Sensex, Nifty continue to trade in green terrain

Firm trade continued over the Dalal Street in late morning session, with both equity benchmarks Sensex and Nifty were trading in green terrain. Markets managed to keep their heads above water despite mixed cues from other Asian markets. However, upside remained capped, amid reports that workers in India are facing increased burnout due to lack of separation between work and personal life as well as concerns of contracting COVID-19. Close to one-third of workers in India cited increased rates of burnout over the past six months with the lack of separation between work duties and personal obligations as negatively impacting their well-being.

On the global front, Asian markets were trading mixed, after Fitch Ratings maintained sovereign ratings of South Korea citing strong external finances, steady macroeconomic performance and sufficient fiscal headroom going into the coronavirus pandemic. The sovereign ratings were maintained at 'AA-', with a stable 'outlook'. Although the pandemic has weighed on economic growth and public finances, domestic control of the virus accompanied by a robust policy response have limited the severity of the deterioration.

The BSE Sensex is currently trading at 39845.33, up by 270.76 points or 0.68% after trading in a range of 39450.82 and 39903.73. There were 14 stocks advancing against 16 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 0.59%, while Small cap index was down by 0.21%.

The top gaining sectoral indices on the BSE were Energy up by 2.88%, Consumer Durables up by 2.08%, FMCG up by 0.38%, Auto up by 0.33% and Oil & Gas up by 0.33%, while Metal down by 2.42%, Realty down by 1.65%, Capital Goods down by 1.28%, Industrials down by 0.97% and Power down by 0.95% were the top losing indices on BSE.

The top gainers on the Sensex were Titan Company up by 4.95%, Reliance Industries up by 3.61%, Ultratech Cement up by 2.89%, ONGC up by 2.09% and Hindustan Unilever up by 1.57%. On the flip side, Bajaj Finance down by 4.13%, Sun Pharma down by 1.87%, Bajaj Finserv down by 1.65%, Larsen & Toubro down by 1.57% and Power Grid down by 1.44% were the top losers.

Meanwhile, expressing cautiousness over Indian banks, Fitch Ratings has said Indian banks face a tough operating environment in the near term as stressed loans and write-offs increase due to the economic fallout from the coronavirus pandemic. It said limited room for fiscal support, fragilities in the financial system and a continuing rise in COVID-19 cases are hampering normalisation of activity.

The agency said ‘Indian banks face a tough operating environment in the near term, as stressed loans and write-offs increase as a result of the economic fallout from the coronavirus pandemic, but a swift economic recovery will be critical to limiting loan losses in what is likely to be a protracted period of weakness in the asset-quality cycle’. Banks have been permitted by the Reserve Bank of India (RBI) to undertake a one-time restructuring exercise of loans affected by the pandemic, which will provide relief in terms of bad loan recognition and provisioning. However, the exercise could leave the sector saddled with a high bad loan burden over the next few years if restructured loans do not perform according to agreed milestones.

Fitch said the central bank's data shows that Indian banks wrote off nearly $85 billion over FY14-FY19, of which state-owned banks contributed nearly 80 per cent. It added ‘The economic stress this time around is set to be deeper and more broad-based, which could make restructuring more challenging. Execution risk remains high, notwithstanding the safeguards built in by RBI in terms of tighter timelines, penal provisioning and more monitoring by the expert committee of loans beyond Rs 15 billion’. State-run banks have a significantly higher share of loans under moratorium than their private-sector peers.

Besides, Fitch does not expect GDP to return to pre-pandemic levels until first quarter of 2022. It has projected Indian economy to contract 10.5 per cent in the current fiscal and expects growth to rebound to 11 per cent in fiscal 2021-22, with downside risks. Indian economy contracted 23.9 per cent in April-June quarter of current fiscal.

The CNX Nifty is currently trading at 11722.60, up by 60.20 points or 0.52% after trading in a range of 11629.35 and 11747.85. There were 19 stocks advancing against 31 stocks declining on the index.

The top gainers on Nifty were Titan Company up by 4.96%, Reliance Industries up by 3.61%, Ultratech Cement up by 2.94%, ONGC up by 2.09% and Hindustan Unilever up by 1.59%. On the flip side, Bajaj Finance down by 4.16%, Hindalco down by 3.28%, Tata Motors down by 2.69%, Sun Pharma down by 1.95% and BPCL down by 1.80% were the top losers.

Asian markets were trading mixed; Hang Seng increased 111.32 points or 0.46% to 24,091.97, Taiwan Weighted strengthened 59.43 points or 0.47% to 12,763.66 and KOSPI rose 15.00 points or 0.63% to 2,380.90. On the flip side, Straits Times trembled 1.48 points or 0.06% to 2,527.78, Jakarta Composite lost 31.57 points or 0.63% to 4,967.65 and Nikkei 225 slipped 45.96 points or 0.2% to 23,387.77.