Lackluster trade continues on Dalal Street

Indian equity benchmarks continued their lackluster trade in afternoon session, despite strong trend in other Asian markets. Investors’ sentiment remained dull as rating agency Standard and Poor’s (S&P) warned that the Indian financial sector is facing rising risk of contagion and failure of any large non-banking financial company (NBFC) or housing finance company (HFC) could disrupt interbank market, payments, hurt credit availability and adversely affect country’s Gross Domestic Product (GDP) growth. Some anxiety also came with data indicating that the share of foreign portfolio investments (FPI) in domestic capital markets through participatory notes (P-notes) stood at Rs 76,611 crore in September-end, registering the fourth consecutive month-on-month decline. However, traders took some support with the commerce and industry ministry stating that India has recorded continuous improvement in its ease of doing business ranking issued by the World Bank on account of steps taken by the government in this regard. 

On the global front, Asian markets were mostly trading in green, as corporate earnings and a ceasefire in northern Syria helped prop up sentiment, though the backdrop of trade and brexit uncertainties was enough to prevent a decisive shift towards riskier assets. Back home, the BSE Sensex is currently trading at 39104.71, up by 45.88 points or 0.12% after trading in a range of 38952.93 and 39327.15. There were 15 stocks advancing against 16 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index rose 0.05%, while Small cap index was up by 0.24%.

The top gaining sectoral indices on the BSE were Realty up by 1.18%, Basic Materials up by 0.45%, Consumer Discretionary Goods & Services up by 0.20%, Auto up by 0.17% and Consumer Durables was up by 0.17%, while Telecom down by 2.12%, PSU down by 1.15%, Oil & Gas down by 1.15%, Power down by 0.61% and TECK was down by 0.53% were the top losing indices on BSE.

The top gainers on the Sensex were HCL Tech up by 2.31%, Tech Mahindra up by 1.35%, Bajaj Auto up by 1.02%, Tata Motors up by 0.98% and Kotak Mahindra Bank was up by 0.83%. On the flip side, Mahindra & Mahindra down by 1.50%, Bharti Airtel down by 1.47%, Infosys down by 1.26%, Sun Pharma down by 1.18% and ONGC was down by 1.16% were the top losers.

Meanwhile, Rating agency Standard and Poor’s (S&P) in its latest report has warned that the Indian financial sector is facing rising risk of contagion and failure of any large non-banking financial company (NBFC) or housing finance company (HFC) could disrupt interbank market, payments, hurt credit availability and adversely affect country’s Gross Domestic Product (GDP) growth. That apart, it said the failure of a large finance company may have other consequences, like draining the credit available to the sector.

According to the report, this contagion runs the risk of spreading to real estate companies too. It said finance companies are the largest lenders to this segment and any failure among such institutions could jeopardize credit flows to developers. Given the seriousness of such risks, it expects the government to support systemically important institutions that get into trouble. It also said the support is more likely to be available to banks rather than any finance company.

The report further stated that India's funding conditions remain fragile after the default of Infrastructure Leasing and Financial Services (IL&FS), with a tight refinancing market and choppy equity markets, collectively making it difficult for institutions to raise capital. It noted that a bank failure in the current market could exacerbate risks and it may be cheaper for the government to support a bank than letting a shaky credit system undermine the economy. In its base case, it expects that the resolution of weak finance companies will be swift and orderly, and contagion will be managed.

The CNX Nifty is currently trading at 11610.75, up by 6.65 points or 0.06% after trading in a range of 11564.70 and 11679.60. There were 24 stocks advancing against 26 stocks declining on the index.

The top gainers on Nifty were HCL Tech up by 2.35%, Eicher Motors up by 2.22%, Tech Mahindra up by 1.43%, UPL up by 1.34% and Ultratech Cement was up by 1.31%. On the flip side, BPCL down by 3.99%, Bharti Infratel down by 3.37%, GAIL India down by 2.91%, Grasim Industries down by 2.74% and Indian Oil Corp was down by 1.76% were the top losers.

Asian markets were mostly trading in green; Hang Seng increased 164.55 points or 0.62% to 26,731.28, Nikkei 225 surged 125.22 points or 0.55% to 22,750.60, Taiwan Weighted strengthened 80.47 points or 0.72% to 11,320.14, Jakarta Composite soared 61.17 points or 0.98% to 6,318.98, Straits Times advanced 28.26 points or 0.9% to 3,172.54 and KOSPI was up by 5.04 points or 0.24% to 2,085.66.

On the flip side, Shanghai Composite was down by 1.04 points or 0.04% to 2,940.58.