Markets trade deeply in red after Bank of Japan widens yield target

Indian equity markets were trading deeply in red in late morning deals on weak global cues after the Bank of Japan shocked markets with an unexpected widening of its target band for interest rates, sparking a rally in the yen, pushing up bond yields and triggering a slump in stocks. The central bank will allow yields on 10-year government bonds to move up or down within 50 basis points around its 0% target, wider than the previous 25-point band.  Further, depreciation in Indian rupee against dollar also weighed down sentiments. Rupee weakened by 15 paise to 82.77 against the dollar at the Inter-bank Foreign Exchange market on account of increased demand for the American currency from importers and banks. On the sectoral front, all the sectoral indices on the BSE were trading in red led by Realty, Metal, Telecom, Auto and Capital Goods.

On the global front, Asian markets were trading in red as traders remain concerned amid reports that aggressive monetary policy moves by central banks across the world could tip the global economy. Back home, in the stock specific development, IRB Infrastructure Developers gained after the civil construction company announced that their board will meet on January 4, 2023, to mull stock split proposal.

The BSE Sensex is currently trading at 61169.22, down by 636.97 points or 1.03% after trading in a range of 61102.68 and 61612.73. All 30 stocks were declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 0.90%, while Small cap index down by 0.45%.

The top losing sectoral indices on the BSE were Realty down by 1.91%, Metal down by 1.86%, Telecom down by 1.80%, Auto down by 1.29% and Capital Goods down by 1.11%, while there were no gaining sectoral indices on BSE.

The top losers on the Sensex were Tata Steel down by 2.01%, Bharti Airtel down by 1.99%, Tata Motors down by 1.95%, Larsen & Toubro down by 1.85% and Mahindra & Mahindra down by 1.84%, while there were no gainers.

Meanwhile, domestic rating agency ICRA has revised banking sector outlook to 'positive’ on healthy asset growth, improving asset quality and stronger capital buffers. It expects asset quality to improve to a decadal best of 4 per cent from a gross non-performing assets (NPAs) perspective by the end of FY24. The banking system's credit growth will slow down to 11-11.6 per cent in FY24, after a very healthy growth of 15.2-16.1 per cent expected in FY23.

According to the report, a bulk of the credit growth story will be led by state-owned lenders which are in far better shape now having recognised and provided for loan losses and also after some capital infusions, adding that the market share gains for private sector lenders will slow down. It estimated that public sector lenders will witness a credit growth of 13.4-14.1 per cent in FY23 and 9.5-10.1 per cent in FY24, adding that the same for private sector banks will be 14.5-15.5 per cent and 12.6-13.5 per cent.

The agency further said the state-owned banks' net NPAs will come down to 1.3-1.6 per cent by FY24-end, while the same for private sector lenders will be 0.8-0.9 per cent. The restructured assets will be under 1 per cent by FY24. On the capital adequacy front, it said there will not be any significant fund infusion requirement to attain a 10-12 per cent asset growth in FY24. It expects the core tier-I buffers to be at 13.8-14.1 per cent in FY23 as against 14.3 per cent in FY22.

The CNX Nifty is currently trading at 18228.35, down by 192.10 points or 1.04% after trading in a range of 18202.65 and 18355.20. There was 1 stock advancing against 49 stocks declining on the index.

The only gainer on Nifty was Adani Enterprises up by 0.80%. On the flip side, Hindalco down by 3.05%, UPL down by 2.50%, SBI Life Insurance down by 2.17%, Adani Ports & SEZ down by 2.02% and Bharti Airtel down by 2.00% were the top losers.

All Asian markets were trading lower; Nikkei 225 slipped 679.35 points or 2.49% to 26,558.29, Taiwan Weighted dropped 268.69 points or 1.86% to 14,164.63, Straits Times trembled 9.62 points or 0.3% to 3,246.99, Shanghai Composite declined 42.54 points or 1.37% to 3,064.58, KOSPI fell 22.46 points or 0.95% to 2,329.71, Jakarta Composite lost 50.65 points or 0.75% to 6,729.05 and Hang Seng decreased 446.61 points or 2.31% to 18,906.20.