0.76%, ITC down by 0.73% and Bajaj Auto down by 0.23% were the top losers.

All the Asian markets are trading in green; Nikkei 225 gained 208.11 points or 0.98% to 21,495.13, Straits Times rose 9.27 points or 0.29% to 3,207.19, Hang Seng surged 272.79 points or 0.95% to 29,124.18, Taiwan Weighted added 73.40 points or 0.71% to 10,422.05, KOSPI increased 12.38 points or 0.57% to 2,168.06, Jakarta Composite jumped 38.59 points or 0.60% to 6,451.86 and Shanghai Composite was up by 46.07 points or 1.54% to 3,036.76.