Benchmarks continue to trade in red terrain in morning deals

Indian equity benchmarks continued to trade in red terrain in morning deals, as investors fretted over the spread of the Omicron variant of Covid-19 and looked ahead to the RBI's bi-monthly monetary policy meeting this week for directional cues. Some concern also came with India Ratings and Research (Ind-Ra) stating that tightening of norms may increase non-banking finance companies' (NBFCs) headline non-performing advances (NPA) by around one third. However, the impact on provisioning could be modest, given NBFCs are using 'IND-As' and generally for higher rated NBFCs, provision policy is more conservative than 'IRAC' requirements. Traders also took a note of report that amid the rising scare from the new coronavirus variant Omicron and ahead of the MPC meet, SBI house economists have urged the central bank to delay liquidity normalisation measures through a reverse repo hike, as such a 'prudent step' in the current situation will give more time for economic recovery to strengthen further.

On the global front, Asian markets were trading mostly in green despite the broadly negative cues from Wall Street on Friday, on renewed concerns about the pace of the global economic recovery amid the rapid spread of the new and possibly vaccine-resistant coronavirus Omicron variant. Back home, on the sectoral front, agriculture industry’s stocks were in focus with the commerce ministry’s statement that India's exports of agricultural and processed food products rose by more than 13 per cent during April-November this fiscal to $13.26 billion. Stocks related to defence industry too remained in action as Defence Minister Rajnath Singh said that defence exports from India during the last seven years have been of more than Rs 38,000 crore due to the government's initiatives.

The BSE Sensex is currently trading at 57494.40, down by 202.06 points or 0.35% after trading in a range of 57342.84 and 57781.46. There were 8 stocks advancing against 22 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index fell 0.17%, while Small cap index was down by 0.02%.

The top gaining sectoral indices on the BSE were Realty up by 1.10%, Capital Goods up by 0.58%, Metal up by 0.28%, Basic Materials up by 0.27% and Industrials up by 0.25%, while IT down by 1.16%, TECK down by 1.06%, Auto down by 0.80%, Oil & Gas down by 0.74% and Energy down by 0.70% were the top losing indices on BSE.

The top gainers on the Sensex were ICICI Bank up by 0.92%, Tata Steel up by 0.77%, Larsen & Toubro up by 0.62%, HDFC up by 0.55% and SBI up by 0.43%. On the flip side, HCL Technologies down by 2.02%, Maruti Suzuki down by 1.78%, Infosys down by 1.40%, Power Grid Corporation down by 1.26% and Indusind Bank down by 1.24% were the top losers.

Meanwhile, India Ratings and Research (Ind-Ra) has said that tightening of norms may increase non-banking finance companies' (NBFCs) headline non-performing advances (NPA) by around one third. It mentioned the Reserve Bank of India's (RBI) clarification on NPA accounting is likely to increase NPAs by around one third for non-banking finance companies (NBFCs). However, the impact on provisioning could be modest, given NBFCs are using 'IND-As' and generally for higher rated NBFCs, provision policy is more conservative than 'IRAC' requirements. Besides, it pointed out that NBFCs would have to invest in systems and processes to comply with daily stamping requirements.

On the other aspects of RBI clarification, the agency said that NBFCs generally classify an account as stage 3 when there is a payment overdue for more than 90 days. Typically for monthly payments, this would be when there are 3 or more instalments overdue on any account. However, when the borrower makes part payment such that the total overdue is less than three instalments, the account is removed from NPA classification and classified as a standard asset, although it remains in the overdue category in case not all overdues are cleared. The RBI clarification would allow stage 3 assets to become standard only when all the overdues or arrears (including interest) are cleared.

Furthermore, it pointed out that NBFC borrowers are generally a weak class of borrowers and have volatile cash flows which could mean that once an account has been classified as NPA, it could remain there for a considerable period as the ability to clear all dues may be constrained. In terms of the provisioning trend, NBFCs have transitioned to the 'Ind-As' regime and the provision created on any account is based on the historical data on roll backs and roll forwards and the credit loss experienced on accounts in different overdue buckets.

The CNX Nifty is currently trading at 17144.20, down by 52.50 points or 0.31% after trading in a range of 17094.60 and 17216.75. There were 14 stocks advancing against 36 stocks declining on the index.

The top gainers on Nifty were Hindalco up by 1.46%, JSW Steel up by 1.41%, ICICI Bank up by 0.97%, Tata Steel up by 0.89% and Larsen & Toubro up by 0.74%. On the flip side, Coal India down by 5.26%, HCL Technologies down by 2.10%, Maruti Suzuki down by 1.80%, Infosys down by 1.42% and Tata Motors down by 1.26% were the top losers.

Asian markets were trading mostly in green; Jakarta Composite soared 34.90 points or 0.53% to 6,573.41, Straits Times advanced 24.45 points or 0.79% to 3,126.38, Shanghai Composite gained 13.49 points or 0.37% to 3,620.92, KOSPI rose 10.71 points or 0.36% to 2,979.04 and Taiwan Weighted strengthened 8.79 points or 0.05% to 17,705.93.

On the flip side, Nikkei 225 slipped 93.97 points or 0.34% to 27,935.60 and Hang Seng decreased 300.30 points or 1.26% to 23,466.39.