Bears tighten grip over Dalal Street

Bears have tightened their grip over the Dalal Street in early noon deals, with both Sensex and Nifty trading near their intraday low points. Heavy selling at Utilities and Banking counters along with negative cues from other Asian markets dragged the indices in deep red. Among the prominent decliners, Axis Bank and NTPC fell over 2 percent. Investors waited for progress in the U.S. debt ceiling deal and the release of domestic GDP data due later in the day. Traders got cautious as a Reserve Bank of India data report  showing that the number of frauds in the banking sector went up to 13,530 in 2022-23 year-on-year, but the amount involved nearly halved at Rs 30,252 crore.

On the global front, Asian markets were trading lower, even after Japan's consumer sentiment improved for the third straight month in May to the highest level in nearly one-and-a-half years. The data from the Cabinet Office showed that the seasonally adjusted consumer confidence index climbed to 36.0 in May from 35.4 in April. The index was forecast to rise to 36.1. Further, the latest reading was the highest since January 2022, when it was 36.8.

The BSE Sensex is currently trading at 62472.40, down by 496.73 points or 0.79% after trading in a range of 62418.02 and 62876.77. There were 8 stocks advancing against 22 stocks declining on the index.

The broader indices were trading mixed; the BSE Mid cap index fell by 0.05%, while Small cap index was up by 0.13%.

The top gaining sectoral indices on the BSE were IT up by 0.32%, Healthcare up by 0.26%, TECK up by 0.26%, Telecom up by 0.24% and Consumer Durables up by 0.23%, while Utilities down by 1.19%, Bankex down by 1.14%, Power down by 1.07%, Metal down by 1.03% and PSU down by 0.92% were the top losing indices on BSE.

The top gainers on the Sensex were Asian Paints up by 1.18%, Tech Mahindra up by 1.14%, Tata Motors up by 1.14%, Sun Pharma up by 0.99% and Bharti Airtel up by 0.94%. On the flip side, Axis Bank down by 2.23%, NTPC down by 2.09%, HDFC down by 1.78%, SBI down by 1.75% and Mahindra & Mahindra down by 1.68% were the top losers.

Meanwhile, the Reserve Bank of India (RBI), in its Annual Report 2022-23, is proposing to introduce expected loss-based approach for provisioning during 2023-24 as part of its measures to strengthen the bad loan resolution ecosystem. This will enable banks to design their own credit loss models and spread the higher provisions over a five-year period under a newer system of setting aside money for lending.

In addition, the finalisation of guidelines on the securitisation of stressed assets, and a comprehensive review of the prudential framework (including the guidelines on the resolution of stress in respect of projects under implementation) are also likely to be undertaken during the year with the objective of further strengthening the resolution ecosystem. 

The RBI in January this year released a discussion paper on the expected loss-based approach for provisioning. As per the discussion paper, the banks will have to classify financial assets, including primary loans, irrevocable loan commitments and investments classified as held-to-maturity or available-for-sale, into one of the three categories - Stage 1, Stage 2, and Stage 3, depending upon the assessed credit losses on them. It said that the classification will have to be done at the time of initial recognition as well as on each subsequent reporting date, and banks will have to make necessary provisions. While the Reserve Bank of India proposes to leave it to banks to design the model, its paper said there is a list of mitigant concerns relating to model risk and considering the significant variability that may arise.

The CNX Nifty is currently trading at 18502.40, down by 131.45 points or 0.71% after trading in a range of 18490.35 and 18603.90. There were 20 stocks advancing against 30 stocks declining on the index.

The top gainers on Nifty were Adani Enterprises up by 1.92%, SBI Life Insurance up by 1.32%, Asian Paints up by 1.21%, HDFC Life Insurance up by 1.19% and Tech Mahindra up by 1.12%. On the flip side, Axis Bank down by 2.27%, NTPC down by 2.15%, ONGC down by 1.95%, HDFC down by 1.80% and SBI down by 1.80% were the top losers.

All Asian markets were trading lower; Hang Seng declined 475.02 points or 2.55% to 18,120.76, Nikkei 225 slipped 440.28 points or 1.43% to 30,887.88, Jakarta Composite plunged 58.66 points or 0.88% to 6,577.76, Taiwan Weighted lost 43.78 points or 0.26% to 16,578.96, Straits Times fell 26.27 points or 0.82% to 3,161.29, Shanghai Composite weakened 19.57 points or 0.61% to 3,204.64 and KOSPI dropped 8.4 points or 0.33% to 2,577.12.