Benchmarks continue to trade higher in morning deals

Indian equity benchmarks continued to trade higher in morning deals, tracking firm cues from global markets and positive earnings results from prominent companies. Sentiments remained positive with a labour ministry stating that retail inflation for farm and rural workers sequentially eased to 6.38 per cent and 6.6 per cent, respectively, in December 2022, mainly due to lower prices of certain food items. Some support also came with a UK Foreign Office minister’s statement that negotiations between Britain and India for an ambitious Free Trade Agreement (FTA) are ‘well advanced’, with the next round of talks set to commence very soon. He also asserted that a strong deal could boost the country's economy. Meanwhile, in a relief to exporters from hotel, healthcare, and educational sectors, the government has announced a one-time relaxation for them with respect to maintaining the average export obligation under the Export Promotion Capital Goods (EPCG) scheme.

On the global front, Japanese stock market is trading in green following the broadly positive cues from global markets on Friday. Investors hope for less aggressive monetary tightening by the U.S. Federal Reserve. Optimism about Chinese economy after reopening helped as well. Most markets closed for the Lunar New Year holidays. Back home, stocks related to leather industry remained in watch as Commerce and Industry Minister Piyush Goyal said the government will implement quality norms for leather and non-leather footwear from July this year, a move aimed at containing the import of sub-standard goods and boosting the domestic industry.

The BSE Sensex is currently trading at 61094.48, up by 472.71 points or 0.78% after trading in a range of 60761.88 and 61113.27. There were 26 stocks advancing against 4 stocks declining on the index.

The broader indices were trading mixed; the BSE Mid cap index rose 0.20%, while Small cap index was down by 0.08%.

The top gaining sectoral indices on the BSE were Bankex up by 1.09%, Auto up by 0.90%, Oil & Gas up by 0.71%, Telecom up by 0.70% and Energy up by 0.69%, while Realty down by 0.79% were the lone losing index on BSE.

The top gainers on the Sensex were Power Grid Corporation up by 2.02%, Mahindra & Mahindra up by 1.94%, Tata Motors up by 1.48%, Kotak Mahindra Bank up by 1.28% and SBI up by 1.18%. On the flip side, Ultratech Cement down by 2.57%, NTPC down by 0.77%, Asian Paints down by 0.18% and Titan Company down by 0.12% were the top losers.

Meanwhile, Fitch Ratings has said long-term benefits to the Indian banking sector from the implementation of the International Financial Reporting Standards (IFRS) accounting standards should outweigh short-term risks. The transition will probably negatively affect banks’ capital levels, as more impairment charges are front-loaded, but should bring qualitative benefits in credit risk management over the longer term.

It stated the adoption of IFRS is unlikely to drive rating changes in and of itself, but specific banks’ capital and risk management responses could influence their standalone Viability Rating. The RBI introduced a discussion paper last week that suggested banks make provisions for bad loans using the expected credit loss (ECL) method. Fitch believes the transition to ECL provisioning is the most important aspect, from a credit perspective, of adopting IFRS and shows the RBI's intent to switch accounting standards.

It mentioned the ECL framework primarily addresses the problem of procyclical provisions as banks are required to estimate ECL ahead of adverse credit events, instead of making provisions after loans have become impaired, as is the current norm. Besides, the rating agency believes the RBI will smoothen the process of adopting ECL provisioning over up to five years. It noted banks would have little room to absorb unexpected stress if they increased provisioning requirements by running down capital ratios closer to regulatory thresholds.

The CNX Nifty is currently trading at 18152.80, up by 125.15 points or 0.69% after trading in a range of 18063.45 and 18162.60. There were 38 stocks advancing against 12 stocks declining on the index.

The top gainers on Nifty were Power Grid Corporation up by 1.95%, Mahindra & Mahindra up by 1.94%, Hindalco up by 1.61%, Tata Motors up by 1.50% and Eicher Motors up by 1.43%. On the flip side, Ultratech Cement down by 2.42%, JSW Steel down by 1.73%, Grasim Industries down by 1.00%, HDFC Life Insurance down by 0.76% and NTPC down by 0.68% were the top losers.

On the global front, Nikkei 225 surged 342.13 points or 1.29% to 26,895.66.