Markets snap 2-day losing run; settles near day’s high

Snapping two-day losing run, Indian equity benchmarks rebounded sharply to touch near intraday day’s high point on Thursday, supported by healthy buying in Reliance Industries, Asian Paints and Axis Bank. Key indices opened on a strong note and sustained buying momentum throughout the session, as traders took encouragement with Finance Minister Nirmala Sitharaman’s statement that banks are going to be the catalysts for economic revival. Some support also came in with report that the government is planning to save about Rs 35,000 crore to help manage the fiscal load put by the production-linked incentive (PLI) and phased manufacturing program (PMP) schemes, its initiatives to attract investment into the country. Traders took note of report that Niti Aayog CEO Amitabh Kant said India was the youngest country with a vibrant startup eco-system and it must convert the present (COVID-19) crisis into an opportunity.

Domestic indices gained more strength during final hour of session, taking support form report that India's exports during the first week of September jumped 13.35 per cent year-on-year to 6.12 billion dollars. At the same time, imports declined by 21.37 per cent to 6.85 billion dollars. Consequently, the deficit during September 1 to 7 worked out to 730 million dollars. Traders paid no heed towards ICRA’s report that not paying the full Goods and Services Tax (GST) compensations by the Centre is among the factors which may result in up to Rs 3 lakh crore cut in capital expenditure (capex) by the states in FY21. It noted that the borrowing alternative offered by the Centre to make up for the shortfall in the promised compensation will lead to the states' fiscal deficits widening to 4.25-5.52 percent.

On the global front, Asian markets closed mostly lower on Thursday, as caution prevailed following the tech-led rebound on Wall Street. Traders overlooked the upbeat Japanese core machine orders data for July. Cabinet Office said that the total value of core machine orders in Japan was up a seasonally adjusted 6.3 percent on month in July, standing at 751.3 billion yen. That beat expectations for an increase of 1.9 percent following the 7.6 percent decline in June. European markets were trading mostly in red, as investors now look ahead to the European Central Bank's monetary policy decision due later in the day. The ECB is unlikely to announce any big changes to its policy, but might well indicate that it is prepared to loosen policy if required. Back home, Oil and gas stocks were in focus with government data showing that India's fuel demand fell 15.6 percent in August compared with the same month last year. Consumption of fuel totalled 14.39 million tones. There was some reaction in hotel and hospitality industry stocks with a study by industry chamber CII and hospitality consulting firm Hotelivat showing that the coronavirus pandemic has dealt a crippling blow to the Indian travel and tourism industry and the entire value chain linked to the sector is likely to lose around Rs 5 lakh crore or $65.57 billion.

Finally, the BSE Sensex rose 646.40 points or 1.69% to 38,840.32, while the CNX Nifty was up by 171.25 points or 1.52% to 11,449.25.

The BSE Sensex touched high and low of 38,878.25 and 38,367.07, respectively and there were 21 stocks advancing against 9 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index rose 0.92%, while Small cap index was up by 1.27%.

The top gaining sectoral indices on the BSE were Energy up by 6.26%, Oil & Gas up by 3.59%, Consumer discretionary up by 1.15%, Basic Materials up by 0.98% and Industrials up by 0.94%, while Telecom down by 1.42%, Metal down by 0.87%, Consumer Durables down by 0.03% were the few losing indices on BSE.

The top gainers on the Sensex were Reliance Industries up by 7.10%, Asian Paints up by 4.25%, Axis Bank up by 3.70%, Ultratech Cement up by 2.79% and Indusind Bank up by 2.51%. On the flip side, Tata Steel down by 2.24%, Bharti Airtel down by 1.38%, Kotak Mahindra Bank down by 0.54%, Titan Company down by 0.47% and HDFC Bank down by 0.46% were the top losers.

Meanwhile, domestic rating agency ICRA in its latest report has said that banks and non-bank lenders will restructure up to Rs 10 lakh crore in debt or 8 percent of outstanding loans under the Reserve Bank of India’s one-time loan restructuring scheme. It said the RBI has operationalized guidelines based on K V Kamath-led panel's recommendations, which give relief to 26 listed sectors affected by the pandemic and stress on banks factoring-in leverage, liquidity and debt serviceability before admitting a case.

The report felt that the overall restructured portfolio will come at 5-8 percent of the overall loans. In value terms, it said the total quantum of the debt which can get restructured will be between Rs 6 lakh crore and Rs 10 lakh crore, specifying that banks have an asset book of Rs 100 lakh crore and another Rs 35 lakh crore is from the non-bank lenders. It noted that the estimate on the amount of portfolio to be restructured is based on an assumption that the overall assets under moratorium came down to 20-25 percent by the close of the six-month relief in August. It added that a part of the assets enjoying the moratorium are special mention accounts where repayments were due for 31 to 89 days, which cannot be restructured under the new guidelines.

According to the report, the lenders will be immediately adhere on the metric of total outstanding liabilities to adjusted tangible net worth. However, it said some sectors may face challenges on meeting other metrics such as total debt to operating profit, debt service coverage ratio and average debt service coverage ratio. For sectors like textiles, construction, trading and ferrous metals, it said the total debt to EBITDA threshold specified by the committee is such that the BB rating hurdle will be difficult to cross.

The CNX Nifty traded in a range of 11,464.05 and 11,327.40 and there were 30 stocks advancing against 19 stocks declining, while 1 stock remains unchanged on the index.

The top gainers on Nifty were Reliance Industries up by 7.29%, BPCL up by 6.02%, Asian Paints up by 4.24%, Indian Oil Corporation up by 3.85% and Axis bank up by 3.65%.  On the flip side, Bharti Infratel down by 4.78%, Hindalco down by 2.93%, Tata Steel down by 2.26%, Bharti Airtel down by 1.20% and Dr. Reddys Lab down by 1.14% were the top losers.

European markets were trading mostly in red; UK’s FTSE 100 decreased 45.12 points or 0.75% to 5,967.72 and France’s CAC fell 11.18 points or 0.22% to 5,031.80, while Germany’s DAX increased 22.60 points or 0.17% to 13,259.81.

Asian markets closed mostly lower on Thursday despite the gains on Wall Street overnight. Investors are now look ahead to the European Central Bank's monetary policy decision due later in the day, at which the Governing Council is expected to keep its 1.35 trillion euro ($1.6 trillion) emergency bond-buying program and record-low interest rates unchanged for now. Chinese shares end lower as more than 300 startups plunged earlier in the session after regulators moved to curb speculation on the tech-heavy ChiNext board. Though, Japanese shares ended up as the safe-haven yen weakened against the dollar, lifting exporters' stocks.