Benchmarks continue weak trend in morning session

Indian equity benchmarks continued their weak trend in morning session, following fresh bouts of selling in IT, TECK, Banking and FMCG sectors amid a largely negative trend in global markets. Traders were taking cautious bet ahead of the bi-monthly meeting of Monetary Policy Committee (MPC) that begin today. Sentiments remained subdued with Moody’s Investors Service pegged India’s GDP growth at 9.3 percent in the current fiscal ending March 2022 and 7.9 percent in FY23. The reimposition of lockdown measures along with behavioural changes on fear of contagion will curb economic activity, it said, adding that it does not expect the impact to be as severe as during the first wave. Meanwhile, Piyush Goyal, Minister of Commerce and Industry has called upon Government e-Marketplace (GeM) to expand its scope and to include more participants in the GeM portal for public procurement of both products and services.

On the global front, Asian markets were trading mostly in red as data showing higher U.S. manufacturing activity in May cheered investors looking for signs of a continued rebound in the world's largest economy. Investors will be watching U.S. jobs data due Friday for clues to the Fed's plans for policy in the coming weeks and months. On the sectoral front, there was some reaction in aviation stocks with a private report that airlines are slashing salaries and re-negotiating vendor contracts as drastic fall in passengers has hurt revenue. Steel industry’s stocks were also in focus as the Indian Stainless Steel Development Association (ISSDA) said India may lose the tag of the world's second largest stainless steel producer to Indonesia in 2021. It also said the surplus production in Indonesia is likely to be pushed into the Indian market.

The BSE Sensex is currently trading at 51600.32, down by 334.56 points or 0.64% after trading in a range of 51555.81 and 51863.94. There were 10 stocks advancing against 20 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index rose 0.87%, while Small cap index was up by 0.78%.

The top gaining sectoral indices on the BSE were Power up by 1.47%, Utilities up by 1.34%, Metal up by 1.17%, Realty up by 0.94% and Basic Materials up by 0.76%, while IT down by 1.18%, TECK down by 1.07%, Bankex down by 0.69% and FMCG down by 0.25% were the losing indices on BSE.

The top gainers on the Sensex were Maruti Suzuki up by 0.82%, Ultratech Cement up by 0.76%, Power Grid up by 0.74%, Sun Pharma up by 0.41% and NTPC up by 0.41%. On the flip side, Tech Mahindra down by 2.43%, ITC down by 1.88%, Infosys down by 1.46%, Axis Bank down by 1.21% and HCL Technologies down by 1.16% were the top losers.

Meanwhile, ICRA Ratings in its latest report has said that restrictions in movements imposed by various states are likely to impact collections of non-banking financial companies (NBFCs) and housing finance companies (HFCs), which may see NPAs rising to 4.5 - 5 percent by March 2022 vis a vis about 4 percent in December 2020. It said this in-turn would keep the earnings subdued in FY22; about 30 percent lower than the pre-Covid levels. 

According to the report, non-banks (NBFC and HFCs) will feel the stress of the second wave of COVID-19 and movement restrictions imposed by various states in April-May 2021, given the fact that 25-30 per cent of their loan collections happen through field collection teams and largely via cash. Loan collections by non-banks, which were impacted by the nation-wide lockdown and the loan moratorium till August 2020, saw a steady revival during the third and fourth quarters of FY2021. It expects this budding recovery to be stemmed by the second wave of the pandemic, which has led to localised lockdowns in various states starting mid-April 2021. 

The report further said with the likelihood of lockdowns extending into large part of June 2021 for most states and some normalization expected from July 2021, non-banks are set to witness roll-forwards into harder overdue buckets and delay in recoveries, which could push-up the overdues in the near-term. It also said write-offs, like the last fiscal, are also expected to remain elevated vis a vis the prior year trends. It added that non-banks with higher share of field-based collections are more adversely impacted; typically, entities focusing on borrowers with limited banking habits, rural borrowers and smaller loan tickets (non-digital loans) have a higher share of their collections from field operations.

The CNX Nifty is currently trading at 15505.70, down by 69.15 points or 0.44% after trading in a range of 15488.50 and 15564.05. There were 27 stocks advancing against 23 stocks declining on the index.

The top gainers on Nifty were Adani Ports &SEZ up by 2.18%, Tata Steel up by 1.68%, Shree Cement up by 1.39%, JSW Steel up by 1.19% and SBI Life Insurance up by 1.09%. On the flip side, Tech Mahindra down by 2.48%, ITC down by 1.93%, Infosys down by 1.46%, Wipro down by 1.20% and HCL Technologies down by 1.18% were the top losers.

Asian markets were trading mostly in red; Hang Seng decreased 147.90 points or 0.5% to 29,320.10, Straits Times trembled 27.06 points or 0.85% to 3,160.17, Taiwan Weighted dropped 25.90 points or 0.15% to 17,136.48 and Shanghai Composite declined 23.47 points or 0.65% to 3,601.24.

On the flip side, KOSPI rose 0.28 points or 0.01% to 3,222.15, Jakarta Composite soared 62.44 points or 1.05% to 6,009.90 and Nikkei 225 surged 120.96 points or 0.42% to 28,935.30.