Benchmarks snap two-day gaining streak; Sensex drifts below 31,350 mark

Indian equity benchmarks ended volatile session on a pessimistic note with losses of over one and half percent on Friday, on the back of weak global cues after a report that an experimental antiviral drug for the coronavirus flopped in its first randomised clinical trial. Key indices failed to sustain the momentum of the last two trading sessions, with Sensex and Nifty slipping below their crucial 31,350 and 9,200 levels, respectively. Key bourses started the session with a gap-down opening, as traders were concerned with rising coronavirus cases in the country. Selling further crept in with the Confederation of Indian Industry’s (CII) report that India's GDP is likely to range between a decline of 0.9% and a growth of 1.5% in the current financial year, with the economy undergoing a turbulent phase caused by the coronavirus-induced lockdown.

However, markets had begun to recover and have cut their respective intra-day loss in afternoon session, as traders found some support with report that Prime Minister Narendra Modi and Finance Minister Nirmala Sitharaman will again meet on April 24 to finalise a second stimulus package for industry, the poor and farmers. Though, both indices failed to hold the recovery and slipped back to opening levels at the end of the session, as some anxiety remained among traders with Former Finance Secretary Subhash Chandra Garg’s statement that the unavailability of data is the main reason why the government has not been able to announce a stimulus package for coronavirus-stricken businesses, including MSMEs. 

On the global front, Asian markets ended lower on Friday, spurred by doubts about progress in the development of drugs to treat COVID-19 and new evidence of U.S. economic damage caused by the coronavirus pandemic.  European markets were trading lower, as investors disappointed by the lack of details in a trillion-euro emergency fund agreed by the bloc's leaders as evidence grew of the global damage wrought by the coronavirus crisis. Back home, airline stocks ended lower with global airlines' grouping IATA stating that the coronavirus pandemic is expected to impact more than 29 lakh jobs in the Indian aviation and dependent industries. Stocks related to Hospital sector also were in watch with ICRA’s report that the Covid-19 epidemic has not just impacted the functioning of hospital sector, but has also dragged down the short- term outlook to negative on account of a sharp fall in volumes both at the out- patient department (OPD) and the in-patient department (IPD).

Finally, the BSE Sensex lost 535.86 points or 1.68% to 31,327.22, while the CNX Nifty was down by 159.50 points or 1.71% to 9,154.40.

The BSE Sensex touched high and low of 31,842.24 and 31,278.27, respectively and there were 8 stocks advancing against 22 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index fell 1.77%, while Small cap index was down by 1.40%.

The top gaining sectoral indices on the BSE were Energy up by 2.05%, Healthcare up by 1.45% and Capital Goods up by 0.11%, while Realty down by 4.15%, Finance down by 3.91%, Bankex down by 3.30%, Metal down by 2.96%, IT down by 2.72%, TECK down by 2.70% were the top losing indices on BSE.

The top gainers on the Sensex were Reliance Industries up by 3.34%, Sun Pharma up by 1.67%, Hero MotoCorp up by 1.38%, Larsen & Toubro up by 1.18% and Power Grid up by 0.82%. On the flip side, Bajaj Finance down by 9.14%, Indusind Bank down by 6.58%, Axis Bank down by 5.96%, ICICI Bank down by 5.09% and HDFC down by 5.00% were the top losers.

Meanwhile, in a major relief for corporate borrowers hit hard by the coronavirus pandemic, the government has decided to amend the insolvency law to suspend up to one year provisions that trigger insolvency proceedings against defaulters. The amendments to the IBC (Insolvency and Bankruptcy Code) would pave the way for banks to restructure loans. An ordinance would be promulgated to suspend three sections of IBC for up to one year and a decision in this regard was taken by the Union Cabinet.

Section 7, 9 and 10 of the IBC would be suspended for six months and the suspension time can be extended up to one year. An enabling provision with respect to extending the time would be part of the ordinance. Suspension of these provisions could be extended up to one year based on the economic situation going forward. The effective date of the amendments coming into force would be the date of promulgation of the ordinance.

Section 7 and 9 pertain to initiation of corporate insolvency proceedings by a financial creditor and an operational creditor, respectively. Section 10 relates to filing an application for insolvency resolution by a corporate. The coronavirus outbreak and the nationwide lockdown to curb spreading of infections have significantly impacted economic activities and the latest decision in a way provides more leeway for corporate borrowers in repaying their loans.

As per existing norms, if a payment default exceeds 90 days then the lender concerned has to refer the account for resolution under IBC or any other mechanism permitted by the Reserve Bank of India (RBI). The lender does not have the option to restructure the loan. Currently, the Reserve Bank of India (RBI) norms prohibit restructuring of loans and resolution has to be done under IBC.

The CNX Nifty traded in a range of 9,296.90 and 9,141.30 and there were 10 stocks advancing against 40 stocks declining on the index.

The top gainers on Nifty were Reliance Industries up by 4.00%, Britannia up by 3.51%, Sun Pharma up by 1.69%, Cipla up by 1.51% and Hero MotoCorp up by 1.36%. On the flip side, Bajaj Finance down by 8.70%, Bharti Infratel down by 7.98%, Zee Entertainment down by 7.52%, Bajaj Finserv down by 6.76% and Hindalco down by 5.98% were the top losers.

European markets were trading lower; UK’s FTSE 100 decreased 55.41 points or 0.95% to 5,771.20, France’s CAC fell 44.78 points or 1.01% to 4,406.22 and Germany’s DAX was down by 107.91 points or 1.03% to 10,405.88.

Asian markets ended lower on Friday. Japanese shares declined by tracking lackluster cues overnight from Wall Street after reports that Gilead Sciences' experimental corona virus drug remdesivir flopped in its first randomized clinical trial. Traders also considered the implications of a Nikkei report that the Bank of Japan may replace its government bond-purchase target to allow unlimited buying. Further, Chinese shares ended lower amid lingering corona virus worries, but some losses were limited as Chinese central bank (PBOC) cut the interest rate on its targeted medium-term lending facility to support the world's second-largest economy.