Key indices remain in red in morning deals

Indian equity benchmarks continued to trade in red in morning deals ahead of the weekly options expiry. Sentiments remained down-beat as Fitch Ratings cut India's growth forecast to 10 per cent for the current financial year (FY22), from 12.8 per cent estimated earlier, due to slowing recovery post-second wave of COVID-19. It said the challenges for the banking sector posed by the coronavirus pandemic have increased due to a virulent second wave in the first quarter of the financial year ending March 2022 (FY22). However, losses remain capped as traders found some support with a domestic rating agency ICRA’s report that the banking system's gross non-performing assets (GNPAs) are set to decline to at least 7.1 percent by March 2022, as against 7.6 percent at FY21-end. The NPAs will go lower on higher recoveries and upgrades, and also faster credit growth. Meanwhile, the Reserve Bank notified the inclusion of retail and wholesale trade under the micro, small and medium enterprises (MSME) category. This will help retail and wholesale trade benefit from priority sector lending under RBI guidelines.

On the global front, Asian markets were trading mostly in red after the Fed signalled a possible inflation-induced policy change, while concerns lingered over China’s crackdown on tech giants. Back home, on the sectoral front, pharma industry’s stocks remained in focus as India Ratings and Research (Ind-Ra) has said the 14.1 per cent y-o-y growth in pharmaceutical market during June was led by a normalisation of demand post high growth months of April (51.5 per cent) and May (47.8 per cent). This was because of the lower base effect and Covid-induced demand during the second wave.

The BSE Sensex is currently trading at 52913.76, down by 141.00 points or 0.27% after trading in a range of 52904.49 and 53103.03. There were 11 stocks advancing against 19 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index rose 0.47%, while Small cap index was up by 0.58%.

The top gaining sectoral indices on the BSE were Utilities up by 1.21%, Power up by 0.94%, Consumer Durables up by 0.76%, Realty up by 0.46% and Consumer Discretionary up by 0.26%, while Metal down by 0.39%, Auto down by 0.38%, FMCG down by 0.37%, Energy down by 0.32% and Healthcare down by 0.28% were the top losing indices on BSE.

The top gainers on the Sensex were Indusind Bank up by 0.96%, NTPC up by 0.94%, Titan Company up by 0.75%, Tech Mahindra up by 0.50% and Ultratech Cement up by 0.48%. On the flip side, Bajaj Auto down by 2.29%, Hindustan Unilever down by 1.05%, Sun Pharma down by 0.87%, Nestle down by 0.76% and HDFC Bank down by 0.58% were the top losers.

Meanwhile, a domestic rating agency ICRA in its latest report has said that the banking system's gross non-performing assets (GNPAs) are set to decline to at least 7.1 percent by March 2022, as against 7.6 percent at FY21-end. The NPAs will go lower on higher recoveries and upgrades, and also faster credit growth. It also said that the fresh accretion to the NPAs will be higher in FY22 due to the absence of any regulatory dispensations like moratoriums.

The rating agency said the fresh NPA generation declined to Rs 2.6 lakh crore or 2.7 per cent of advances in FY21 compared to Rs 3.7 lakh crore or 4.2 per cent in FY20 and added that the same will be higher in FY22. It also said the headline asset quality numbers of banks do not reflect the underlying stress on the income and cash-flows of the borrowers impacted because of COVID-19 and various regulatory and policy measures such as the moratorium on loan repayment, standstill on asset classification and liquidity extended to borrowers under Emergency Credit Line Guarantee Scheme (ECLGS) had a positive impact on the reported asset quality of lenders.

In the absence of standstill on asset classification, ICRA expects the fresh NPAs generation to be higher, however, it also expects the recoveries and upgrades to improve in FY22, adding that the first half of the ongoing fiscal can see higher accretions due to the second wave of the pandemic. It also believed that the banks are relatively better placed to handle the stress from the second wave and hence it continue to maintain a stable outlook on the sector.

The CNX Nifty is currently trading at 15832.30, down by 47.35 points or 0.30% after trading in a range of 15829.45 and 15885.75. There were 18 stocks advancing against 32 stocks declining on the index.

The top gainers on Nifty were Shree Cement up by 1.67%, Indusind Bank up by 0.91%, Titan Co up by 0.79%, NTPC up by 0.77% and BPCL up by 0.51%. On the flip side, Bajaj Auto down by 2.37%, Tata Motors down by 1.56%, JSW Steel down by 1.14%, Hindustan Unilever down by 1.13% and ONGC down by 1.13% were the top losers.

Asian markets were trading mostly in red; Hang Seng decreased 559.50 points or 2% to 27,401.12, Nikkei 225 slipped 175.26 points or 0.62% to 28,191.69, KOSPI fell 25.80 points or 0.79% to 3,259.54, Shanghai Composite declined 20.09 points or 0.57% to 3,533.63 and Straits Times trembled 17.15 points or 0.55% to 3,124.45.

On the flip side, Taiwan Weighted strengthened 4.29 points or 0.02% to 17,854.98 and Jakarta Composite soared 7.61 points or 0.13% to 6,051.65.