Benchmarks trade with marginal gains in early deals

Indian equity benchmarks have made a positive start and are trading with marginal gains in early deals. Traders remained optimistic with rating agency Crisil’s report that recovery of stressed assets through the Insolvency and Bankruptcy Code (IBC) was two-times at Rs 70,000 crore compared to that through other mechanisms in 2018-19 but resolution timelines for bad loans still remains an issue. Further, some support came with India’s WPI inflation eased to 3.07% in the month of April 2019, as compared to 3.18% in March and 3.62% during the corresponding month of the previous year. The inflation softens mainly due to cheaper fuel prices, even as prices of food articles remained high. However, gains remain capped with a report that dampening prospects of higher farm and economic growth in the $2.6 trillion economy, monsoon rains are expected to hit Kerala coast on June 4 and deliver less rainfall than average in 2019. It added that the country is likely to receive 93% rainfall of the long period average.

On the global front, the US markets ended higher on Tuesday after President Trump further signaled that US and Chinese officials could still strike a trade deal. Asian markets were mostly trading in green as markets staged a recovery attempt after recent steep losses. Nevertheless, lingering worries about US-China trade tensions weighed on investor sentiment.

Back home, India is expected to again extend the deadline by a month to impose retaliatory import duties on 29 US products, including almond, walnut and pulses. Meanwhile, the rupee on Wednesday opened 10 paise higher at 70.34 against the US dollar. In scrip specific developments, Dalmia Bharat rose as its JV commissions monolithic refractory production line in MP and Orchid Pharma edged higher on getting nod from USFDA for Risedronate Sodium Tablets.

The BSE Sensex is currently trading at 37391.69, up by 73.16 points or 0.20% after trading in a range of 37368.04 and 37539.05. There were 17 stocks advancing against 14 stocks declining on the index.

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

The top gaining sectoral indices on the BSE were Oil & Gas up by 1.07%, Metal up by 0.71%, Energy up by 0.63%, Basic Materials up by 0.54% and IT was up by 0.44% while, Telecom was down by 0.63% were the only losing indices on BSE.

The top gainers on the Sensex were Tata Steel up by 1.52%, Power Grid Corporation up by 1.43%, Vedanta up by 1.34%, HCL Tech up by 1.34% and Mahindra & Mahindra was up by 0.97%. On the flip side, Yes Bank down by 1.70%, Sun Pharma Industries down by 1.38%, Bharti Airtel down by 0.92%, Coal India down by 0.91% and Asian Paints was down by 0.65% were the top losers.

Meanwhile, Rating agency Crisil in its latest report has said that recovery of stressed assets through Insolvency and Bankruptcy Code (IBC) doubled to Rs 70,000 crore in 2018-19, as against Rs 35,000 crore recovered using other resolution mechanism including Debt Recovery Tribunal (DRT), Securitisation and Reconstruction of Financial Assets (Sarfaesi), Enforcement of Securities Interest Act, and Lok Adalat. As per the report, the recovery rate for the 94 cases resolved through IBC by FY2018-19 is 43%, compared with 26.5% through earlier resolution mechanisms.

According to a report available on the Insolvency and Bankruptcy Board of India (IBBI) website, almost Rs 2.02 lakh crore of debt pertaining to 4,452 cases were disposed of even before admission into the IBC process, as the borrowers made good the amounts in default to the creditors. As per Crisil, this gets reflected in slower accretion of new non-performing assets (NPAs) in the banking system. They estimate the banking sectors gross NPA has declined to around 10% in end-March 2019 from 11.5% the year before on the same date. It further said the resolution timelines under the IBC are still an issue.

The report noted that while the average resolution timeline for cases resolved through IBC is 324 days, which is better than 4.3 years earlier, it is still above the 270 days set out in the code. As on March 31, 2019, there were 1,143 cases outstanding under the IBC of which resolution in 32 per cent of the cases was pending for more than 270 days. There are also a few big-ticket accounts for which resolution has not been finalised for over 400 days. Other challenges such as burden on the National Company Law Tribunal to resolve a large number of cases, clarity on priority of claims, limited number of information utilities, and creation of a secondary asset market, also need to be addressed.

The CNX Nifty is currently trading at 11242.55, up by 20.50 points or 0.18% after trading in a range of 11235.35 and 11274.30. There were 26 stocks advancing against 22 stocks declining on the index.

The top gainers on Nifty were BPCL up by 2.23%, UPL up by 1.81%, Indian Oil Corporation up by 1.78%, Tata Steel up by 1.57% and Power Grid Corporation was up by 1.51%. On the flip side, Zee Entertainment down by 4.24%, Yes Bank down by 1.64%, Sun Pharma Industries down by 1.18%, Bharti Airtel down by 1.10% and Coal India was down by 0.87% were the top losers.

Asian markets were mostly trading in green; Hang Seng increased 204.30 points or 0.73% to 28,326.32, Taiwan Weighted strengthened 80.82 points or 0.77% to 10,600.07, Shanghai Composite gained 31.67 points or 1.1% to 2,915.28, Nikkei 225 surged 26.27 points or 0.12% to 21,093.50 and KOSPI was up by 12.01 points or 0.58% to 2,093.85. On the flip side, Straits Times lost 0.82 points or 0.03% to 3,222.89 and Jakarta Composite was down by 14.07 points or 0.23% to 6,057.13.