Markets trade in fine-fettle in early deals

Indian equity benchmarks made optimistic start on Thursday tracking positive cues from Asian peers on developments over a potential vaccine for Covid-19. Markets are trading in fine-fettle with gains of around a percent each in early deals. Buying in all the sector indices lead by industrials, power and auto stocks supporting the domestic indices. Broader indices -- BSE mid and small cap -- are also trading in line with larger peers. Sentiment got a boost with Finance minister Nirmala Sitharaman’s statement that the government is committed to undertaking refo¬rms to make the tax administration simple for businesses, particularly the micro, small and medium enterprises (MSMEs). Traders took note that traders' body CAIT suggested a host of measures, like technical audits and waiver of late fees, to broaden the GST base and make the taxation system simple. Meanwhile, with over 19,000 cases being reported, India's total tally of coronavirus cases has crossed the 600,000 mark. At present, the country has 605,220 cases, of which 17,840 are fatalities.

On the global front, all the Asian markets are trading higher following the mostly positive cues overnight from Wall Street on optimism about a potential coronavirus vaccine as well as on upbeat US manufacturing data. Investors now look ahead to the US Labor Department's closely watched monthly employment report for June to be released later today.

Back home, banking stocks were in focus with Fitch Ratings’ report that Indian banks may continue to face heightened asset quality and earning pressure for at least two years, as disruption to business activity and supply chains and shrinking personal incomes damage banks' balance sheets. In scrip specific development, Dr Reddy's Laboratories climbed after it announced a partnership with Fujifilm Toyama Chemical and Global Response Aid for a potential Covid-19 drug.
The BSE Sensex is currently trading at 35728.51, up by 314.06 points or 0.89% after trading in a range of 35595.36 and 35733.37. There were 28 stocks advancing against 2 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index surged 0.87%, while Small cap index was up by 0.99%.

The top gaining sectoral indices on the BSE were Industrials up by 1.30%, Power up by 1.26%, Auto up by 1.20%, Bankex up by 1.19%, Capital Goods up by 1.19%, while there was no loser on the BSE sectoral front.

The top gainers on the Sensex were ONGC up by 3.79%, Mahindra & Mahindra up by 3.09%, Indusind Bank up by 2.70%, HDFC Bank up by 1.69% and SBI up by 1.54%. On the flip side, Tech Mahindra down by 0.46% and Hindustan Unilever down by 0.16% were the only losers.

Meanwhile, assuming a slippage of 5-10 percent of the asset under management (AUM) under moratorium, rating agency ICRA said non-banking financial companies' (NBFCs) non-performing asset (NPA) could increase to 5-7 percent in the current financial year (FY21) from about 3.3-3.4 percent in FY20, due to the disruption in economic activity caused by the spread of coronavirus and the subsequent lockdown imposed to contain it. It said the lockdown has significantly impacted the cash flow position of NBFCs' borrowers. It noted that while the moratorium extended by the NBFCs to their borrowers is likely to give them the much-needed breathing space, their asset quality performance is likely to see sizeable dislocation from the recent trends.

The rating agency said asset quality of NBFCs is likely to be more impacted than housing finance companies (HFCs), with the segmental NPA touching around 7-9.5 percent by March 2021. On the other hand, mortgage players could witness NPAs of about 3.4-4.8 percent in FY21. It pointed out that the portfolio under moratorium for some large NBFCs is as high as 70-80 percent, with the sectoral average of about 52 percent, while for housing finance companies (HFCs), the average is about 28 percent. The additional coronavirus-related provision carried by NBFCs is about 0.7 percent of the AUM, while for HFCs, it is about 0.2 percent.

ICRA further said that the envisaged sharp increase in the stage-3 assets post moratorium window and weak economic indicators would warrant entities to further revise their expected credit loss models and increase provisions, thus impacting their earnings. It said the liquidity profile of nonbanks has remained adequate to meet near-term requirements. It added that while nonbanks have extended moratoriums to its borrowers, not all lenders have extended a moratorium to the NBFCs.

The CNX Nifty is currently trading at 10529.40, up by 99.35 points or 0.95% after trading in a range of 10485.55 and 10531.25. There were 45 stocks advancing against 5 stocks declining on the index.

The top gainers on Nifty were ONGC up by 3.98%, Mahindra & Mahindra up by 3.17%, Indusind Bank up by 2.73%, Grasim Industries up by 2.24% and GAIL India up by 2.23%. On the flip side, UPL down by 0.49%, Tech Mahindra down by 0.32%, Hindustan Unilever down by 0.18%, Maruti Suzuki down by 0.07% and Eicher Motors down by 0.02% were the top losers.

All the Asian markets are trading in green; Nikkei 225 rose 8.35 points or 0.04% to 22,130.08, Straits Times gained 5.51 points or 0.21% to 2,615.68, Hang Seng surged 323.34 points or 1.32% to 24,750.53, Taiwan Weighted jumped 70.06 points or 0.60% to 11,773.48, KOSPI advanced 16.23 points or 0.77% to 2,122.93, Jakarta Composite increased 38.94 points or 0.79% to 4,953.33 and Shanghai Composite was up by 35.12 points or 1.16% to 3,061.10.