Local indices trade marginally higher in morning deals

Swinging between gains and losses, the domestic stock markets were now trading marginally higher in morning session, on account of buying in front line blue chip counters. Traders took some support with Commerce and Industry Minister Piyush Goyal’s statement that several multinational firms in sectors such as electronics, retail, e-commerce, and automotive, among others, have shown interest in shifting their base to India. He also said the government is working hard to institutionalize more investor friendly reforms to support and facilitate investments into India. Some support also came with report that the COVID-19 pandemic has provided a unique opportunity to both India and Japan to further strengthen economic ties by enhancing cooperation in areas like software development, modern technology, infrastructure and manufacturing. However, gains remain capped as a report released by the Finance Ministry stated that India's total external debt increased by 2.8 percent to $558.5 billion at the end of March mainly on account of a rise in commercial borrowings. The external debt stood at $543 billion at end-March 2019.  Besides, surging domestic cases of the novel coronavirus and sluggish trade across Asian equities kept investors cautious.

On the global front, Asian markets were trading mostly in red, as U.S.-China trade tensions linger and investors await testimony from Fed Chair Jerome Powell and U.S. Treasury Secretary Steven Mnuchin later in the week. Some concern also came as a surge in coronavirus cases raising uncertainty about the pace of economic recovery. Back home, on the sectoral front, stocks related to leather sector remained in focus with Council for Leather Exports (CLE) Chairman Aqeel Ahmed Panaruna said the country's exports of leather and footwear items are expected to see continuous improvement in the growth rate in the coming months on account of increasing demand in global markets.

The BSE Sensex is currently trading at 38959.22, up by 113.40 points or 0.29% after trading in a range of 38776.19 and 38965.36. There were 10 stocks advancing against 20 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index fell 0.43%, while Small cap index was down by 0.26%.

The top gaining sectoral indices on the BSE were IT up by 1.87%, TECK up by 1.21%, Energy up by 0.70%, Bankex up by 0.08% and Oil & Gas up by 0.02%, while Telecom down by 2.29%, FMCG down by 1.08%, Auto down by 1.06%, Realty down by 1.00% and Metal down by 0.91% were the top losing indices on BSE.

The top gainers on the Sensex were HCL Technologies up by 3.69%, Kotak Mahindra Bank up by 2.17%, Infosys up by 2.04%, Tech Mahindra up by 1.99% and TCS up by 1.49%. On the flip side, Bharti Airtel down by 2.69%, Bajaj Finance down by 1.99%, Power Grid down by 1.98%, Nestle down by 1.91% and Bajaj Auto down by 1.84% were the top losers.

Meanwhile, India Ratings and Research in its latest report has said it revised its outlook on the India's banking sector to negative for the second half of this fiscal (FY21) from stable. The agency said it has revised its outlook in view of an expected spike in stressed assets, higher credit costs, weaker earnings on account of interest reversals and lower fee income, and muted growth prospects in the wake of the measures taken to contain the spread of COVID-19. It expects restructuring/slippages pool from the corporate sector to be around Rs 3.3 lakh crore to Rs 6.3 lakh crore during the current fiscal.

It has revised the rating outlook on public sector banks (PSBs) to negative for the second half from stable, while maintaining a stable outlook for private banks, as they are better placed to withstand the challenges presented by the pandemic. It said state-run lenders' modest capital buffers are expected to deplete further in FY21 due to provisioning requirements. Also, pre-COVID profitability expectations for FY21 would be belied and most banks are likely to report net losses.

These banks may also need to continue to build up their provision cover in FY22 for restructured assets as some of the restructured assets could turn NPA in FY23. It mentioned PSBs' could require Rs 350 billion-Rs 550 billion in H2 of FY21 for tier 1 ratio of 10 per cent. Besides, it said the credit costs of banks are estimated to range between 2.6-3.4 per cent in FY21 (2.9-3.8 per cent for PSBs and 2-2.6 per cent for private banks), depending on the quantum of pool getting restructured or slipping to NPAs.

The CNX Nifty is currently trading at 11513.70, up by 8.75 points or 0.08% after trading in a range of 11477.15 and 11530.90. There were 13 stocks advancing against 37 stocks declining on the index.

The top gainers on Nifty were HCL Tech. up by 3.74%, Kotak Mahindra Bank up by 2.33%, Infosys up by 2.06%, Tech Mahindra up by 2.06% and Wipro up by 1.60%. On the flip side, Tata Motors down by 2.67%, Bharti Infratel down by 2.23%, Bharti Airtel down by 2.21%, Power Grid down by 2.04% and Dr. Reddys Lab down by 2.01% were the top losers.

Asian markets were trading mostly in red; Hang Seng decreased 232.32 points or 0.95% to 24,223.09, Taiwan Weighted dropped 56.95 points or 0.44% to 12,818.67, Shanghai Composite declined 13.84 points or 0.41% to 3,324.25, Jakarta Composite lost 11.03 points or 0.22% to 5,048.19 and KOSPI fell 5.04 points or 0.21% to 2,407.36.

On the flip side, Straits Times advanced 5.89 points or 0.24% to 2,503.60.