Benchmarks wipe off opening gains to trade tad lower in early deals

Indian equity benchmarks made slightly positive start on Wednesday tracking overnight gains on Wall Street. But, soon markets lost their ground and slipped below neutral lines in early deals. Domestic indices are trading lower with marginal cut due to selling in Realty, Healthcare and Industrials stocks. Initially market participants  took support with provisional commerce ministry data showing that the country's exports rose by 50.45 per cent to $7.41 billion during August 1-7, on account of healthy growth in the shipments of engineering goods, gems and jewellery as well as petroleum products. However, some cautiousness crept in as Trade Promotion Council of India (TPCI) said increasing container freights would push the overall cost of domestic goods in the international markets, which would make it less competitive and hurt the country’s merchandise exports. Traders took note of the finance ministry’s statement the economic impact of the second wave of the COVID-19 pandemic is likely to be muted and there are visible signs of economic rejuvenation. Meanwhile, India recorded 36,316 new Covid-19 cases and 468 deaths in the past 24 hours, taking its tally to 32,033,333 and the death toll to 429,183.

On the global front, Asian markets are trading mixed, following the mixed cues overnight from Wall Street, reflecting economic optimism following news that the US Senate approved a $1 trillion infrastructure bill. Traders also remained concerned about the rapid spread of the delta variant of the coronavirus in the region. Meanwhile, Indonesia market is closed on account of holiday. Back home, banking stocks were in focus with Moody’s report that the asset quality risks for banks will rise in most parts of ASEAN and India, as the region battles new waves of coronavirus infections amid low vaccination rates. In scrip specific development, Power Grid traded higher as it posted a nearly three-fold jump in consolidated net profit at Rs 5,998.28 crore in the June quarter, mainly on the back of higher revenues. However, IFCI traded lower as it reported widening of loss to Rs 717.78 crore in the first quarter of the current fiscal from Rs 296.42 crore YoY.

The BSE Sensex is currently trading at 54466.25, down by 88.41 points or 0.16% after trading in a range of 54451.49 and 54758.74. There were 9 stocks advancing against 21 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index lost 1.19%, while Small cap index was down by 1.79%.

The few gaining sectoral indices on the BSE were Metal up by 1.89%, Basic Materials up by 0.21%, PSU up by 0.04%, while Realty down by 2.21%, Healthcare down by 1.55%, Industrials down by 1.08%, Consumer discretionary down by 1.07%, Consumer Durables down by 1.05% were the top losing indices on BSE.

The top gainers on the Sensex were Tata Steel up by 1.75%, Power Grid up by 0.84%, NTPC up by 0.66%, SBI up by 0.49% and HDFC Bank up by 0.37%. On the flip side, Tech Mahindra down by 1.41%, Sun Pharma down by 1.28%, Bajaj Auto down by 1.05%, Dr. Reddy's Lab down by 1.04% and Mahindra & Mahindra down by 0.87% were the top losers.

Meanwhile, rating agency Moody's has said the asset quality risks for banks will rise in most parts of ASEAN and India, as the region battles new waves of coronavirus infections amid low vaccination rates. Yet the continued policy support and strong loss-absorbing buffers will help to mitigate the negative impact. For banks in ASEAN and India, coronavirus outbreaks triggering strict containment steps will impede economic recovery and erode borrowers' debt repayment capacity, increasing their asset risks. Besides, strong loss-absorbing buffers, the policy support and the virus impact focused on a few segments will keep their credit strength intact.

It mentioned, for India (Baa3 negative), the economy will return to growth in the fiscal year ending March 2022. But, the severe second coronavirus outbreak will delay improvements in asset quality. By contrast, the resumption of global economic activity will boost trade growth in Vietnam (Ba3 positive), Malaysia (A3 stable) and Singapore (Aaa stable). The financial impact of a prolonged pandemic is concentrated on a few economic segments, which will limit the deterioration in banks' overall asset quality.

More fundamentally, various regulatory measures implemented in the past decade to strengthen banks' balance sheets have led banks to face the pandemic on a strong footing. Since the onset of the pandemic, most banks in the region have built sufficient loan loss buffers to cover likely increases in nonperforming loans. It added the deadlines on many of these measures have also been extended this year with the resurgences of coronavirus cases. For example, the Reserve Bank of India recently extended the deadline on liquidity support measure. RBI also relaxed certain parameters of its loan restructuring program in response to the severe impact of the second wave in India on borrowers.

The CNX Nifty is currently trading at 16267.25, down by 12.85 points or 0.08% after trading in a range of 16247.25 and 16338.75. There were 19 stocks advancing against 31 stocks declining on the index.

The top gainers on Nifty were Hindalco up by 3.15%, JSW Steel up by 2.85%, Tata Steel up by 2.26%, Power Grid up by 1.36% and NTPC up by 0.74%. On the flip side, Tech Mahindra down by 1.22%, Bajaj Auto down by 1.20%, Sun Pharma down by 1.15%, Cipla down by 1.10% and Indusind Bank down by 1.03% were the top losers.

Asian markets are trading mixed; Straits Times fell 17.54 points or 0.55% to 3,189.82, Taiwan Weighted declined 115.58 points or 0.67% to 17,208.06 and KOSPI lost 13.10 points or 0.40% to 3,230.09. On the other hand, Nikkei 225 rose 148.30 points or 0.53% to 28,036.45, Hang Seng added 41.76 points or 0.16% to 26,647.38 and Shanghai Composite was up by 9.55 points or 0.27% to 3,539.48.