Sensex, Nifty remain in green in late morning deals

Indian equity benchmarks remained in green terrain in late morning session, with both Sensex and Nifty holding notable gains. Positive cues from other Asian markets helped key indices to remain higher. However, some volatility witnessed over the Dalal Street, amid a private report stating that continuing lockdowns in several states have led to a further decline in business resumption, and economic activity has now dipped to levels seen in June last year. Besides, India Ratings and Research (Ind-Ra) said that collections for microfinance institutions (MFIs) and small finance banks (SFBs) are estimated to have declined 3 to 5 per cent in April and additional 5 to 7 per cent in first fortnight of May on a month-on-month basis. The agency expects the overall microfinance sector to witness a shortfall of 10 to 15 per cent in collections on a consolidated basis this month. The variation among MFIs can be wider, depending on their level of concentration in regions where lifting of Covid lockdown restrictions is slow.

On the global front, Asian markets were trading in green, after Singapore's gross domestic product expanded 1.3 percent on year in the first three months of 2021. The Ministry of Trade and Industry said that exceeded expectations for an increase of 0.9 percent following the 2.4 percent contraction in the fourth quarter of 2020. On a seasonally adjusted quarterly basis, GDP rose 3.1 percent after climbing 3.8 percent in the three months prior.

The BSE Sensex is currently trading at 50794.31, up by 142.41 points or 0.28% after trading in a range of 50666.00 and 50961.35. There were 22 stocks advancing against 8 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.02%, while Small cap index was up by 0.43%.

The top gaining sectoral indices on the BSE were Metal up by 1.98%, Consumer Durables up by 1.34%, IT up by 1.21%, TECK up by 1.10% and Consumer discretionary up by 1.02%, while Power down by 0.75%, Bankex down by 0.52%, Energy down by 0.27%, Capital Goods down by 0.21% and Healthcare down by 0.09% were the top losing indices on BSE.

The top gainers on the Sensex were Asian Paints up by 2.86%, Titan Co up by 2.54%, ONGC up by 2.52%, Nestle up by 1.91% and Bajaj Finserv up by 1.59%. On the flip side, HDFC Bank down by 1.34%, Axis Bank down by 0.94%, Indusind Bank down by 0.32%, SBI down by 0.29% and Reliance Industries down by 0.25% were the top losers.

Meanwhile, with an aim to mitigate economic downturn, A Reserve Bank of India (RBI) study has advocated a mix of fiscal and monetary policies, and said that demand side channel needs to be complemented with a conducive monetary transmission mechanism from the supply side. Referring to the 2009 crisis, the study by Development Research Group (DRG) on 'Risk Premium Shocks and Business Cycle Outcomes in India', said that at the micro-level, the interest rate spread, attributed to risk premium on loans, increased in response to a rise in loan defaults during the post-2009 period. Also, the credit growth was found to be negatively associated with the loan default rate, indicating that a shock to the borrowing sectors has a significant negative impact on credit growth.

On the policy interventions to deal with the crisis, the study said ‘our policy experiments reveal that an expansionary policy mix of fiscal and monetary policies may perform better than the individual-level intervention of expansionary monetary or fiscal policy to mitigate the economic downturn as the demand side channel can be complemented with a conducive monetary transmission mechanism from the supply side’. DRG has been constituted as part of RBI's Department of Economic and Policy Research to undertake quick and effective policy-oriented research backed by strong analytical and empirical basis on subjects of current interest. The study co-authored by Shesadri Banerjee, Jibin Jose, and Radheshyam Verma investigates the dynamic effects of financial shocks on the business cycle.

RBI has also published another DRG study titled, 'Threshold Level of Inflation Concept and Measurement'. It is co-authored by Ravindra H Dholakia, Jai Chander, Ipsita Padhi and Bhanu Pratap. The study examines the concept of threshold inflation and defines it as the long-run equilibrium rate of inflation that maximises the steady state growth within the relevant range of values. The empirical findings of the study broadly confirm higher threshold inflation and higher growth in emerging market economies than in advanced economies.

The CNX Nifty is currently trading at 15256.90, up by 59.20 points or 0.39% after trading in a range of 15223.05 and 15293.85. There were 38 stocks advancing against 11 stocks declining, while 1 stock remained unchanged on the index.

The top gainers on Nifty were JSW Steel up by 4.17%, Asian Paints up by 2.94%, ONGC up by 2.57%, Titan Co up by 2.51% and Hindalco up by 2.30%. On the flip side, HDFC Bank down by 1.48%, Axis Bank down by 1.01%, SBI down by 0.42%, Reliance Industries down by 0.34% and Indusind Bank down by 0.26% were the top losers.

Asian markets were trading in green; Nikkei 225 surged 151.83 points or 0.54% to 28,516.44, Taiwan Weighted strengthened 231.85 points or 1.42% to 16,570.14, Straits Times advanced 15.58 points or 0.5% to 3,139.19, Shanghai Composite gained 55.93 points or 1.6% to 3,553.21, Jakarta Composite soared 64.98 points or 1.13% to 5,828.61, KOSPI rose 19.77 points or 0.63% to 3,164.07 and Hang Seng increased 358.39 points or 1.26% to 28,770.65.