Weak trade continues over Dalal Street

Weak trade continued over the Dalal Street in early noon deals, with both Sensex and Nifty falling around 0.40% each, on the back of negative cues from other Asian markets along with heavy selling at IT and TECK stocks. Traders remained cautious, as a private report stated that private equity and venture capital funds' investments in the country declined 5 per cent to $3.9 billion across 59 deals in July. Besides, another report stated that the Rs 1.3 lakh crore interest-free loans allotted to states for their capital expenditure needs are likely to remain underutilised by 20 percent in FY24. Meanwhile, the income tax department has come out with a draft form for various categories of businesses to report valuation of their inventories, including equity and debt securities, livestock or other raw material/by-products, by a cost accountant when asked by a tax officer.

On the global front, Asian markets were trading lower, even after the Malaysian trade surplus increased in July as imports fell faster than exports. The trade surplus rose to MYR 17.1 billion in July from MYR 15.8 billion in the same month last year. In June, the trade surplus was MYR 25.5 billion. Exports fell 13.1 percent yearly in July, slower than the 14.1 percent decline a month ago.

Back home, dairy industry stocks were in focus, as Crisil Ratings in its latest report has said that revenue of the organised dairy industry is likely to grow 14-16 per cent in 2023-24, on the back of strong demand for value added products and stable consumption of liquid milk. It said with raw milk supply improving, there will be fewer price hikes and profitability will recover 20-50 basis points.

The BSE Sensex is currently trading at 64862.07, down by 288.95 points or 0.44% after trading in a range of 64786.59 and 65042.68. There were 7 stocks advancing against 23 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index fell 0.39%, while Small cap index was down by 0.21%.

The few gaining sectoral indices on the BSE were Power up by 1.11%, Utilities up by 0.97%, Capital Goods up by 0.16% and FMCG up by 0.10%, while IT down by 1.41%, TECK down by 1.16%, Metal down by 0.94%, PSU down by 0.73% and Energy down by 0.72% were the top losing indices on BSE.

The top gainers on the Sensex were Axis Bank up by 0.64%, Hindustan Unilever up by 0.55%, Larsen & Toubro up by 0.49%, Maruti Suzuki up by 0.40% and Bharti Airtel up by 0.26%. On the flip side, TCS down by 2.02%, Tech Mahindra down by 1.73%, Wipro down by 1.69%, Infosys down by 1.29% and Tata Steel down by 0.99% were the top losers.

Meanwhile, concerned over the practice of banks and Non-Banking Financial Companies (NBFCs) using penal interest as a revenue enhancement tool, Reserve Bank of India (RBI) has came out with modified norms, under which lenders would be able to levy only ‘reasonable’ penal charges in case of default in repayment of loans. It said the banks and other lending institutions will not be allowed to levy penal interest with effect from January 1, 2024.

RBI its notification on 'Fair Lending Practice-Penal Charges in Loan Accounts' has said penalty, if charged, for non-compliance of material terms and conditions of loan contract by the borrower shall be treated as 'penal charges' and shall not be levied in the form of 'penal interest' that is added to the rate of interest charged on the advances. It further said the quantum of penal charges ‘shall be reasonable and commensurate with the noncompliance’ of material terms and conditions of loan contract without being discriminatory within a particular loan/product category. Also, there shall be no capitalisation of penal charges -- no further interest computed on such charges.

However, it said the instructions will not apply to credit cards, external commercial borrowings, trade credits and structured obligations which are covered under product-specific directions. It also said that many entities regulated by it use penal rates of interest, over and above the applicable interest rates, in case of defaults/non-compliance by the borrower. The intent of levying penal interest/charges is essentially to inculcate a sense of credit discipline and such charges are not meant to be used as a revenue enhancement tool over and above the contracted rate of interest.

The CNX Nifty is currently trading at 19287.55, down by 77.70 points or 0.40% after trading in a range of 19253.60 and 19329.75. There were 13 stocks advancing against 37 stocks declining on the index.

The top gainers on Nifty were Adani Enterprises up by 3.86%, Adani Ports and Special Economic Zone up by 2.95%, Eicher Motors up by 1.23%, Axis Bank up by 0.81% and Larsen & Toubro up by 0.48%. On the flip side, Coal India down by 2.11%, Hero MotoCorp down by 1.93%, TCS down by 1.86%, Wipro down by 1.76% and Hindalco down by 1.68% were the top losers.

All Asian markets were trading lower; Hang Seng declined 314.01 points or 1.74% to 18,012.62, Nikkei 225 slipped 175.24 points or 0.56% to 31,450.76, Taiwan Weighted lost 135.35 points or 0.83% to 16,381.31, Jakarta Composite plunged 32.2 points or 0.47% to 6,868.34, Straits Times fell 26.64 points or 0.84% to 3,170.11, Shanghai Composite weakened 25.04 points or 0.8% to 3,138.70 and KOSPI dropped 15.35 points or 0.61% to 2,504.50.