Sensex, Nifty remain under selling pressure

Indian equity benchmarks remained under selling pressure in late morning session, on the back of negative cues from other Asian markets. Domestic sentiments were negative, as RBI Governor Shaktikanta Das has said that big tech's play in finance poses systemic concerns like overleverage. Besides, RBI Governor said that loan recovery agents using harsh methods like calling up at odd hours, foul language unacceptable.

On the sectoral front, bank stocks were in focus, as M Rajeshwar Rao, deputy governor of the Reserve Bank of India (RBI), said that gross non-performing assets (NPAs) of the banking sector dropped below 6 per cent as of March 2022 - the lowest since 2016 - and net NPAs fell to 1.7 per cent during the same period, indicating that the sector has remained largely unscathed from the ill-effects of the Covid-19 pandemic so far,

On the global front, Asian markets were trading mostly in red, even after non-oil domestic exports in Singapore were up 3.2 percent on month in May.  That topped expectations for an increase of 1.4 percent following the 3.3 percent decline in April. On a yearly basis, NODZ jumped 12.4 percent - again exceeding expectations for a gain of 7.6 percent following the 6.4 percent increase in the previous month.

The BSE Sensex is currently trading at 51089.13, down by 406.66 points or 0.79% after trading in a range of 50921.22 and 51634.15. There were 6 stocks advancing against 24 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 0.83%, while Small cap index was down by 1.14%.

The only gaining sectoral index on the BSE was Metal up by 0.78%, while Consumer Durables down by 3.07%, IT down by 2.37%, TECK down by 2.17%, Consumer discretionary down by 1.62% and Oil & Gas down by 1.56% were the top losing indices on BSE.

The top gainers on the Sensex were Tata Steel up by 1.36%, Bajaj Finserv up by 1.22%, Reliance Industries up by 1.09%, SBI up by 0.70% and Bajaj Finance up by 0.56%. On the flip side, Titan Co down by 6.44%, Wipro down by 4.12%, Dr. Reddy's Lab down by 3.40%, TCS down by 3.20% and Tech Mahindra down by 2.51% were the top losers.

Meanwhile, rating agency ICRA has revised its outlook on the domestic steel to stable from positive, mainly on the account of mounting input costs amid low steel rates. It noted that after two back-to-back years of earnings surge, the steel companies are now staring at a significant decline in earnings over the next 12 months as the industry faces multiple headwinds emanating from trade barriers from export duty on finished steel, unprecedented coal/energy cost pressures, and muted domestic demand growth so far.

According to the report, the industry could therefore be on the way to an accelerated mean reversion as the operating environment becomes far less attractive in the coming months. Such challenges would be accentuated by high inflation and front-loading of policy rate hikes. It said while domestic demand growth forecast for FY23 is kept unchanged at 7-8 percent, the industry's overall operating profits for the fiscal is revised downwards by around 30 percent...as margins get squeezed between lower steel prices and elevated input costs. Consequently, it has revised the sector's outlook to stable from positive. In the current FY23, the operating profits of steel companies are likely to be lower by 40-50 percent over FY22 levels.

The report further said the steady rise in coking coal costs had started to nibble at the margins of steelmakers even before the export duty was announced. Therefore, the consolidated operating profits per metric tonne for the four leading domestic steelmakers come down by around USD 110/MT in Q4 FY22 compared to USD 326/MT recorded in Q1 FY22. With domestic hot-rolled coil prices correcting by around 9 percent since the imposition of the export duty, and with coking coal consumption costs poised to spike by around 30-35 percent quarter-on-quarter, notwithstanding the correction in domestic iron ore prices, the industry's operating profits are expected to sequentially decline by USD 80-90/MT in Q1 FY2023.

The CNX Nifty is currently trading at 15242.60, down by 118.00 points or 0.77% after trading in a range of 15183.40 and 15400.40. There were 11 stocks advancing against 39 stocks declining on the index.

The top gainers on Nifty were Coal India up by 1.83%, JSW Steel up by 1.66%, Tata Steel up by 1.39%, Bajaj Finserv up by 1.20% and Reliance Industries up by 1.09%. On the flip side, Titan Co down by 6.51%, Wipro down by 4.17%, Dr. Reddy's Lab down by 3.35%, TCS down by 3.25% and HDFC Life Insurance down by 2.85% were the top losers.

Asian markets were trading mostly in red; Nikkei 225 slipped 381.97 points or 1.45% to 26,049.23, Jakarta Composite lost 136.85 points or 1.94% to 6,913.48, Straits Times trembled 13.28 points or 0.43% to 3,084.15, KOSPI fell 11.48 points or 0.47% to 2,439.93, Shanghai Composite declined 0.64 points or 0.02% to 3,284.74 and Taiwan Weighted dropped 173.45 points or 1.1% to 15,665.16. On the flip side, Hang Seng increased 163.57 points or 0.78% to 21,009.00.