Benchmarks trade marginally lower in early deals

Indian equity benchmarks are trading marginally lower in early deals on Friday as traders remained cautious with a report that India’s monsoon rains were below average for the fourth straight week, with rainfall scanty over central and western parts of the country in the week ended on June 26, raising concerns about major crop production and the impact on the nation's economy. However, losses remain capped as some respite came with the Reserve Bank of India’s (RBI’s) Financial Stability Report (FSR) stating that the financial system remains stable despite some dislocation of late. It said the proportion of commercial lenders' non-performing assets (NPAs) may fall slightly to 9% by March, but recommended that the vigil on non-banking finance companies (NBFCs) continues.

Global cues too remained sluggish with most of the Asian counters trading in red at this point of time as investors await the kickoff of the G-20 summit in Osaka, Japan, where US President Donald Trump and Chinese President Xi Jinping are expected to meet amid the ongoing trade standoff. The US markets ended mostly higher on Thursday ahead of US-China trade talks, but Boeing weighed on the Dow amid expectations that the 737 Max will remain out of service for longer.

Back home, logistic stocks remained in focus with Union Minister Piyush Goyal’s statement that Ministries of commerce, road, civil aviation and railways should work in coordination with an aim to cut the logistics cost to 9 per cent of GDP from the current 14 per cent. Telecom stocks edged lower amid Moody's Investors Service’s statement that the proposed spectrum auctions in India, which includes radiowaves for 5G technology, are likely to be held only in the second half of 2020 or later, given the stressed balance sheets of telecom operators.

The BSE Sensex is currently trading at 39543.23, down by 43.18 points or 0.11% after trading in a range of 39532.18 and 39675.25. There were 10 stocks advancing against 21 stocks declining on the index.

The broader indices were trading mixed; the BSE Mid cap index rose 0.03%, while Small cap index was down by 0.01%.

The top gaining sectoral indices on the BSE were Healthcare up by 1.00%, Capital Goods up by 0.55%, Industrials up by 0.36%, IT up by 0.23% and PSU was up by 0.16%, while Telecom down by 0.84%, Bankex down by 0.48%, Realty down by 0.45%, Metal down by 0.23% and Power was down by 0.23% were the top losing indices on BSE.

The top gainers on the Sensex were Sun Pharma up by 1.49%, Tech Mahindra up by 1.45%, Larsen & Toubro up by 0.81%, Infosys up by 0.66% and Bajaj Finance up by 0.63%. On the flip side, Yes Bank down by 1.38%, Bharti Airtel down by 1.14%, Tata Motors - DVR down by 1.04%, ICICI Bank down by 0.98% and Tata Motors down by 0.93% were the top losers.

Meanwhile, the Reserve Bank of India (RBI) in its bi-annual Financial Stability Report (FSR) has stated that the financial system remains stable despite some dislocation of late. It said the proportion of commercial lenders' non-performing assets (NPAs) may fall slightly to 9% by March 2020, but recommended that the vigil on non-banking finance companies (NBFCs) continues. RBI governor Shaktikanta has said that as the banks, especially the state-run ones, are on the mend, the structure of non-banking credit intermediation should focus on developing on more prudent lines.

He also pitched for better coordination between the government and the monetary authority to boost growth, and advised state-run banks to get leaner in such a way that they are able to attract private capital and not overly depend on public funds. However, there is something to cheer on the NPAs front, which has dominated the banking sector for the past four years, with a sharp decline in the pile of dud assets.

The FSR said the NPA cycle seems to have turned around with the bulk of the legacy NPAs already recognised in the banks' books. It added that gross NPAs for the system have declined sharply to 9.3% as of March 2019 from 11.2% year ago. Under the baseline scenario, the RBI expects NPAs to improve to 9% by March 2020. The stock of NPAs for state-run banks declined to 12.6% and is likely to come down to 12% by March 2020. The report said there has been a sharp improvement in the provision coverage ratio of all banks to 60.6% as of March 2019 from 52.4% in September 2018 and 48.3% in March 2018.

On NBFCs, the regulator warned against potential stress, and pitched for a tighter regulation of the NBFCs and housing finance companies (HFCs). The central bank said solvency contagion losses to the banking system due to an idiosyncratic HFC/NBFC failure show that the failure of largest of these can cause losses comparable to those caused by big banks, underscoring the need for greater surveillance over large HFCs/NBFCs. The report said mutual funds are the biggest supporters of the financial system courtesy the funds that they provide and hence, any disruption in the MF market has immediate and significant spillovers in the asset markets.

The CNX Nifty is currently trading at 11831.60, down by 9.95 points or 0.08% after trading in a range of 11827.95 and 11871.70. There were 20 stocks advancing against 28 stocks declining on the index.

The top gainers on Nifty were Dr. Reddys Lab up by 1.51%, Sun Pharma up by 1.30%, Tech Mahindra up by 1.28%, Adani Ports &Special up by 1.25% and Britannia up by 1.14%. On the flip side, Indiabulls Housing down by 1.82%, Bharti Infratel down by 1.73%, Bharti Airtel down by 1.29%, Yes Bank down by 1.16% and Indusind Bank down by 0.98% were the top losers.

Most of the Asian markets are trading in red; Nikkei 225 shed 83.80 points or 0.39% to 21,254.37, Straits Times slipped 5.84 points or 0.18% to 3,322.76, Hang Seng declined 161.01 points or 0.56% to 28,460.41, Taiwan Weighted decreased 43.35 points or 0.40% to 10,730.55, KOSPI dipped 4.66 points or 0.22% to 2,129.66 and Shanghai Composite was down by 26.37 points or 0.88% to 2,970.42. On the flip side, Jakarta Composite was up by 1.57 points or 0.02% to 6,354.28.