Bourses continue to trade higher on easing WPI inflation

Key benchmark indices continued to trade higher in afternoon session, on the back of easing wholesale price index (WPI) inflation data. Wholesale inflation fell to a multi-year low of 1.08 percent in July mainly on account of cheaper fuel and food items. Inflation based on WPI was at 2.02 percent in June this year and 5.27 percent in July 2018. Sentiments remained upbeat with government’s data which showed that snapping the 6-month rising streak, the retail inflation fell in the month of July despite rise in the food prices. The CPI-based inflation was reduced to 3.15 per cent in the last month also continued to support sentiments. Hopes of a stimulus package from the government to revive the economy coupled with firm trend in the global markets too brought some cheer on the street.  Meanwhile, in a bid to boost credit to the needy segment of borrowers, Reserve Bank of India (RBI) said that bank credit to registered NBFCs (other than MFIs) for on-lending to agriculture, micro and small enterprises (MSEs) and housing sector up to prescribed limits will be classified as priority sector lending.

On the global front, Asian markets were trading higher, after the United States decided to postpone some tariffs on Chinese goods, fueling hopes for a trade deal between the two countries.  Back home, the BSE Sensex is currently trading at 37329.59, up by 371.43 points or 1.01% after trading in a range of 37000.77 and 37409.31. There were 23 stocks advancing against 8 stocks declining on the index.

The broader indices were trading mixed; the BSE Mid cap index rose 0.20%, while Small cap index was down by 0.03%.

The top gaining sectoral indices on the BSE were Metal up by 2.26%, Telecom up by 2.02%, Basic Materials up by 1.80%, Oil & Gas up by 1.13% and TECK was up by 1.01%, while Healthcare down by 1.23% and Power was down by 0.06% were the only losing indices on BSE.

The top gainers on the Sensex were Tata Steel up by 4.99%, Vedanta up by 4.69%, Yes Bank up by 4.01%, Tech Mahindra up by 3.05% and Bharti Airtel was up by 2.86%. On the flip side, Sun Pharma down by 5.66%, Tata Motors - DVR down by 1.91%, Tata Motors down by 1.89%, Kotak Mahindra Bank down by 1.26% and ONGC was down by 0.51% were the top losers.

Meanwhile, in a bid to boost credit to the needy segment of borrowers, Reserve Bank of India (RBI) said that bank credit to registered NBFCs (other than MFIs) for on-lending to agriculture, micro and small enterprises (MSEs) and housing sector up to prescribed limits will be classified as priority sector lending.

According to the revised norms, on-lending by NBFCs for ‘term lending’ component under agriculture will be allowed up to Rs 10 lakh per borrower. For MSE borrowers, the limit will be Rs 20 lakh per borrower. In case of housing sector, the limit has been enhanced from Rs 10 lakh to Rs 20 lakh per borrower for classification of the loan as priority sector lending. Under the revised on-lending model, banks can classify only the fresh loans sanctioned by NBFCs out of bank borrowing. However, loans granted by housing finance companies (HFCs) under the existing on-lending guidelines will continue to be classified under priority sector by banks.

The RBI also clarified that bank credit to NBFCs for on-lending will be allowed up to a limit of five percent of individual bank’s total priority sector lending on an ongoing basis. Further, these norms will be reviewed after March 31, 2020. Under the priority sector norms, banks are mandated to lend a particular portion of their funds to specified sectors, such as agriculture, education, export, MSME and social infrastructure.

The CNX Nifty is currently trading at 11022.50, up by 96.65 points or 0.88% after trading in a range of 10935.60 and 11059.05. There were 35 stocks advancing against 15 stocks declining on the index.

The top gainers on Nifty were Tata Steel up by 4.79%, Vedanta up by 4.54%, UPL up by 4.45%, Zee Entertainment up by 4.40% and Yes Bank was up by 3.06%. On the flip side, Sun Pharma down by 6.00%, Indiabulls Housing Finance down by 3.37%, Dr. Reddys Lab down by 2.89%, Wipro down by 2.67% and Coal India was  down by 1.91% were the top losers.

All Asian markets were trading higher; Taiwan Weighted strengthened 65.07 points or 0.63% to 10,427.73, Nikkei 225 surged 199.69 points or 0.98% to 20,655.13, KOSPI rose 12.54 points or 0.65% to 1,938.37, Jakarta Composite soared 34.04 points or 0.55% to 6,245.00, Straits Times advanced 0.33 points or 0.01% to 3,147.06, Shanghai Composite gained 12.53 points or 0.45% to 2,809.79 and Hang Seng was up by 51.71 points or 0.2% to 25,333.01.