Local equities extend losses in morning session

Local equity markets extended their losses in morning session, with Sensex and Nifty falling over 100 and 30 points, respectively. Some cautiousness came in with a report that the economic slowdown in the country has led to 5% decline in online hiring during January-June period of this year as compared to the preceding six months. Traders were reacting over a report that West Bengal Finance minister Amit Mitra has expressed concerns over the Reserve Bank of India approving transfer of record Rs 1.76 lakh crore dividend and surplus reserves to the central government, saying it has increased the financial risk of the country. However, losses remain capped with industry’s self-regulatory organisation Sa-Dhan’s report that India’s microfinance industry is set to cross Rs 1 lakh crore loan portfolio during September quarter of the ongoing financial year. The industry witnessed 9% quarter-on-quarter growth in its gross loan portfolio (GLP) to Rs 98,107 crore during April-June 2019-20. Traders took note of a report which suggested that adopting a more human-centric approach to human capital development could accelerate the GDP growth in a given country by between 0.5% and 2%. It pointed out that skills mismatch already impacts over 50% of employers.

On the global front, Asian markets were trading mostly in green, improving from the previous day’s pounding after Donald Trump said China-US trade talks would resume soon, though the president’s sharp changes in tone are keeping investors on edge. Back home, The Union Cabinet on August 28 will consider relaxing foreign direct investment (FDI) norms in several sectors, including single-brand retail and digital media, to attract overseas players.

The BSE Sensex is currently trading at 37530.61, down by 110.66 points or 0.29% after trading in a range of 37456.59 and 37687.82. There were 12 stocks advancing against 19 stocks declining on the index.

The broader indices were trading mixed; the BSE Mid cap index slipped 0.16%, while Small cap index was up by 0.08%.

The top gaining sectoral indices on the BSE were IT up by 0.72%, TECK up by 0.60%, Utilities up by 0.36%, Realty up by 0.19% and Healthcare was up by 0.16%, while Metal down by 2.05%, Basic Materials down by 0.68%, BANKEX down by 0.60%, Energy down by 0.54% and Telecom was down by 0.47% were the top losing indices on BSE.

The top gainers on the Sensex were Tata Motors up by 1.70%, HCL Tech. up by 1.53%, Tech Mahindra up by 1.38%, Infosys up by 1.22% and Bajaj Auto was up by 1.21%. On the flip side, Tata Steel down by 2.81%, Yes Bank down by 2.64%, Vedanta down by 1.85%, Hindustan Unilever down by 1.78% and ONGC was down by 1.71% were the top losers.

Meanwhile, amid weak credit demand from corporates and the lingering Non-Banking Financial Company (NBFC) crisis, global rating agency S&P in its latest report has said that the government’s Rs 70,000 crore upfront capital infusion into state-run banks would not deliver on the key objectives of higher lending and a recovering in their fortunes. The report mentioned the overall improvement in asset quality will take a few more years and significantly hinges on the resolution of large Non-performing assets (NPAs).

It further highlighted that fragile financial markets, rising risk aversion, and weakness in some highly leveraged corporate sectors will continue to stress the asset quality and growth, adding that the key to banking recovery is the resolution of legacy weak assets. It can be noted that fixed capital formation by the corporates, which indicates the investment to create durable assets, has been lagging far behind historical averages for almost a decade now, leading to poor overall credit demand across industries.

Moreover, the report mentioned banks' credit growth is likely to be in line with the nominal Gross domestic product (GDP) growth, while their earnings will at best be marginal and system wide will remain weak. However, it said the plan to immediately infuse Rs 70,000 crore at one go will help replenish the depleted capital base of public sector banks. The government expects the move to lead to an incremental lending of around Rs 5 trillion and help revive the bleeding banks.

The CNX Nifty is currently trading at 11073.50, down by 31.85 points or 0.29% after trading in a range of 11052.60 and 11129.65. There were 19 stocks advancing against 31 stocks declining on the index.

The top gainers on Nifty were Britannia up by 2.01%, Tata Motors up by 1.62%, Cipla up by 1.49%, HCL Tech up by 1.47% and Tech Mahindra was up by 1.32%. On the flip side, Yes Bank down by 3.02%, Tata Steel down by 2.78%, JSW Steel down by 2.53%, Hindalco down by 2.48% and Indiabulls Housing was down by 2.05% were the top losers.

Asian markets were trading mostly in green, Taiwan Weighted strengthened 38.99 points or 0.38% to 10,426.22, Nikkei 225 surged 30.38 points or 0.15% to 20,486.46, KOSPI rose 15.17 points or 0.79% to 1,939.77, Straits Times advanced 4.21 points or 0.14% to 3,071.73 and Jakarta Composite was up by 2.76 points or 0.04% to 6,280.93. On the flip side, Hang Seng decreased 5.80 points or 0.02% to 25,658.27 and Shanghai Composite was down by 9.49 points or 0.33% to 2,892.70.