Benchmarks continue lackluster trade slightly in red

Indian equity benchmarks continued their lackluster trade slightly in red in afternoon session, due to selling in frontline blue chip stocks, despite mostly positive trade in Asian equities. Cautiousness remained in markets with former Union finance minister Yashwant Sinha’s statement that contraction in demand and reluctance to invest led to the current slowdown in the Indian economy. He said some corporates are sitting on a pile of cash, but are not making investments, thus affecting demand. However, losses were limited as traders found some support with NITI Aayog vice chairman Rajiv Kumar’s statement that India has become a more attractive investment destination following the reduction in corporate tax rates but relocation of units from competitors such as China will depend on other factors as well, such as the ability of states to make their environment more business-friendly. He added that this measure will help restore growth momentum in the second half of the economy. He expects the second half of FY20 (October 2019-March 2020) to clock higher than 7.5% GDP growth. On the sectoral front, Auto sector remained in focus with the rating agency ICRA in its latest report stating that the automotive industry, which accounts for almost half the manufacturing GDP of India, is likely to be one of the key beneficiaries of recent corporate tax revision.

On the global front, Asian markets were trading mostly in green, as investors await developments in the China-US trade standoff. Back home, the BSE Sensex is currently trading at 39083.59, down by 6.44 points or 0.02% after trading in a range of 38913.06 and 39306.37. There were 15 stocks advancing against 15 stocks declining on the index.

The broader indices were trading mixed; the BSE Mid cap index fell 0.36%, while Small cap index was up by 0.09%.

The top gaining sectoral indices on the BSE were Energy up by 2.33%, IT up by 1.85%, TECK up by 1.67%, Healthcare up by 0.53% and FMCG was up by 0.13%, while Capital Goods down by 1.61%, Bankex down by 1.27%, Realty down by 1.20%, PSU down by 1.06% and Industrials down was by 0.86% were the top losing indices on BSE.

The top gainers on the Sensex were Reliance Industries up by 4.09%, Infosys up by 2.71%, Tech Mahindra up by 2.64%, Tata Motors up by 2.07% and Sun Pharma was up by 1.97%. On the flip side, Hero MotoCorp down by 2.87%, Larsen & Toubro down by 2.57%, Asian Paints down by 2.52%, Kotak Mahindra Bank down by 2.20% and Bajaj Auto was down by 1.80% were the top losers.

Meanwhile, global rating agency Moody’s Investors Service in its latest report has said that the recommendations of the Reserve Bank of India’s (RBI) Housing Finance Committee, if implemented, will be credit positive for Indian residential mortgage-backed securities (RMBS) because it will increase the likelihood that a suitable replacement can step in and take the place of a failed operator. In May 2019, the RBI had constituted a committee on the development of housing finance securitisation market to look into the current state of mortgage securitisation in the country and make recommendations to address various issues relating to originators/investors as well as market micro structure.

It has said the report recommended specific measures for facilitating secondary market trading in mortgage securitisation instruments. Besides, it said the recommendations to standardize loan servicing processes across home loan lenders will make it easier to transfer loan servicing from one provider to another, if the original provider fails. Adding further, it said the committee recommended linking of home loans pricing to an external, such as the repo rate. It stated that such a correlation will mitigate interest rate risk in RMBS transactions as it will remove the interest rate mismatch between a lenders own benchmark rate and coupon rates.

Moody’s further said that the RBI also recommended standardizing loan documentation criteria and establishing minimum loan eligibility and disclosure requirements for RMBS deals. It noted that the move will increase transparency in the country's mortgage sector, reducing risks in the underlying loans backing RMBS deals. It added that the recommendation on the tax treatment of securitization transactions will remove uncertainty for originators and investors.

The CNX Nifty is currently trading at 11589.65, down by 10.55 points or 0.09% after trading in a range of 11539.20 and 11655.05. There were 21 stocks advancing against 29 stocks declining on the index.

The top gainers on Nifty were Zee Entertainment up by 4.55%, Reliance Industries up by 4.04%, Infosys up by 2.81%, Tech Mahindra up by 2.61% and Tata Motors was up by 2.03%. On the flip side, Eicher Motors down by 5.00%, JSW Steel down by 3.04%, Indian Oil Corporation down by 2.80%, Hero MotoCorp down by 2.66% and Larsen & Toubro was down by 2.64% were the top losers.

Asian markets were trading mostly in green; Hang Seng increased 52.12 points or 0.2% to 26,274.52, Nikkei 225 surged 19.75 points or 0.09% to 22,098.84, Straits Times advanced 12.32 points or 0.39% to 3,155.56, KOSPI rose 9.34 points or 0.45% to 2,101.04 and Shanghai Composite gained 8.43 points or 0.28% to 2,985.51.

On the flip side, Taiwan Weighted dropped 1.01 points or 0.01% to 10,918.01 and Jakarta Composite lost 83.96 points or 1.35% to 6,122.24.