Lackluster trade continues on Dalal Street

Indian equity benchmarks continued their lackluster trade in afternoon session, amid negative signals from other Asian markets. The Sensex was down 251 points, while Nifty fell by 67 points. Investors remained hassled as the wholesale inflation across the country rose to 13.56 per cent in December. The high rate of inflation in December 2021 is primarily due to rise in prices of mineral oils, basic metals, crude petroleum & natural gas, chemicals and chemical products, food products, textile and paper and paper products etc as compared to the corresponding month of the previous year. Additional pressure came with domestic rating agency ICRA’s statement that the upcoming budget is unlikely to make any provision for recapitalisation of state-owned lenders, as over Rs 3.36 lakh crore has been spent on the banks in the last six years.

On the global front, Asian markets were trading mostly lower after a fresh salvo of hawkish remarks from Federal Reserve officials solidified expectations that U.S. interest rates could rise as soon as March, leaving markets braced for tighter monetary conditions. Back home, on sectoral front, realty, capital goods and industrials stocks were trading in green, while telecom, banking and healthcare were trading in red.

The BSE Sensex is currently trading at 60983.90, down by 251.40 points or 0.41% after trading in a range of 60757.03 and 61136.25. There were 8 stocks advancing against 22 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index rose 0.06%, while Small cap index up by 0.36%.

The top gaining sectoral indices on the BSE were Realty up by 1.27%, Capital Goods up by 0.98%, Industrials up by 0.80%, IT up by 0.34% and Consumer Durables was up by 0.18%, while Telecom down by 1.18%, Bankex down by 1.01%, Healthcare down by 0.50%, FMCG down by 0.38% and Metal was down by 0.35% were the top losing indices on BSE.

The top gainers on the Sensex were Infosys up by 1.35%, Larsen & Toubro up by 1.09%, NTPC up by 0.52%, TCS up by 0.47% and HDFC Bank was up by 0.39%. On the flip side, Asian Paints down by 3.09%, Axis Bank down by 2.63%, Nestle down by 2.01%, HDFC down by 1.76% and Hindustan Unilever was down by 1.69% were the top losers.

Meanwhile, domestic rating agency ICRA in its latest report has said the upcoming budget is unlikely to make any provision for recapitalisation of state-owned lenders, as over Rs 3.36 lakh crore has been spent on the banks in the last six years. It also said the banks will raise capital through internal accruals and fundraising from the market, and the lenders have the ability to manage. It noted that courtesy of the over Rs 3.36 lakh crore of fund infusions from the taxpayers, the state-owned banks' stock of net non-performing assets has reduced to 2.8 per cent as of September 2021 from the 8 per cent level of March 2018.

ICRA said with high provisions on legacy stressed assets, the earnings outlook for public banks also seems healthy, as it expects most public banks to incrementally remain profitable and generate growth capital requirements internally. It can be noted that in the past, the bank recapitalisation allocation is one of the most keenly awaited numbers in the annual budget exercise. It said recoveries from legacy NPAs as NARCL (National Asset Reconstruction Company) becomes operational could aid the bottom lines of the banks in the coming years.

According to the report, public banks were also able to roll over their additional tier I bonds that were due for a call option in FY22, reflecting a strong investor appetite for their issuances, which bodes well for their future issuances. It also said with cleaner balance sheets and an improved earnings outlook, banks can also raise capital from market sources as they have done in recent years. It expects the budget to have some provision for a permanent refinance window from the RBI, as such entities account for a fourth of the overall lending in the economy.

The CNX Nifty is currently trading at 18190.25, down by 67.55 points or 0.37% after trading in a range of 18119.65 and 18232.10. There were 16 stocks advancing against 34 stocks declining on the index.

The top gainers on Nifty were Tata Consumer Products up by 4.42%, Adani Ports up by 2.64%, Indian Oil Corporation up by 1.49%, Infosys up by 1.40% and Larsen & Toubro was up by 1.17%. On the flip side, Asian Paints down by 3.08%, Axis Bank down by 2.62%, UPL down by 2.37%, Nestle down by 2.17% and ONGC was down by 2.10% were the top losers.

Asian markets were trading mostly lower; KOSPI fell 40.17 points or 1.36% to 2,921.92, Hang Seng decreased 136.08 points or 0.56% to 24,293.69, Shanghai Composite declined 26.74 points or 0.75% to 3,528.52, Nikkei 225 slipped 364.85 points or 1.28% to 28,124.28 and Taiwan Weighted was down by 33.60 points or 0.18% to 18,403.33.

On the other hand, Jakarta Composite soared 4.73 points or 0.07% to 6,663.09 and Straits Times was up by 19.84 points or 0.61% to 3,277.14.