Post Session: Quick Review

Monday turned-out to be a fabulous day of trade for Indian equity benchmarks where frontline gauges extended previous session’s rally and garnered gains of over half a percent. Markets started the session on a cautious note as traders remained on sidelines ahead of Q4 GDP data, scheduled to be announced later in the week. Some cautiousness also crept in with a report that foreign investors have pulled out a net amount of Rs 4,375 crore from the Indian capital markets in May so far, driven by global and domestic factors. Also, the RBI’s data showed that after rising for the past few weeks, the country's foreign exchange reserves declined $2.057 billion to $417.998 billion in the week to May 17 on account of a fall in foreign currency assets. Some anxiety also prevailed with report stating that the fourth quarter (January to March 2019) financial results released by 304 companies in the corporate sector show a sequential drop in revenue growth to 10.7 per cent from 20.1 per cent in the previous quarter (October to December 2018).

However, markets made recovery and gained traction with the RBI’s statement that it will inject Rs 15,000 crore into the financial system next month through purchase of government bonds via the auction route. The decision has been taken in view of the evolving liquidity situation. Traders took a note of a private report stating that India has decided to join hands with Japan and Sri Lanka to expand the port in Colombo as part of efforts to balance Chinese inroads into the neighbourhood. This marks one of the government’s first foreign policy moves following its reelection. Traders continued to take support with international rating agency S&P Global Ratings’ statement that the landslide victory for Prime Minister Narendra Modi-led BJP in the general election is likely to improve the flow of foreign capital for corporates in India. Adding more comfort, the Commerce and Industry Ministry proposed cutting down compliance time significantly to just one hour per month for start-ups as part of measures to ease regulatory requirements for budding entrepreneurs. The proposal is a part of 'Start-up India Vision 2024', prepared by the Department for Promotion of Industry and Internal Trade (DPIIT) for the new government to promote the growth of budding entrepreneurs.

Firm opening in European counters too aided sentiments with European markets trading in green, as the Finnish manufacturing confidence rose in May after falling in the previous month. The data released by the Confederation of Finnish Industries EK showed that the business confidence of manufacturing companies rose to 1 in May from minus 1 in April. Confidence in the construction sector rose to 5 in May from 3 in the preceding month. Asian markets ended mostly in green ahead of the US President Donald Trump’s state visit to Japan as well as results from the European parliamentary election.

Back home, banking sector stocks edged higher with report that public sector banks (PSBs) have recovered close to Rs 1.2 lakh crore from stressed assets during the financial ended March, primarily helped by resolution under the Insolvency and Bankruptcy Code (IBC). Non-Banking Financial Companies’ (NBFCs) stocks ended in green with report that the RBI proposed a set of guidelines for large NBFCs to help them deal with severe liquidity problems and prevent re-occurrence of IL&FS type of debt crisis.

The BSE Sensex ended at 39668.47, up by 233.75 points or 0.59% after trading in a range of 39353.16 and 39821.94. There were 21 stocks advancing against 10 stocks declining on the index. (Provisional)

The broader indices ended in green; the BSE Mid cap index surged 1.15%, while Small cap index was up by 1.79%. (Provisional)

The top gaining sectoral indices on the BSE were Power up by 3.04%, Capital Goods up by 2.95%, Utilities up by 2.51%, Industrials up by 2.39% and Basic Materials was up by 2.14%, while Energy down by 0.76% and Healthcare down by 0.30% were the only losing indices on BSE. (Provisional)

The top gainers on the Sensex were Tata Steel up by 5.52%, Yes Bank up by 3.75%, NTPC up by 3.48%, Larsen & Toubro up by 2.94% and Axis Bank up by 2.44%. On the flip side, Indusind Bank down by 2.31%, Reliance Industries down by 1.78%, Bharti Airtel down by 1.49%, Asian Paints down by 1.41% and Tata Motors down by 0.63% were the top losers. (Provisional)

Meanwhile, in order to help ailing Non-Banking Financial Companies (NBFCs) deal with liquidity crisis, the Reserve Bank of India (RBI) has proposed a set of guidelines for large NBFCs. The proposed norms are for helping NBFCs deal with severe liquidity problems and prevent re-occurrence of IL&FS type of debt crisis. According to proposal, a Liquidity Coverage Ratio (LCR) regime would be introduced in all deposit taking NBFCs and non-deposit taking shadow banks with an asset size of Rs 5,000 crore and above in a phased manner. The RBI has released a draft circular on the 'Liquidity Risk Management Framework for NBFCs and Core Investment Companies (CICs).

With a view to ensuring a smooth transition to the LCR regime, the proposal is to implement it in a calibrated manner through a glide path over a period of four years commencing April 2020 and up to April 2024. The draft said the LCR requirement would be binding on NBFCs from April 01, 2020, with the minimum LCR to be 60 per cent, progressively increasing in equal steps till it reaches the required level of 100 per cent, by April 1, 2024.

The draft said An NBFC shall maintain an adequate level of unencumbered HQLA (High Quality Liquid Assets) that can be converted into cash to meet its liquidity needs for a 30 calendar-day time horizon under a significantly severe liquidity stress scenario. HQLA means liquid assets that can be readily sold or immediately converted into cash at little or no loss of value or used as collateral to obtain funds in a range of stress scenarios.

The RBI further proposed that Asset-Liability Management Committee (ALCO) consisting of the NBFC's top management should be responsible for ensuring adherence to the risk tolerance/limits set by the Board as well as implementing the liquidity risk management strategy of the NBFC. The draft guidelines also cover application of generic asset liability management (ALM) principles, granular maturity buckets in the liquidity statements and tolerance limits, liquidity risk monitoring tool and adoption of the 'stock' approach to liquidity.

The CNX Nifty ended at 11920.50, up by 76.40 points or 0.65% after trading in a range of 11812.40 and 11957.15. There were 32 stocks advancing against 18 stocks declining on the index. (Provisional)

The top gainers on Nifty were Tata Steel up by 5.80%, Yes Bank up by 3.93%, Indian Oil Corp. up by 3.38%, NTPC up by 3.25% and Larsen & Toubro up by 3.18%. On the flip side, Zee Entertainment down by 4.44%, Indusind Bank down by 2.00%, Reliance Industries down by 1.75%, Bharti Airtel down by 1.19% and Tech Mahindra down by 1.19% were the top losers. (Provisional)

European markets were trading in green; France’s CAC rose 10.65 points or 0.20% to 5,327.16 and Germany’s DAX was up by 46.28 points or 0.39% to 12,057.32.

Asian markets ended mostly in green on Monday despite trade worries and provisional results for the European Union elections showed no party was able to secure a majority in European parliament. Besides, British Prime Minister Theresa May's resignation, limit the further gains. Chinese shares ended higher despite data showing that profits for China's industrial firms dropped in April on slowing demand and manufacturing activity. China's industrial profits fell an annual 3.7 percent in April in contrast to an increase of 13.9 percent growth in March, the country's statistics bureau said. Japanese shares ended up in thin trade as US President Trump announced he will announce something on a US-Japan trade agreement in August. Trump also said he was happy with how things were going with North Korea. Meanwhile, Seoul stocks declined as investors continued to fret about the trade war between the United States and China.