Sensex, Nifty remain weak in early noon deals

Indian equity benchmarks remained weak in early afternoon deals, with both Sensex and Nifty trading marginally lower, despite positive cues from other Asian markets. Traders were cautious amid a private report stating that the Reserve Bank of India (RBI) may not cut the key lending rate before February unless inflation falls sharply or a global crisis unfolds. Meanwhile, in the direction of realizing the Prime Minister Narendra Modi’s vision of ‘Sahkar Se Samridhi’, the Government of India has taken important decisions which will increase the income of Primary Agricultural Credit Societies, as well as increase the employment opportunities in rural areas and farmers will be able to get fertilizers, pesticides, seeds and agricultural machinery at the local level.

On the global front, Asian markets were trading mostly in green, even after Consumer prices in China were up 0.2 percent on year in May. That was shy of expectations for an increase of 0.4 percent following the 0.1 percent increase in the previous month. On a monthly basis, consumer prices fell 0.2 percent, missing expectations for a decline of 0.1 percent - which would have been unchanged from the April reading.

The BSE Sensex is currently trading at 62844.67, down by 3.97 points or 0.01% after trading in a range of 62720.89 and 62992.16. There were 16 stocks advancing against 14 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index rose by 0.24%, while Small cap index was up by 0.26%.

The top gaining sectoral indices on the BSE were Capital Goods up by 0.79%, Telecom up by 0.76%, Industrials up by 0.73%, Realty up by 0.73% and Bankex up by 0.31%, while TECK down by 0.59%, FMCG down by 0.49%, IT down by 0.47%, Metal down by 0.33% and Consumer Durables down by 0.24% were the top losing indices on BSE.

The top gainers on the Sensex were Indusind Bank up by 2.21%, Axis Bank up by 1.51%, Ultratech Cement up by 0.98%, Larsen & Toubro up by 0.87% and Bajaj Finance up by 0.82%. On the flip side, Hindustan Unilever down by 1.85%, SBI down by 1.60%, Tata Steel down by 1.49%, Infosys down by 1.32% and Mahindra & Mahindra down by 1.12% were the top losers.

Meanwhile, Reserve Bank of India (RBI) has came out with guidelines on default loss guarantee (DLG) in digital lending, a move aimed at ensuring the orderly development of the credit delivery system. DLG is a contractual arrangement between a regulated entity (RE) and an entity meeting prescribed norms, under which the latter guarantees to compensate the RE, loss due to default up to a certain percentage of the loan portfolio specified upfront. RE refers to entities, like banks and NBFCs, which are regulated by the RBI.

As per the guidelines, a RE may enter into DLG arrangements only with a Lending Service Provider (LSP)3/ other RE with which it has entered into an outsourcing (LSP) arrangement. DLG arrangements must be backed by an explicit legally enforceable contract between the RE and the DLG provider. It further said RE should ensure that the total amount of DLG cover on any outstanding portfolio, which is specified upfront should not exceed 5 per cent of the amount of that loan portfolio.

In case of implicit guarantee arrangements, the DLG provider shall not bear performance risk of more than the equivalent amount of five per cent of the underlying loan portfolio. It also said recognition of individual loan assets in the portfolio as NPA and consequent provisioning will be the responsibility of the RE. Also, the REs will have put in place a Board approved policy before entering into any DLG arrangement.

The CNX Nifty is currently trading at 18631.55, down by 3.00 points or 0.02% after trading in a range of 18600.00 and 18676.65. There were 26 stocks advancing against 24 stocks declining on the index.

The top gainers on Nifty were Indusind Bank up by 2.18%, Axis Bank up by 1.52%, Grasim Industries up by 1.43%, Ultratech Cement up by 0.93% and Larsen & Toubro up by 0.85%. On the flip side, Hindustan Unilever down by 1.79%, Tata Steel down by 1.57%, SBI down by 1.54%, HDFC Life Insurance down by 1.52% and Infosys down by 1.33% were the top losers. 

Asian markets were trading mostly in green; Nikkei 225 surged 623.9 points or 1.93% to 32,265.17, Taiwan Weighted added 152.71 points or 0.9% to 16,886.40, Hang Seng advanced 123.75 points or 0.64% to 19,422.93, KOSPI increased 30.31 points or 1.15% to 2,641.16 and Shanghai Composite strengthened 12.59 points or 0.39% to 3,226.18, while Jakarta Composite plunged 0.41 points or 0.01% to 6,665.92 and Straits Times fell 2.45 points or 0.08% to 3,184.16.