Sensex, Nifty hold gains in late morning session

Indian equity benchmarks were holding notable gains in late morning session, with both Sensex and Nifty trading in green terrain, despite negative cues from other Asian markets. Domestic sentiments remained optimistic, amid a private report stating that the Centre's production-linked incentive (PLI) scheme has the potential to add nearly 4 per cent to GDP in terms of incremental revenues. The PLI scheme aims to provide nearly Rs 2.4 lakh crore worth of incentives over the next five years, with the lion's share going to electronics, auto components, and pharma.

However, gains were limited, as rating agency Crisil has warned of more companies defaulting on their debt obligations as it expects the withdrawal of pandemic-induced relief measures coupled with volatile input prices creating cost pressures for entities, especially those rated in the sub-investment-grade category. The annual default rate has nearly halved to 2.2 per cent in FY22, marginally higher than 2 per cent in FY21, for the straight two fiscal years on the back of a K-shaped recovery evident in the default rates. The annual default rate stood at averaged at 4.1 percent in the past decade.

On the global front, Asian markets were trading in red, after the private sector in Hong Kong continued to expand in June, albeit at a slower pace, the latest survey from S&P Global showed on Wednesday with a PMI score of 52.4. That's down from 54.9 in May, although it remains above the boom-or-bust line of 50 that separates expansion from contraction. The latest headline reading signaled a third consecutive month in which the PMI has printed above the 50.0 neutral threshold, to indicate a further improvement in the health of the sector. That said, overall private sector growth eased from May.

The BSE Sensex is currently trading at 53378.29, up by 243.94 points or 0.46% after trading in a range of 53143.28 and 53584.24. There were 23 stocks advancing against 7 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.71%, while Small cap index was up by 0.24%.

The top gaining sectoral indices on the BSE were Auto up by 1.85%, Consumer discretionary up by 1.33%, FMCG up by 1.28%, Bankex up by 1.02% and Realty up by 0.91%, while Metal down by 2.23%, Utilities down by 0.88%, Energy down by 0.82%, PSU down by 0.63% and Oil & Gas down by 0.48% were the top losing indices on BSE.

The top gainers on the Sensex were Bajaj Finance up by 3.03%, Hindustan Unilever up by 2.68%, Asian Paints up by 2.09%, Maruti Suzuki up by 2.01% and Mahindra & Mahindra up by 1.76%. On the flip side, NTPC down by 2.70%, Power Grid down by 2.22%, Tata Steel down by 2.03%, Reliance Industries down by 1.27% and Sun Pharma down by 0.42% were the top losers.

Meanwhile, rating agency Crisil has warned of more companies defaulting on their debt obligations as it expects the withdrawal of pandemic-induced relief measures coupled with volatile input prices creating cost pressures for entities, especially those rated in the sub-investment-grade category. The annual default rate has nearly halved to 2.2 per cent in FY22, marginally higher than 2 per cent in FY21, for the straight two fiscal years on the back of a K-shaped recovery evident in the default rates. The annual default rate stood at averaged at 4.1 percent in the past decade.

The report, however, warned that the default rate may increase going forward as the pandemic-induced relief measures are withdrawn and volatile input prices create cost pressure for the industry in general, and for entities rated in the sub-investment-grade category, in particular, dominated by MSMEs. But the overall annual default rate continues to be cushioned by the skew in the rated portfolio mix towards the more-resilient investment grade category.

According to the report, the default rate for investment grade ratings declined last fiscal over financial year 2021 while that for sub-investment grade increased within categories. But for the sub-investment grade category, dominated by MSMEs, the default rate increased to 5.24 per cent in FY22 from 3.90 per cent in FY21 whereas the average was 6.1 per cent between fiscals 2011 and 2020. Of the entities that defaulted last financial year, about 90 per cent were MSMEs.

The report cited two reasons for the overall annual default rates staying low. One reason is the proactive relief measures announced by the regulators and the government, especially the loan moratorium and emergency credit guaranteed lines, which eased pressure on credit profiles and staved off defaults to a good extent. The second reason is the rising proportion of companies getting into the investment-grade category.

The CNX Nifty is currently trading at 15871.65, up by 60.80 points or 0.38% after trading in a range of 15800.90 and 15927.15. There were 37 stocks advancing against 13 stocks declining on the index.

The top gainers on Nifty were Bajaj Finance up by 3.04%, Britannia up by 2.97%, Hindustan Unilever up by 2.65%, Hero MotoCorp up by 2.64% and Eicher Motors up by 2.46%. On the flip side, ONGC down by 5.61%, Hindalco down by 3.95%, NTPC down by 2.73%, Power Grid down by 2.26% and Tata Steel down by 2.06% were the top losers.

All Asian markets were trading in red; Nikkei 225 slipped 282.21 points or 1.07% to 26,141.26, Hang Seng decreased 298.75 points or 1.37% to 21,554.32, Jakarta Composite lost 73.43 points or 1.1% to 6,629.84, Taiwan Weighted dropped 236.72 points or 1.65% to 14,112.48, KOSPI fell 29.21 points or 1.25% to 2,312.57, Shanghai Composite declined 45.50 points or 1.34% to 3,358.53 and Straits Times trembled 3.54 points or 0.11% to 3,100.57.