Markets continue to trade in green in afternoon deals

Domestic equity markets continued to trade in green in afternoon deals on account of buying in Kotak Mahindra Bank, Bharti Airtel, Tech Mahindra and NTPC companies’ stocks. Meanwhile, broader indices were also trading in green with BSE Mid cap index and Small cap index gaining in the range of 0.25-0.80%. Traders were getting encouragement with private report India is likely to experience a normal southwest monsoon in 2024. This prediction offers a glimmer of hope in the ongoing battle against inflation. The sentiments were also supported by Indian rupee appreciating 9 paise to 83.22 against the dollar at the Interbank Foreign Exchange on increased selling of the US currency by exporters and banks. On the BSE sectoral front, traders were seen pilling up position in Oil & Gas, Energy, Metal, PSU and Basic Materials, while selling was witnessed in Telecom, Auto and Healthcare.

On the global front, Asian markets were trading mostly in red as Japan’s corporate inflation climbed in March. Japan’s corporate inflation rate came in at 0.8% for March. Back home, in the stock specific development, Ramco Systems was locked at upper circuit on the BSE after the largest South Korean airline - Korean Air signed a multi-million dollar deal with the company for its aviation software Ramco Aviation.

The BSE Sensex is currently trading at 74867.47, up by 183.77 points or 0.25% after trading in a range of 74807.55 and 74983.34. There were 19 stocks advancing against 11 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.73%, while Small cap index up by 0.26%.

The top gaining sectoral indices on the BSE were Oil & Gas up by 1.96%, Energy up by 1.75%, Metal up by 1.47%, PSU up by 1.22% and Basic Materials up by 1.01%, while Telecom down by 0.58%, Auto down by 0.15% and Healthcare down by 0.11% were the top losing indices on BSE.

The top gainers on the Sensex were Kotak Mahindra Bank up by 1.59%, Bharti Airtel up by 1.32%, NTPC up by 1.24%, Tech Mahindra up by 1.17% and Power Grid up by 0.98%. On the flip side, Maruti Suzuki down by 1.41%, Sun Pharma down by 0.80%, Mahindra & Mahindra down by 0.52%, Bajaj Finserv down by 0.51% and HDFC Bank down by 0.43% were the top losers.

Meanwhile, Credit rating agency ICRA has revised the banking sector outlook to Stable from Positive on the expectation of moderation in credit growth and profitability metrics, though the same would continue to remain healthy. It said while the compression in the interest margins over the last 18 months has been driven by rising deposit cost, the expectations of a rate cut in H2 FY2025 could lead to margin pressure, driven by a likely downward repricing of advances. Notwithstanding the margin compression, it said the growth in loan book shall translate into steady operating profits, aided by benign credit costs. ICRA expects this to drive healthy earnings, that will largely be sufficient for most banks to meet their regulatory as well as growth capital requirements.

According to the report, the credit to deposit ratio (CD ratio) for the banks is estimated to have increased to 78% (excluding the merger of HDFC) as on March 22, 2024, the highest since December 21, 2018 (77.9%) and much higher compared to 75.7% as on March 24, 2023, and 71.9% as on March 25, 2022. This will pose significant challenges for the banks to pursue credit growth as their on-balance sheet liquidity has been deployed towards strong credit growth during the last two years. The CD ratio is likely to remain elevated at 77-78% (excluding HDFC merger) and over 80% (including HDFC merger) at the sector level in FY2025, even though some of the private banks may see a decline, while some of the public banks may see an increase in their CD ratio.

Rating agency expects the headline asset quality metrics of the banking sector to remain on an improving trajectory. Gross and net additions to non-performing advances (NPAs) are likely to increase amid seasoning of recently originated book and slower recoveries and upgrades as low hanging resolutions and recoveries are largely completed. However, continued growth in the loan book would lead to an improvement in the headline asset quality metrics. ICRA expects the gross NPAs (GNPAs) and net NPAs (NNPAs) to decline to 2.1-2.3% and 0.5-0.6%, respectively, by March 2025 from 3.0% and 0.7%, respectively, estimated for March 31, 2024, which would remain the best in more than a decade. Notwithstanding this, ICRA remains cautious about the impact of macro-economic shocks such as slowdown in credit growth, and high interest rates locally as well as in developed markets on the asset quality, if these were to materialise.

The CNX Nifty is currently trading at 22691.90, up by 49.15 points or 0.22% after trading in a range of 22673.70 and 22727.25. There were 28 stocks advancing against 22 stocks declining on the index.

The top gainers on Nifty were BPCL up by 3.16%, Coal India up by 2.56%, Kotak Mahindra Bank up by 1.73%, Hindalco up by 1.68% and Bharti Airtel up by 1.30%. On the flip side, HDFC Life Insurance down by 1.91%, Divi's Lab down by 1.80%, Cipla down by 1.64%, SBI Life down by 1.46% and Maruti Suzuki down by 1.34% were the top losers.

Asian markets were trading mixed; Nikkei 225 slipped 191.32 points or 0.48% to 39,581.81, Taiwan Weighted lost 32.67 points or 0.16% to 20,763.53 and Shanghai Composite weakened 30.08 points or 0.99% to 3,018.46. However, Hang Seng advanced 244.36 points or 1.45% to 17,072.43.