Benchmarks trade flat with positive bias in early deals

Indian equity benchmarks made slightly positive start on Thursday but soon turned volatile and are hovering near neutral lines. Markets are trading flat with positive bias in early deals on account of board based buying in Auto, Consumer discretionary and Realty stocks. Sentiments got a boost as Principal Economic Adviser (PEA) Sanjeev Sanyal said the Indian economy is likely to witness close to double-digit growth in the current fiscal year despite the second Covid-19 wave ravaging the country. Some support came as data released by the RBI showed India reported a current account surplus of 0.9 percent of GDP in the pandemic-hit FY21, as against a deficit of 0.9 percent in FY20.  However, some cautiousness came in as second wave nowhere close to waning, India recorded 48,878 infections and 991 fatalities in the last 24 hours. The country's total coronavirus caseload stands at 30,410,577, while the death toll has jumped to 399,475. Investors are looking ahead to the manufacturing PMI data to be out later in the day.

Most of the Asian markets were trading lower following the mixed cues overnight from Wall Street as the surge in infections due to the delta variant of the coronavirus, and curbs on travel in several countries raised some uncertainty about the pace of global economic rebound and rendered the mood cautious. Hong Kong is closed on account of SAR Establishment Day. Back home, auto stocks were in demand ahead of their monthly sales numbers, amid expectations of sequential improvement. However, power stocks traded under pressure despite the Union Cabinet Committee of Economic Affairs gave its nod to a new scheme for revival of the power distribution sector in India. In scrip specific development, SpiceJet witnessed selling pressure on reporting a fifth straight quarterly loss as of the March quarter.

The BSE Sensex is currently trading at 52515.12, up by 32.41 points or 0.06% after trading in a range of 52422.28 and 52638.50. There were 17 stocks advancing against 13 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index rose 0.15%, while Small cap index was up by 0.31%.

The top gaining sectoral indices on the BSE were Auto up by 1.17%, Consumer discretionary up by 0.84%, Realty up by 0.51%, Metal up by 0.50%, Industrials up by 0.46%, while Power down by 0.69%, Utilities down by 0.57%, TECK down by 0.47%, IT down by 0.47%, Oil & Gas down by 0.24% were the top losing indices on BSE.

The top gainers on the Sensex were Bajaj Auto up by 2.21%, Mahindra & Mahindra up by 1.93%, Maruti Suzuki up by 1.03%, Asian Paints up by 0.97% and Kotak Mahindra Bank up by 0.79%. On the flip side, Indusind Bank down by 0.85%, Infosys down by 0.84%, HCL Technologies down by 0.66%, Ultratech Cement down by 0.57% and Tech Mahindra down by 0.54% were the top losers.

Meanwhile, the rating agency -- Standard and Poor's (S&P) has said Indian banks face systemic risks as the country wades through the aftermath of the Covid-19 second wave. The banking sector's weak loans are likely to remain elevated at 11-12 per cent of gross loans in the next 12-18 months. The second wave will impair the performance of Indian financial institutions in the first half of fiscal 2022, with much resting on the effectiveness of government measures to address this problem.

It stated credit losses should remain high at 2.2 per cent before recovering to 1.8 per cent in the year ending March 2023. Lenders struggled with a high level of weak loans well before the pandemic struck and, conditions have clearly deteriorated. The second wave has front-ended weakness in asset quality. Financial institutions face a strained first half amid weak collections and poor disbursements. Disbursements slowed considerably in April and May. The credit that banks extended fell by about one per cent in the first two months of this fiscal year. The drop was largely seasonal -- there were similar declines in the same period for fiscals 2018 and 2019. The credit growth in India started improving in June, and will continue to do so.

Further, it said that tourism and recreation related sectors, commercial real estate, and unsecured retail loans may contribute to higher non-performing loans (NPLs). However, the banking system's exposure to many of these segments is moderate, and should have only a limited effect. Housing finance (excluding affordable housing) and gold loans will likely be less affected than financing for micro enterprises or commercial vehicles. Finance companies will likely be more impacted than banks.

The CNX Nifty is currently trading at 15741.05, up by 19.55 points or 0.12% after trading in a range of 15709.40 and 15755.55. There were 34 stocks advancing against 16 stocks declining on the index.

The top gainers on Nifty were Mahindra & Mahindra up by 2.14%, Bajaj Auto up by 2.13%, Hero MotoCorp up by 1.30%, Tata Motors up by 1.28% and Eicher Motors up by 1.02%. On the flip side, Indusind Bank down by 0.87%, Infosys down by 0.75%, Shree Cement down by 0.68%, BPCL down by 0.48% and HCL Technologies down by 0.46% were the top losers.

Asian markets were trading mostly in red; Nikkei 225 declined 124.57 points or 0.43% to 28,666.96, Taiwan Weighted fell 20.04 points or 0.11% to 17,735.42, KOSPI lost 15.47 points or 0.47% to 3,281.21 and Shanghai Composite was down by 2.65 points or 0.07% to 3,588.55. On the other hand, Straits Times rose 0.40 points or 0.01% to 3,130.86 and Jakarta Composite added 24.05 points or 0.40% to 6,009.54.