Benchmarks snap 2-day losing streak on Monday

Indian equity benchmarks snapped two day losing streak to end half a percent higher on Monday, as upbeat operating performance by India Inc in the December 2022 quarter supported the market sentiments. Markets opened higher and extended gains, as traders took encouragement with data showing that India’s forex reserves zoomed by $10.417 billion to $572 billion as on January 13, making it one of the biggest weekly jumps in the kitty in recent times. In the previous reporting week, the overall reserves had dropped by $1.268 billion to $561.583 billion. 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.

However, key gauges trimmed some of their initial gains in afternoon deals, as traders got anxious with the latest payroll data showing that fresh formal job creation remained below one million for the second consecutive month in November, signalling pressure in the employment market. Investors also were cautious as foreign investors pulled out a net amount of Rs 15,236 crore this month so far on attractive Chinese markets and concerns about the US economy entering a recession. But, market regained traction to end higher as some optimism remained among traders 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.

On the global front, European markets were trading higher as dovish Fed remarks helped offset investor concerns of a global economic slowdown. On a light day on the economic front, investors await Euro area consumer confidence survey results and a speech by ECB President Christine Lagarde at an event for directional cues. Japanese market settled higher on Monday as 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 were 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. Banking stocks were in focus as credit rating agency Fitch said the benefits of Indian banks' switching to the International Financial Reporting Standards (IFRS) accounting rules will outweigh any short-term impact on capital levels and is unlikely to drive rating changes.

Finally, the BSE Sensex rose 319.90 points or 0.53% to 60,941.67 and the CNX Nifty was up by 90.90 points or 0.50% to 18,118.55.

The BSE Sensex touched high and low of 61,113.27 and 60,761.88, respectively. There were 21 stocks advancing against 9 stocks declining on the index.

The broader indices ended mixed; the BSE Mid cap index rose 0.44%, while Small cap index was down by 0.30%.

The top gaining sectoral indices on the BSE were IT up by 1.65%, TECK up by 1.48%, Healthcare up by 0.80%, Bankex up by 0.76% and FMCG up by 0.73%, while Realty down by 0.72%, Power down by 0.45%, Utilities down by 0.29%, Capital Goods down by 0.29% and Industrials down by 0.27% were the top losing indices on BSE.

The top gainers on the Sensex were Hindustan Unilever up by 1.94%, Sun Pharma up by 1.85%, Tech Mahindra up by 1.65%, TCS up by 1.56% and Infosys up by 1.47%. On the flip side, Ultratech Cement down by 4.62%, NTPC down by 1.22%, Tata Steel down by 0.73%, Larsen & Toubro down by 0.58% and Reliance Industries down by 0.54% 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 traded in a range of 18,162.60 and 18,063.45. There were 32 stocks advancing against 18 stocks declining on the index.

The top gainers on Nifty were Sun Pharma up by 1.92%, Hindustan Unilever up by 1.84%, Eicher Motors up by 1.70%, UPL up by 1.65% and Tech Mahindra up by 1.60%. On the flip side, Ultratech Cement down by 4.42%, Grasim Industries down by 1.98%, NTPC down by 1.07%, Tata Steel down by 0.94% and JSW Steel down by 0.87% were the top losers.

European markets were trading higher; UK’s FTSE 100 increased 18.48 points or 0.24% to 7,789.07, France’s CAC rose 2.44 points or 0.03% to 6,998.43 and Germany’s DAX gained 0.94 points or 0.01% to 15,034.50.

Japanese market settled higher on Monday after the Japanese currency Yen retreated from last week's 7 1/2-month high. Meanwhile, Bank of Japan's policy meeting minutes showed that board members wanted to modify their yield control curve in order to improve market functionality. Market sentiments improved further after sharp gains on Wall Street overnight. Most of Asian markets including Hong Kong, China, Indonesia, Malaysia, Singapore, South Korea and Taiwan were closed for Lunar New Year celebrations.

Nikkei 225 ended up by 352.51 points or 1.31% to 26,906.04.