Benchmarks continue lackluster trade slightly in red

Indian equity benchmarks continued their lackluster trade slightly in red in morning session, amid weak global cues. Some concern also came as Fitch Ratings said India continues to lag way behind in COVID vaccination, and the negative outlook on sovereign rating signifies the rising debt-to-GDP ratio. In April 2021, Fitch affirmed India's sovereign rating at 'BBB-' with a negative outlook. The outlook was changed to 'negative' from 'stable' in June last year on grounds that the pandemic had significantly weakened the country's growth outlook and exposed the challenges associated with a high public-debt burden. However, traders took some support as India Ratings and Research (Ind-Ra) has maintained a stable outlook on the banking sector for 2021-22 supported by the continuing systemic support that has helped manage the system-wide COVID-19 linked stress.

On the global front, Asian markets were trading mostly in red on sliding crude oil prices and as traders are weighing the likely impact of the spread of the delta variant of coronavirus in the region and some other countries, particularly in the U.S., on the pace of economic recovery. Back home, on the sectoral front, stocks related to gems and jewellery industry remained in watch as the Gems and Jewellery Export Promotion Council (GJEPC) has suggested for introduction of a repair policy; cut in import duty on gold and silver; and the abolition of equalisation levy of 2 per cent for purchase of rough diamonds with a view to promoting the growth of the sector.

The BSE Sensex is currently trading at 58265.99, down by 13.49 points or 0.02% after trading in a range of 58169.36 and 58372.94. There were 15 stocks advancing against 15 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index rose 0.84%, while Small cap index was up by 0.70%.

The top gaining sectoral indices on the BSE were Telecom up by 1.01%, Power up by 0.80%, Bankex up by 0.65%, Utilities up by 0.65% and Capital Goods up by 0.56%, while IT down by 0.58%, TECK down by 0.41%, Auto down by 0.26%, Healthcare down by 0.23% and Energy down by 0.05% were the top losing indices on BSE.

The top gainers on the Sensex were Indusind Bank up by 1.39%, Kotak Mahindra Bank up by 1.01%, Tata Steel up by 0.79%, SBI up by 0.75% and Axis Bank up by 0.66%. On the flip side, NTPC down by 1.47%, Nestle down by 1.00%, TCS down by 0.92%, Bajaj Auto down by 0.84% and Power Grid Corp down by 0.84% were the top losers.

Meanwhile, India Ratings and Research (Ind-Ra) has maintained a stable outlook on the banking sector for 2021-22 supported by the continuing systemic support that has helped manage the system-wide COVID-19 linked stress. While, it expects an increase in stressed assets in retail and MSME segments by end-March. It also estimates gross non-performing assets (GNPA) of the banking sector to be at 8.6 percent and stressed assets at 10.3 percent for fiscal 2021-22. 

According to the report, banks will continue to strengthen their financials by raising capital and adding to provision buffers which have already seen a sharp increase in the last three to four years. It said its stable outlook on large private banks indicates their continued market share gains both in assets and liabilities, while competing intensely with public sector banks (PSBs). Most have strengthened their capital buffers and proactively managed their portfolio.

The report further stated that outlook on PSBs takes into account continued government support through large capital infusions (Rs 2.8 lakh crore over FY18-FY21 and further Rs 0.2 lakh crore provisioned for FY22). The agency has a negative outlook on five banks (about 6.5 per cent of system deposits), driven primarily by weak capital buffers and continued pressure on franchise.  It estimates that the asset quality impact in the retail segment has been higher for private banks with a median rise of over 100 per cent in gross NPAs over Q1 FY21 to Q1 FY22 (about 45 per cent for PSBs).

The CNX Nifty is currently trading at 17357.05, down by 5.05 points or 0.03% after trading in a range of 17324.00 and 17383.40. There were 25 stocks advancing against 25 stocks declining on the index.

The top gainers on Nifty were UPL up by 1.76%, Indusind Bank up by 1.42%, HDFC Life Insurance up by 1.26%, BPCL up by 1.07% and Kotak Mahindra Bank up by 1.07%. On the flip side, Divi's Lab down by 1.45%, NTPC down by 1.34%, Eicher Motors down by 1.26%, Britannia Industries down by 0.95% and TCS down by 0.94% were the top losers.

Asian markets were trading mostly in red; Nikkei 225 surged 256.25 points or 0.86% to 29,916.14, Hang Seng increased 190.00 points or 0.73% to 26,353.63, Shanghai Composite gained 54.73 points or 1.51% to 3,676.59 and Straits Times advanced 7.45 points or 0.24% to 3,108.53.

On the flip side, Jakarta Composite lost 14.54 points or 0.24% to 6,112.40, KOSPI fell 15.91 points or 0.5% to 3,187.42 and Taiwan Weighted dropped 66.43 points or 0.38% to 17,428.87.