Indian bourses continue to trade in positive territory

Indian equity benchmarks continued their trade in positive territory in late morning session, on positive global leads and sustained buying by domestic institutional investors. The indices remained positive with the Export-Import Bank of India (Exim Bank) forecasting that India’s merchandise exports to increase from $81.4 billion to $82 billion, with an expected growth rate of 0.6% from a year ago during the second quarter of 2019-20 (July-September). Some support also came in with Finance Minister Nirmala Sitharaman’s statement that the government is not underestimating the slow Gross Domestic Product (GDP) growth and has full focus on how it can rise in the next quarter. She said the up and down are part of the growth process and the government is responding to the current economic challenges to revive demand and consumption in the country. On the sectoral front, agriculture stocks remained in focus with the Agricultural and Processed Food Products Export Development Authority’s (APEDA) report showing that the country's agriculture exports dipped 14.39 per cent to $5.45 billion (about Rs 38,700 crore) in April-July this fiscal.

On the global front, Asian markets were trading mostly in green, as hopes of diminishing US-China tensions and reduced risk of no-deal Brexit prompted investors to take profit in risk-off trade ahead of key central bank policy meetings. Back home, the BSE Sensex is currently trading at 37285.53, up by 140.08 points or 0.38% after trading in a range of 37193.57 and 37298.84. There were 24 stocks advancing against 7 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index rose 0.74%, while Small cap index was up by 1.14%.

The top gaining sectoral indices on the BSE were Realty up by 2.79%, Metal up by 2.05%, Auto up by 1.95%, Basic Materials up by 1.40% and Industrials up by 1.31%, while IT down by 1.13%, TECK down by 0.96% and FMCG down by 0.11% were the few losing indices on BSE.

The top gainers on the Sensex were Yes Bank up by 8.00%, Tata Motors up by 7.14%, Tata Motors - DVR up by 6.55%, Vedanta up by 2.80% and Indusind Bank up by 2.59%. On the flip side, HCL Technologies down by 1.96%, Infosys down by 1.44%, Tech Mahindra down by 1.02%, TCS down by 0.75% and ITC down by 0.59% were the top losers.

Meanwhile, Moody’s Investors Service in its latest report has said that the Reserve Bank of India’s (RBI) direction to banks to link all new floating rate personal and retail loans, along with loans to micro and small enterprises (MSEs) to external benchmarks with effect from October 1, is credit negative for banks as it will limit their flexibility in managing interest rate risk. It mentioned this could cause volatility in net interest margins (NIMs), in turn translating into volatility in the overall profitability of banks.

It added the lack of a single benchmark that can consistently and accurately capture the movement of interest rates in the economy will also cause volatility to banks’ NIMs. It further highlighted that under the new rules, the direct linkage between lending rates and funding costs will no longer exist. This will expose banks to asymmetrical movements in the cost of funding and loan yields, exposing them to interest rate risks.

Currently, banks’ floating rate loans are benchmarked to the marginal cost of funds-based lending rates (MCLR). With changes in lending rates aligned to changes in the cost of funding, banks are able to mitigate their interest rate risk.

The CNX Nifty is currently trading at 11038.30, up by 35.25 points or 0.32% after trading in a range of 11011.65 and 11044.45. There were 37 stocks advancing against 13 stocks declining on the index.

The top gainers on Nifty were Yes Bank up by 7.84%, Tata Motors up by 7.26%, JSW Steel up by 4.05%, Vedanta up by 2.76% and Tata Steel up by 2.60%. On the flip side, Wipro down by 1.98%, HCL Technologies down by 1.86%, Infosys down by 1.40%, Zee Entertainment down by 1.35% and Tech Mahindra down by 1.11% were the top losers.

Asian markets were trading mostly in green; Hang Seng increased 423.98 points or 1.59% to 27,107.66, Nikkei 225 surged 195.58 points or 0.91% to 21,587.68, Straits Times advanced 34.75 points or 1.1% to 3,190.46, Taiwan Weighted strengthened 14.89 points or 0.14% to 10,768.47 and KOSPI rose 12.51 points or 0.62% to 2,044.59.

On the flip side, Shanghai Composite declined 0.10 points to 3,021.10 and Jakarta Composite lost 4.97 points or 0.08% to 6,331.70.