Local gauges continue to trade lower

Mirroring global cues, key barometer gauges continued to trade lower in morning deals. The frontline indices have drifted below the psychological 40,200 (Sensex) and 12,050 (Nifty) levels. Some pessimism spread among the investors with a private report that the pre-monsoon rainfall in the country was the second lowest in 65 years. The three-month pre-monsoon season March, April and May ended with a rainfall deficiency of 25%. However, losses remain capped with a report that India is forecast to overtake the UK to become the world’s fifth largest economy this year and projected to surpass Japan to feature at the second position in the Asia-Pacific region by 2025. It added the economic outlook ‘looks positive’ for the second term of Modi government, with GDP growth forecast to average around 7 per cent per year over the 2019-2023 period. Traders took note of finance secretary Subhash Chandra Garg’s statement that the economic growth which hit a five-year low of 5.8% in the March quarter - is showing signs of a rebound. Besides, India’s wheat production has increased to a record 101.20 million tonne (MT) for the crop year 2018-19 (July-June), up by 1.3% from a year ago.

On the global front, Asian markets were trading mostly in red as global trade tensions continued to weigh on markets. Fears of an economic slowdown have mounted in recent days as US President Donald Trump has threatened Mexico with tariffs, adding to anxieties over the US-China trade war. Back home, a report stated that India’s food grains production is estimated to fall marginally to 283.37 million tonne (MT) in the 2018-19 crop year due to fall in pulses and coarse cereals output even as the country harvested record rice and wheat crops.

The BSE Sensex is currently trading at 40141.87, down by 125.75 points or 0.31% after trading in a range of 40130.00 and 40312.07. There were 14 stocks advancing against 17 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index gained 0.38%, while Small cap index was up by 0.25%.

The top gaining sectoral indices on the BSE were Realty up by 1.36%, Utilities up by 0.84%, Power up by 0.76%, PSU up by 0.60% and Capital Goods was up by 0.54%, while IT down by 1.25%, TECK down by 1.11%, Healthcare down by 0.69%, Oil & Gas down by 0.18% and BANKEX was down by 0.15% were the top losing indices on BSE.

The top gainers on the Sensex were Yes Bank up by 2.18%, NTPC up by 1.84%, Power Grid up by 1.22%, ITC up by 1.01% and Vedanta was up by 0.88%. On the flip side, Hero MotoCorp down by 2.16%, TCS down by 1.98%, HCL Tech down by 1.84%, Asian Paints down by 1.58% and Bajaj Auto was down by 1.42% were the top losers.

Meanwhile, in order to reduce concentration of risk and align them (guidelines) with the global norms, the Reserve Bank of India (RBI) has modified the guidelines on large exposures for banks. The modified 'Large Exposures Framework' (LEF) provides exclusion of entities connected with the sovereign from definition of group of connected counter-parties. It also introduces economic interdependence criteria in definition of connected counter-parties.

As per the revised norms, the sum of all the exposure values of a bank to a single counter-party must not be higher than 20 per cent of the bank's available eligible capital base at all times. In exceptional cases, board of banks may allow an additional 5 per cent exposure of the bank's available eligible capital base. In case of groups of connected counter-parties, the sum of all the exposure values of a bank to a group of connected counter-parties must not be higher than 25 per cent of the bank's available eligible capital base at all times.

Under the LE Framework, an exposure to a counter-party will constitute both on and off-balance sheet exposures included in either the banking or trading book and instruments with counter-party credit risk. Besides, on exposures to NBFCs, the banks' exposures to a single NBFC should be restricted to 15 per cent of their eligible capital base. Also, banks' exposures to a group of connected NBFCs or group of connected counter-parties having NBFCs in the group should be restricted to 25 percent of their Tier I Capital.

The CNX Nifty is currently trading at 12049.15, down by 39.40 points or 0.33% after trading in a range of 12041.35 and 12095.20. There were 18 stocks advancing against 31 stocks declining, while 1 stock remain unchanged on the index.

The top gainers on Nifty were Yes Bank up by 2.48%, NTPC up by 1.84%, Eicher Motors up by 1.42%, Power Grid up by 0.96% and ITC was up by 0.92%. On the flip side, HCL Tech down by 2.21%, Hero MotoCorp down by 1.98%, TCS down by 1.97%, Asian Paints down by 1.74% and Zee Entertainment was down by 1.45% were the top losers.

Asian markets were trading mostly in red; Hang Seng decreased 103.68 points or 0.39% to 26,790.18, Taiwan Weighted dropped 55.26 points or 0.53% to 10,444.81, Nikkei 225 slipped 31.61 points or 0.15% to 20,379.27, Shanghai Composite declined 24.41 points or 0.84% to 2,865.67 and KOSPI was down by 1.62 points or 0.08% to 2,066.23. On the other hand, Straits Times was up by 13.23 points or 0.42% to 3,136.69.