Bulls hold tight grip over Dalal Street as Union Budget speech starts

Bulls were holding a tight grip over the Dalal Street, as both Sensex and Nifty trading with strong gains, amid Union Budget 2021 presentation. Indices were at their intraday high points, as budget introduces Aatmanirbharbharat Health Yojana with outlay of Rs 64,180 crore and government allots Rs 20,000 crore for bank recapitalisation. Adding more support, India's manufacturing sector activity strengthened in January as companies scaled up production at the quickest pace in three months in response to faster expansions in total sales and new export orders. The seasonally adjusted IHS Markit India Manufacturing Purchasing Managers' Index rose from 56.4 in December to 57.7 in January, to signal the strongest improvement in the health of the sector in three months.

On the global front, Asian markets were trading mostly in green, after the manufacturing sector in China continued to expand in January, albeit at a slower pace, the latest survey from Caixin showed on Monday with a seasonally adjusted PMI score of 51.5. That's down from 53.0, although it remains above the boom-or-bust line of 50 that separates expansion from contraction. Chinese goods producers signaled a sustained rise in output during January, to extend the current period of expansion to 11 months. That said, the rate of growth was the least marked since last April and modest. The slowdown coincided with a weaker increase in total new work at the start of the year.

The BSE Sensex is currently trading at 47058.80, up by 773.03 points or 1.67% after trading in a range of 46433.65 and 47116.54. There were 24 stocks advancing against 6 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.45%, while Small cap index was up by 0.57%.

The top gaining sectoral indices on the BSE were Realty up by 3.03%, Bankex up by 2.82%, Metal up by 2.09%, Capital Goods up by 1.84% and Industrials up by 1.60%, while Healthcare down by 0.31% was the only losing index on BSE.

The top gainers on the Sensex were Indusind Bank up by 9.25%, ICICI Bank up by 6.08%, HDFC up by 3.97%, Larsen & Toubro up by 3.08% and Mahindra & Mahindra up by 2.51%. On the flip side, Dr. Reddy’s Lab down by 3.26%, Tech Mahindra down by 1.81%, TCS down by 1.19%, HCL Tech. down by 0.80% and Hindustan Unilever down by 0.48% were the top losers.

Meanwhile, in order to effectively deal with non-performing assets (NPAs) of the financial sector, Chief Economic Adviser K V Subramanian has made a strong case for setting up of a bad bank led by private sector. He added that NPAs likely to see a surge once regulatory forbearance to deal with the impact of COVID-19 is withdrawn. Bad bank refers to a financial institution which takes over bad assets of lenders and undertakes resolution. Lenders have been making a case for setting up a bad bank to ease out pressure of bad loans on them in these difficult times.

Subramanian said ‘the bad bank will certainly help in consolidating some of the non-performing assets. It's important to also think about implementing the bad bank in the private sector that enables (faster) decision making’. He noted that resolution of bad assets with alacrity in decision making often in the public sector is impacted because of the fear of 3Cs. 3Cs refer to Central Bureau of Investigation (CBI), Central Vigilance Commission (CVC) and Comptroller and Audit General (CAG). He said ‘so, the bad bank idea itself is actually something which is required at this point in time, but also designing it in the private sector actually has a lot more possibility for it to be effective’.

The proposal to set up a bad bank has been under consideration of the government for long and some steps may be announced in the Budget 2021-22 to be unveiled by Finance Minister Nirmala Sitharaman on Feburay 01, 2021 in the Lok Sabha. Subramanian, the lead author of the Economic Survey 2020-21, has made a case for carrying out a fresh asset quality review (AQR) once the ongoing forbearances related to COVID-19 come to an end. Elaborating on the AQR exercise, he said that it amounts to recognising something bad that is cosmetically covered up.

The CNX Nifty is currently trading at 13840.65, up by 206.05 points or 1.51% after trading in a range of 13661.75 and 13858.15. There were 40 stocks advancing against 10 stocks declining on the index.

The top gainers on Nifty were Indusind Bank up by 9.27%, ICICI Bank up by 6.11%, HDFC up by 3.96%, Hindalco up by 3.25% and Larsen & Toubro up by 3.05%. On the flip side, UPL down by 7.68%, Dr. Reddy’s Lab down by 3.32%, Wipro down by 1.88%, Tech Mahindra down by 1.81% and TCS down by 1.17% were the top losers.

Asian markets were trading mostly in green; Hang Seng increased 538.90 points or 1.91% to 28,822.61, Nikkei 225 surged 374.98 points or 1.36% to 28,038.37, Taiwan Weighted strengthened 241.26 points or 1.59% to 15,379.57, Jakarta Composite soared 88.07 points or 1.5% to 5,950.42, KOSPI rose 69.37 points or 2.33% to 3,045.58 and Shanghai Composite gained 3.39 points or 0.1% to 3,486.46. On the flip side, Straits Times trembled 1.48 points or 0.05% to 2,901.04.