Weak trade continues over Dalal Street in late morning session

Weak trade continued over the Dalal Street in late morning session, with both Sensex and Nifty trading in red terrain. Negative cues from other Asian markets impacted domestic sentiments. Traders seem to have overlooked domestic rating agency ICRA’s latest report stating 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. Besides, IndustriALL Global Union along with its affiliates in India has urged the government to take measures to improve occupational health and safety situation in the country.

On the global front, Asian markets were trading mostly in red, even after Japan posted a current account surplus of 1,979.7 billion yen in May, the Ministry of Finance said on Thursday - up 85.3 percent on year. That exceeded expectations for a surplus of 1,820.4 billion following the 1,321.8 billion yen surplus in April. Exports jumped 46.5 percent on year to 6,183.2 billion yen, while imports spiked an annual 6,181.2 billion yen for a trade surplus of 2.0 billion yen.

The BSE Sensex is currently trading at 52914.74, down by 140.02 points or 0.26% after trading in a range of 52881.27 and 53103.03. There were 12 stocks advancing against 18 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.44%, while Small cap index was up by 0.67%.

The top gaining sectoral indices on the BSE were Utilities up by 1.21%, Realty up by 0.88%, Power up by 0.82%, Consumer Durables up by 0.74% and Industrials up by 0.24%, while Metal down by 0.67%, Auto down by 0.52%, Healthcare down by 0.41%, FMCG down by 0.39% and Energy down by 0.28% were the top losing indices on BSE.

The top gainers on the Sensex were Indusind Bank up by 1.27%, NTPC up by 0.81%, Titan Co up by 0.80%, Ultratech Cement up by 0.75% and Tech Mahindra up by 0.33%. On the flip side, Bajaj Auto down by 2.41%, Hindustan Unilever down by 1.05%, Sun Pharma down by 0.91%, Nestle down by 0.71% and Maruti Suzuki down by 0.64% were the top losers.

Meanwhile, ratings agency Crisil has said that the Indian IT industry will stage a ‘strong recovery’ in 2021-22 with a revenue growth of up to 11 per cent. It noted that the recovery will be led by increasing outsourcing and accelerating digital transformation services mainly in sectors such as banking, financial services and insurance (BFSI), healthcare, retail and manufacturing. Crisil said higher business levels, and more profitable digital deals (45 per cent share in revenues in FY21 versus 40 per cent in FY20) will also help IT services players maintain healthy operating margins.

The agency said the revenue growth in 2021-22 will be almost 4 percentage points more than the growth of 6 per cent in last fiscal year and similar to the 10 per cent growth logged over fiscals 2018-2020. BFSI, which accounts for 28 per cent of IT service revenue, will clock 13-14 per cent growth in this fiscal year, up from FY21's 9 per cent rise due to rising share of digital transactions, continued regulatory compliance and data security. Retail and manufacturing, which together account for 30 per cent of revenues, are expected to recover 8-9 per cent after slowing down to 2-3 per cent last fiscal year. Healthcare, though a small segment accounting for only 6 per cent of revenues, will sustain its high growth at 15-16 per cent, benefitting from higher spending on tackling COVID-19 and increasing adoption of virtual services.

Despite stronger revenue growth, profitability is unlikely to rise beyond the levels witnessed in 2020-21, it said, adding that operating margins expanded 2 percentage points to a seven-year high of 25 per cent in the last fiscal year mainly due to cost savings from lower travel, favourable onshore-offshore mix (due to lower onsite roles following the pandemic), and lower attrition levels. With the expansionary recruitment phase, including maintenance of higher bench strength, employee costs, which account for 67 per cent of revenues, are expected to rise. The agency expects continued improvement in the credit quality of most IT firms, given their lowly leveraged balance sheets and robust liquidity. Recurrence of additional waves of the pandemic in the US and Europe, which are key destinations for IT services, would be the factors to monitor.

The CNX Nifty is currently trading at 15832.90, down by 46.75 points or 0.29% after trading in a range of 15822.25 and 15885.75. There were 20 stocks advancing against 30 stocks declining on the index.

The top gainers on Nifty were Shree Cement up by 1.90%, Indusind Bank up by 1.23%, Titan Co up by 0.80%, NTPC up by 0.77% and Ultratech Cement up by 0.69%. On the flip side, Bajaj Auto down by 2.38%, Tata Motors down by 1.67%, JSW Steel down by 1.26%, Hindustan Unilever down by 1.16% and Hindalco down by 1.14% 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.