Indian bourses continue to trade in positive territory

Key benchmark indices continued to trade in positive territory in afternoon session, tracking gains in global markets. Sentiments remained positive with report that the Reserve Bank of India (RBI) announced detailed rules for exempting incremental car, home and micro, small and medium enterprises (MSMEs) loans from maintaining cash reserve ratio (CRR). The RBI said CRR will not have to be maintained for five years or for the tenure of the loan, depending upon which-ever is less. This will essentially mean a lower cost for banks and will help improve liquidity. Some optimism also came with Finance Minister Nirmala Sitharaman’s statement that bad loans of public sector banks (PSBs) came down to Rs 7.27 lakh crore at the end of September 2019 from Rs 8.96 lakh crore at the end of March 2018. Encouraging earnings by some companies too added some thrust on the street. On the sectoral front, Airline sector remained in focus as the government is mulling certain measures to support the growth and development of the maintenance, repair and overhaul (MRO) industry, an important segment for the aviation sector.

On the global front, Asian Markets were trading higher, spurred by fresh Wall Street records but investors remained jittery about the global economic impact of the coronavirus outbreak in China. Back home, the BSE Sensex is currently trading at 41236.74, up by 257.12 points or 0.63% after trading in a range of 41179.14 and 41444.34. There were 27 stocks advancing against 3 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index rose 0.27%, while Small cap index was up by 0.01%.

The top gaining sectoral indices on the BSE were Utilities up by 1.46%, Metal up by 1.29%, Power up by 1.23%, Auto up by 1.17% and Energy up by 0.83%, while IT down by 0.07% and Capital Goods was down by 0.05% were the few losing indices on BSE.

The top gainers on the Sensex were Maruti Suzuki up by 2.49%, Power Grid up by 2.33%, NTPC up by 2.12%, Indusind Bank up by 1.42% and Ultratech Cement was up by 1.39%. On the flip side, TCS down by 0.52%, Nestle down by 0.37% and Hindustan Unilever was down by 0.05% were the top losers.

Meanwhile, Rating agency Fitch in its latest report has said that the Reserve Bank of India’s (RBI) recent move on extending the MSME loan restructuring scheme and allowing relaxation in asset classification for certain real estate projects indicate a gradual shift away from its earlier effort to enhance the quality and transparency of asset classification in Indian banking system. It noted that there is a risk that such regulatory forbearance will perpetuate moral hazard, as it follows aggressive lending growth and risk-taking in certain sectors in five years to the financial year ended March 2019.

Fitch said 'It is not clear at the moment whether this forbearance will be extended to non-bank financial institutions (NBFIs) as well, but we believe that the probability of this is high, considering the impact that the NBFI liquidity squeeze and a slowing economy have had on the MSME and real-estate sectors. In recent years, banks have preferred to lend to NBFIs, which lend heavily to the real estate and MSME sectors, as a way to deploy their excess liquidity, while limiting their own direct exposure to these areas.’

The ratings agency believed that these extensions are only likely to defer asset-quality pressures unless there is a sustained improvement in macroeconomic conditions. Although, it expects India's GDP growth to pick up in the coming months, to 5.6 percent in FY21 from 4.6 percent in FY20, there are still risks to the country's economic outlook. On the RBI's move to exempt cash reserve ratio cut against lending to specific sectors like auto, small businesses and housing, the agency said the move is aimed at improving monetary transmission as interest rates on the three products go down, but flagged concerns on the same.

The CNX Nifty is currently trading at 12122.05, up by 90.55 points or 0.75% after trading in a range of 12103.10 and 12172.30. There were 43 stocks advancing against 7 stocks declining on the index.

The top gainers on Nifty were GAIL India up by 5.13%, JSW Steel up by 3.90%, Tata Motors up by 2.66%, Maruti Suzuki up by 2.54% and Hindalco was up by 2.46%. On the flip side, Coal India down by 0.75%, Yes Bank down by 0.53%, TCS down by 0.49%, Britannia Industries down by 0.49% and Nestle was down by 0.37% were the top losers.

All Asian Markets were trading higher; Hang Seng increased 371.48 points or 1.36% to 27,612.82, Jakarta Composite soared 6.13 points or 0.1% to 5,958.21, Taiwan Weighted strengthened 89.97 points or 0.78% to 11,664.04, Straits Times advanced 17.47 points or 0.55% to 3,180.62, KOSPI rose 22.05 points or 1% to 2,223.12 and Shanghai Composite was up by 16.72 points or 0.58% to 2,907.21.