Indices hold gains in late morning session

Indian equity benchmarks remained higher during late morning session, with both Sensex and Nifty holding their notable gains. Domestic sentiments were optimistic, on the back of positive cues from other Asian markets. Traders were positive, as asserting that a stronger India-US health partnership can be a powerful force to fight COVID-19 globally, External Affairs Minister S Jaishankar, at his meetings with top leaders of the American corporate sector, appreciated their swift response to India's fight against the pandemic. Besides, in the wake of second COVID wave and the Supreme Court order lifting the ban on classification of non-performing assets (NPAs), the Reserve Bank of India (RBI) has asked banks to closely monitor their bad loans and prepare themselves for higher provisioning.

On the global front, Asian markets were trading in green, even after the unemployment rate in Japan came in at a seasonally adjusted 2.8 percent in April. The Ministry of Communications and Internal Affairs said that was above expectations for 2.7 percent and was up from 2.6 percent in March. The job-to-applicant ratio was 1.09 - again missing forecasts for 1.10, which would have been unchanged from the previous month.

The BSE Sensex is currently trading at 51357.04, up by 241.82 points or 0.47% after trading in a range of 51258.69 and 51477.05. There were 13 stocks advancing against 17 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.21%, while Small cap index was up by 0.13%.

The top gaining sectoral indices on the BSE were Energy up by 3.24%, Metal up by 1.58%, Oil & Gas up by 1.12%, Telecom up by 0.48% and Basic Materials up by 0.47%, while Power down by 0.43%, Utilities down by 0.38%, Healthcare down by 0.29%, Consumer Durables down by 0.28% and Auto down by 0.22% were the top losing indices on BSE.

The top gainers on the Sensex were Reliance Industries up by 4.39%, Kotak Mahindra Bank up by 1.18%, HDFC up by 0.78%, Tech Mahindra up by 0.75% and ITC up by 0.66%. On the flip side, Sun Pharma down by 3.54%, Mahindra & Mahindra down by 1.82%, Dr. Reddy’s Lab down by 1.09%, ICICI Bank down by 1.06% and Titan Co down by 1.01% were the top losers.

Meanwhile, in the wake of second COVID wave and the Supreme Court order lifting the ban on classification of non-performing assets (NPAs), the Reserve Bank of India (RBI) has asked banks to closely monitor their bad loans and prepare themselves for higher provisioning. The waiver of compound interest on all loan accounts which opted for moratorium during March-August 2020 may put stress on banks' financial health.' However, the apex bank expressed confidence that banks are better positioned than before in managing stress in their balance sheets in view of higher capital buffers, improvement in recoveries and a return to profitability.

RBI said in its annual report 2020-21 stated that ‘stress tests indicate that Indian banks have sufficient capital at the aggregate level even in a severe stress scenario. Bank-wise as well as system-wide supervisory stress testing provide clues for a forward-looking identification of vulnerable areas’. The annual report also emphasised the need for banks to keep a tab on the NPAs and accordingly earmark capital for provisioning. it added ‘with the lifting of the interim stay on asset classification standstill by the Hon'ble Supreme Court on March 23, 2021, banks' asset quality will need to be closely monitored in coming quarters, with preparedness for higher provisioning’.

The waiving of interest on interest charged on loans during moratorium period (March 1, 2020 to August 31, 2020) may also impinge on lending institutions' finances. In March this year, the Supreme Court directed banks to waive compound interest on loans above Rs 2 crore for borrowers who had availed moratorium as loans below this amount got blanket interest on interest waiver in November last year. Compound interest support scheme for loan moratorium cost the government Rs 5,500 crore during 2020-21, and the scheme covered all borrowers, including the prompt one who did not avail moratorium.

In March last year, RBI announced a loan moratorium on payment of installments of term loans falling due between March 1 and May 31, 2020, due to the pandemic and later, the same was extended to August 31. Considering the potential stress due to COVID, banks were advised about deferment of phase-in of the last tranche of Capital Conservation Buffer (CCB) of 0.625 per cent from September 30, 2020 to April 1, 2021. This was further deferred by six months to October 1, 2021. CCB is not applicable to small finance banks, payment banks, regional rural banks and local area banks.

The CNX Nifty is currently trading at 15424.05, up by 86.20 points or 0.56% after trading in a range of 15394.75 and 15455.55. There were 27 stocks advancing against 23 stocks declining on the index.

The top gainers on Nifty were Reliance Industries up by 4.60%, Coal India up by 2.28%, Eicher Motors up by 2.23%, Tata Steel up by 2.22% and Grasim Industries up by 2.20%. On the flip side, Sun Pharma down by 3.29%, Mahindra & Mahindra down by 1.62%, Titan Co down by 1.26%, ICICI Bank down by 1.10% and Dr. Reddy’s Lab down by 1.05% were the top losers.

Asian markets were trading in green; Nikkei 225 surged 623.35 points or 2.18% to 29,172.36, Taiwan Weighted strengthened 261.02 points or 1.57% to 16,862.63, Straits Times advanced 19.94 points or 0.63% to 3,184.76, Shanghai Composite gained 0.18 points or 0.01% to 3,609.03, Jakarta Composite soared 1.78 points or 0.03% to 5,843.61, KOSPI rose 27.65 points or 0.87% to 3,193.16 and Hang Seng increased 183.98 points or 0.63% to 29,297.18.