Benchmarks trade slightly lower amid lackluster Asian cues

Indian equity benchmarks made weak start, tracking lackluster trade in Asian peers, and were trading slightly lower in early deals on Friday, as investors booked profit after four days of continuous upmove. Some cautiousness crept in with ICRA’s report that weak consumer sentiment, the slowdown in the infrastructure sector, and benign commodity prices have negatively impacted the performance of companies in Q3FY20. Also, traders were reacting to report that the RBI projected the economy to expand by 6% during the next financial year, pegging it at the lower end of the GDP growth estimate of the Economic Survey. Besides, Central and state tax officers will share information about taxpayers for enforcement action as the government looks to tighten enforcement measures to check GST evasion. Though, downside remained capped with RBI Governor Shaktikanta Das’ statement that the Rs 1-lakh-crore of long-term repos are aimed at helping banks lower their lending rates, thus quickening the monetary policy transmission. Traders took note of private report that if you want to reach a $5 trillion economy, the outstanding credit, which is around Rs 95-98 trillion, it will have to be doubled, which means need to grow (credit) at around 15 percent.

On the global front, most of the Asian markets were trading in red after recent strong gains and despite an extended rally overnight on Wall Street. Investors turned cautious as they awaited the release of China's January trade data as well as the US monthly jobs data for January later in the day. Lingering worries about the coronavirus outbreak also weighed on sentiment. China's National Health Commission said that the death toll in the country related to the coronavirus outbreak has risen to 636, while the number of people infected has increased to 31,161. Meanwhile, Japan said that an additional 41 people on board the Diamond Princess Cruise ship docked in the port of Yokohama have tested positive for the coronavirus.

Back home, aviation stocks were in focus with airlines body IATA’s statement that after four years of double-digit growth, the Indian domestic passenger traffic rose by just 5.1 per cent in 2019, down from 18.9 per cent in 2018. In stock specific developments, Hero MotoCorp gained as it reported 14.47 percent on-year rise in standalone net profit for the December quarter. HCC was up after it announced plans to reduce debt by Rs 2,100 crore. Tata Teleservices jumped after the Department of Telecom approved the merger of its consumer mobile business with Bharti Airtel. Wipro gained as Marelli awarded it a multi-year, global, strategic IT deal.

The BSE Sensex is currently trading at 41194.85, down by 111.18 points or 0.27% after trading in a range of 41191.90 and 41394.41. There were 12 stocks advancing against 18 stocks declining on the index.

The broader indices were trading mixed; the BSE Mid cap index declined 0.03%, while Small cap index was up by 0.30%.

The top gaining sectoral indices on the BSE were Consumer Durables up by 0.72%, FMCG up by 0.32%, Healthcare up by 0.32%, IT up by 0.31% and Utilities was up by 0.26%, while Metal down by 0.85%, Realty down by 0.83%, Energy down by 0.80%, Capital Goods down by 0.74% and PSU was down by 0.55% were the losing indices on BSE.

The top gainers on the Sensex were Hero MotoCorp up by 2.16%, NTPC up by 1.96%, Titan Company up by 1.41%, HCL Technologies up by 1.03% and ITC up by 0.49%. On the flip side, Power Grid Corporation down by 1.55%, Tata Steel down by 1.32%, SBI down by 1.04%, Larsen & Toubro down by 1.03% and Reliance Industries down by 0.93% were the top losers.

Meanwhile, in an attempt to increase lending to micro, small and medium enterprises (MSMEs), auto and home segment, Reserve Bank of India (RBI) has tweaked maintenance of cash reserve ratio (CRR) norms by providing relaxation in calculation of total deposits. The move will encourage lending towards these targeted sectors having multiplier effect by banks as they will get exemption in CRR over incremental lending. This exemption window is available till July 2020. CRR is the percentage of total deposits that bank mandatorily park with the apex bank. It stands at 4% of a bank’s total deposit.

Alongside sustained efforts to improve monetary transmission, the RBI is actively engaged in revitalising the flow of bank credit to productive sectors to support growth. As a part of this, the central bank said it has now been decided that scheduled commercial banks will be allowed to deduct the equivalent of incremental credit disbursed by them as retail loans for automobiles, residential housing and loans to MSMEs, over and above the outstanding level of credit to these segments as at the end of the fortnight ended January 31, 2020 from their net demand and time liabilities (NDTL) for maintenance of CRR. It added that this exemption will be available for incremental credit extended up to the fortnight ending July 31, 2020.

To give boost to the real estate sector, RBI said, it has been decided to permit extension of date of commencement of commercial operations (DCCO) of project loans for commercial real estate, delayed for reasons beyond the control of promoters, by another one year without downgrading the asset classification, in line with treatment accorded to other project loans for non-infrastructure sector. Observing that MSME sector plays an important role in the growth of the Indian economy, RBI said the restructuring of the borrower account has been extended by further one year to March 31, 2021.

Considering the importance of MSMEs in the Indian economy and for creating an enabling environment for the sector, a one-time restructuring of loans to MSMEs that were in default but ‘standard’ as on January 1, 2019, was permitted without an asset classification downgrade. It said the restructuring of the borrower account was to be implemented by March 31, 2020, and added that the scheme has provided relief to a large number of MSMEs. As the process of formalisation of the MSME sector has a positive impact on financial stability and this process is still underway, it has been decided to extend the benefit of one-time restructuring without an asset classification downgrade to standard accounts of GST registered MSMEs that were in default as on January 1, 2020.

The CNX Nifty is currently trading at 12122.25, down by 15.70 points or 0.13% after trading in a range of 12102.70 and 12154.70. There were 24 stocks advancing against 26 stocks declining on the index.

The top gainers on Nifty were Zee Entertainment up by 2.88%, NTPC up by 2.68%, Hero MotoCorp up by 2.10%, UPL up by 1.69% and Titan Company up by 1.28%. On the flip side, Eicher Motors down by 2.51%, Power Grid Corporation down by 2.02%, BPCL down by 1.48%, Tata Motors down by 1.31% and Indian Oil Corporation down by 0.85% were the top losers.

Asian markets were trading mostly in red; Hang Seng decreased 214.39 points or 0.78% to 27,279.31, Taiwan Weighted dropped 108.62 points or 0.92% to 11,641.06, Nikkei 225 slipped 55.62 points or 0.23% to 23,817.97, Straits Times trembled 23.03 points or 0.71% to 3,208.52, KOSPI fell 22.90 points or 1.03% to 2,205.04 and Shanghai Composite declined 17.00 points or 0.59% to 2,849.51. On the flip side, Jakarta Composite was up by 10.41 points or 0.17% to 5,997.56.