Markets trade near day’s low points; Sensex drops around 850 points

Indian equity markets magnified their losses and traded near low points of day on account of heavy selling by fund and retail investors. Frontline gauges fell below their crucial 60200 (Sensex) and 17900 (Nifty) levels. Meanwhile, the session was also proving weak for broader indices which were trading with losses in the range of 1.20-1.65%. Traders remained on sidelines ahead of January F&O expiry later in the day. Traders remained concerned as Icra Ratings said after remaining stable for many weeks, the cost of borrowing for states inched up by 5 basis points to 7.64 per cent at Tuesday's auction when 15 of them raised Rs 25,700 crore from the market. All the sectoral indices on the BSE were trading in red led by Bankex, PSU, Telecom, Utilities and Power.

On the global front, Asian markets were trading mostly higher, following the mixed cues from global markets overnight, with traders cautiously assessing recent economic data and remaining optimistic about the US Fed further slowing the pace of interest rate hikes next week.  Back home, in the stock specific developments, TVS Motor Company surged after the company reported a stable performance, with the company’s standalone operating EBITDA up 16 per cent at Rs 659 crore for the third quarter (October-December) of financial year 2022-23 (Q3FY23). However, Indus Towers dropped after the company posted a net loss of Rs 708 crore in the third quarter (October-December) of financial year (Q3FY23), mainly due to provision for doubtful debt of Rs 2,201 crore and exceptional charge of Rs 493 crore.

The BSE Sensex is currently trading at 60130.53, down by 848.22 points or 1.39% after trading in a range of 60098.73 and 60899.21. There were 3 stocks advancing against 27 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 1.62%, while Small cap index down by 1.20%.

The top losing sectoral indices on the BSE were Bankex down by 2.56%, PSU down by 2.29%, Telecom down by 1.93%, Utilities down by 1.83% and Power down by 1.76%, while there were no gaining indices on BSE.

The only gainers on the Sensex were Maruti Suzuki up by 0.89%, Hindustan Unilever up by 0.33% and Tata Steel up by 0.12%. On the flip side, SBI down by 4.11%, Indusind Bank down by 3.01%, Axis Bank down by 2.62%, HDFC Bank down by 2.47% and ICICI Bank down by 2.35% were the top losers.

Meanwhile, rating agency ICRA in its latest report has said that the implementation of expected credit loss (ECL)-based provisioning model proposed by the Reserve Bank of India (RBI) will be smooth as the transition will hit banks' balance sheets only one time. It said this is an important step towards banks' eventual shift to the Indian accounting standards (IND-AS) regime and the ongoing improvements in their financial metrics should help most of them to transition smoothly to the new framework.

According to the report, the methodology/basis of computation of ECL is central to Ind-AS and migration to the ECL-based loss provisioning will be a major step towards the eventual shift to an Ind-AS regime for banks. Banks' non-performing loan ratios are likely to touch decadal lows by March 2024. With further improvement in profitability and capital cushions in the near-term, the timing is apt for banks to implement the ECL-based provisions and given their capital cushion most banks can easily transition to the new regime.

The report noted that under the ECL model, loans will be classified as stage 1, 2 & 3, depending on their credit risk profile with stage 2 & 3 loans commanding higher provisions. This is in contrast to the existing approach of the incurred loss provisioning, wherein a step-up provisioning is made based on the duration for which the account has remained dud. Shifting to the ECL provisioning model will entail a one-time provisioning for stage 2 & 3 loans apart from other off-balance sheet exposures. While the regulator has proposed a maximum time frame of five years after the date of implementation for spreading out these provisions, the agency expects some banks to raise external capital sooner to manage the impact of the transition in a better manner

The CNX Nifty is currently trading at 17863.50, down by 254.80 points or 1.41% after trading in a range of 17853.25 and 18100.60. There were 6 stocks advancing against 44 stocks declining on the index.

The top gainers on Nifty were Maruti Suzuki up by 0.84%, Bajaj Auto up by 0.75%, Hindalco up by 0.44%, Hindustan Unilever up by 0.29% and Hero MotoCorp up by 0.11%. On the flip side, Adani Ports & SEZ down by 6.15%, SBI down by 4.13%, Indusind Bank down by 3.03%, Adani Enterprises down by 3.02% and Axis Bank down by 2.66% were the top losers.

Asian markets were trading mostly in green, KOSPI increased 31.38 points or 1.29% to 2,426.64, Straits Times rose 57.84 points or 1.73% to 3,351.55 and Nikkei 225 surged 100.98 points or 0.37% to 27,400.17. However, Jakarta Composite plunged 23.31 points or 0.34% to 6,837.54.