Local equities continue firm trade; Sensex reclaims 39,600 mark

Local equity benchmarks continue to trade firm in morning session on account of buying in front line counters, with the Sensex and Nifty gaining more than 250 and 60 points, respectively. Market participants took encouragement from a report that India and Indonesia set an ambitious $50 billion target for bilateral trade over the next six years as Prime Minister Narendra Modi and President Joko Widodo discussed ways to deepen cooperation in a number of key areas including economy, defence and maritime security. Traders took note of outgoing RBI Deputy Governor Viral V Acharya’s statement that capital markets play a crucial role in the economic development of a country and the Reserve Bank has been taking efforts to expand the investor base. Investors ignored Former Reserve Bank of India Deputy Governor Rakesh Mohan’s statement that there is a dire need to increase household savings as there has been a steep fall in the net household financial savings in recent years. The net household financial savings have significantly slumped to 7% of gross domestic product or GDP in recent years from 11-12% of GDP in 2007-8. Besides, World Bank President David Malpass stated that uncertainty from trade tensions and slowing global growth is increasing the need for developing countries to pursue reforms that make them more attractive to private investment.

On the global front, Asian markets were trading in green; after Donald Trump and Xi Jinping agreed to restart trade talks, reviving hopes of an end to their tariffs war. Back home, Government data showed that supply of coal to the power sector by state-owned Coal India declined by 2.6% to 80.9 million tonnes in the first two months of the ongoing fiscal. This comes amid coal imports rising 12.9% to 235.2 million tonnes (MT) in FY19 over 208.2 MT imported in FY18.

The BSE Sensex is currently trading at 39658.65, up by 264.01 points or 0.67% after trading in a range of 39541.09 and 39662.48. There were 24 stocks advancing against 7 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index gained 0.42%, while Small cap index was up by 0.38%.

The top gaining sectoral indices on the BSE were Realty was up by 1.85%, Healthcare up by 0.90%, Power up by 0.90%, Auto up by 0.86%, Capital Goods up by 0.83% while, Telecom down by 0.49%, Oil & Gas down by 0.07% and TECK was down by 0.04% were the few losing indices on BSE.

The top gainers on the Sensex were Bajaj Auto up by 1.85%, NTPC up by 1.80%, Hero MotoCorp up by 1.59%, HDFC Bank up by 1.37% and Tata Motors - DVR was up by 1.32%. On the flip side, HCL Tech down by 0.77%, TCS down by 0.33%, Maruti Suzuki down by 0.28%, Hindustan Unilever down by 0.27% and Kotak Mahindra Bank was down by 0.09% were the top losers.

Meanwhile, with an aim to help banks boost their lending activities, the Reserve Bank of India (RBI) has relaxed the leverage ratio (LR) for them. The leverage ratio stands reduced to 4 per cent for Domestic Systemically Important Banks (DSIBs) and 3.5 per cent for other banks effective from the quarter commencing October 1, 2019.  The RBI further stated that both the capital measure and the exposure measure along with Leverage Ratio are to be disclosed on a quarter-end basis. However, banks must meet the minimum Leverage Ratio requirement at all times.

The leverage ratio, as defined under Basel-III norms, is Tier-I capital as a percentage of the bank’s exposures. The framework is designed to capture leverage associated with both on- and off-balance sheet exposures. Earlier this month, RBI had said it has decided to harmonise LR in line with Basel III standards keeping in mind financial stability of financial firms.

Besides, RBI had said, in last month (June) on Developmental and Regulatory Policies, in order to mitigate risks of excessive leverage, the Basel Committee on Banking Supervision (BCBS) designed the Basel III Leverage Ratio as a simple, transparent, and non-risk-based measure to supplement existing risk-based capital adequacy requirements. In terms of the framework on LR put in place by the RBI, banks have been monitored against an indicative LR of 4.5 per cent. These guidelines have served the purpose of disclosures and also as the basis for parallel run by banks. The final minimum LR requirement was to be stipulated taking into consideration the final rules prescribed by the Basel Committee by end 2017.

The CNX Nifty is currently trading at 11853.95, up by 65.10 points or 0.55% after trading in a range of 11830.80 and 11863.70. There were 36 stocks advancing against 13 stocks declining, while 1 stock remain unchanged on the index.

The top gainers on Nifty were Dr. Reddy’s Lab up by 2.41%, Indiabulls Housing up by 2.27%, NTPC up by 1.84%, Bajaj Auto up by 1.81% and Hero MotoCorp was up by 1.65%. On the flip side, Indian Oil Corp. down by 1.15%, BPCL down by 1.07%, Ultratech Cement down by 1.07%, Bharti Infratel down by 1.01% and HCL Tech was down by 0.82% were the top losers.

Asian markets were trading in green; Nikkei 225 surged 452.10 points or 2.12% to 21,728.02, Taiwan Weighted strengthened 171.92 points or 1.6% to 10,902.75, Shanghai Composite gained 55.92 points or 1.88% to 3,034.80, Straits Times advanced 41.81 points or 1.26% to 3,363.42, Jakarta Composite soared 18.32 points or 0.29% to 6,376.95 and KOSPI was up by 0.62 points or 0.03% to 2,131.24.