Domestic indices remain in red in late morning deals

Domestic equity indices remained in red and were trading lower with cut of over half a percent in late morning deals on account of profit booking at higher levels. Selling in Infosys, Mahindra & Mahindra, Axis Bank, Tech Mahindra and TCS weighed on the markets. Weak cues from the global markets also weighed on the domestic sentiments. Traders overlooked report that India's services sector experienced its fastest growth in five months this August, driven by resilient demand and easing inflationary pressures, according to HSBC India Services Purchasing Managers' Index (PMI), compiled by S&P Global. India's PMI climbed to 60.9 in August, up from July's 60.3, surpassing the preliminary estimate of 60.4. Paint industry related stocks were trading higher on the back of a fall in crude oil prices. Asian Paints, Berger Paints India, Shalimar Paints, Kansai Nerolac Paints, Indigo Paints, and Akzo Nobel India traded higher.  

On the global front, Asian markets were trading mostly in red following negative cues from the US markets overnight. Sentiments were weak after weak U.S. economic data sparked recession fears. Back home, on the BSE sectoral front, almost all the sectoral indices on BSE were trading in red; however stocks from Healthcare counter was the only exception. Stocks from IT, Metal, TECK, Auto and Telecom counters were the prominent losers of the session.

The BSE Sensex is currently trading at 82128.65, down by 426.79 points or 0.52% after trading in a range of 81833.69 and 82199.94. There were 7 stocks advancing against 23 stocks declining on the index.

The broader indices were trading mixed; the BSE Mid cap index was down by 0.51%, while Small cap index up by 0.14%.

The only gaining sectoral index on the BSE was Healthcare up by 0.17%, while IT down by 1.51%, Metal down by 1.45%, TECK down by 1.33%, Auto down by 0.94%, Telecom down by 0.79% were the losing top indices on BSE.

The top gainers on the Sensex were Asian Paints up by 2.34%, Hindustan Unilever up by 1.01%, Sun Pharma up by 0.51%, HDFC Bank up by 0.31% and Ultratech Cement up by 0.18%. On the flip side, Infosys down by 1.76%, Mahindra & Mahindra down by 1.74%, Axis Bank down by 1.46%, Tech Mahindra down by 1.46% and TCS down by 1.27% were the top losers.

Meanwhile, credit rating agency ICRA in its latest report has said that the increasing delinquencies in the microfinance sector, which is likely to push up the Non-banking finance companies - microfinance institutions (NBFC-MFI) credit costs to 320-340 bps in FY2025 from 220 bps in FY2024. It said the evolving asset quality risks will dampen sectoral growth and earnings in the current fiscal. While demand remains robust, ICRA expects the NBFC-MFIs’ AUM growth to significantly moderate to 17-19% in FY2025 from 29% in FY2024, given the rising concerns on asset quality and operational challenges. On the earnings front, it expects them to report a lower but healthy return on managed assets (RoMA) of 2.5-2.7% in FY2025 compared to a record high of 3.6% in FY2024. 

According to the report, the robust growth in the last two years has accentuated concerns about potential overleveraging of borrowers in certain regions. Further, it said farmers’ protests and the Karz Mukti Abhiyan in certain regions, especially Punjab and Haryana, have impacted collections and the asset quality. This, along with climatic conditions and operational challenges, including employee attrition, would keep the asset quality under pressure in the near term. As per ICRA’s estimates, non-performing assets (NPAs) have increased by 30 bps in Q1 FY2025.

The report said one of industry’s self-regulatory organisations, Microfinance Industry Network, recently introduced guardrails for responsible lending, to strengthen the lending practices and address concerns regarding the overleveraging of borrowers. The salient features include capping the overall microfinance indebtedness of a borrower to Rs 2 lakh while restricting the number of microfinance lenders to a maximum of four. In ICRA’s opinion, while these norms are expected to address the risk to some extent, adherence to the same remains monitorable. It expects some impact on the business volumes in the near term with some borrowers becoming ineligible for microfinance loans under the lending guardrails. It further stated that the NBFC-MFIs reported a marginal decline in assets under management (AUM) in Q1 FY2025. Increasing cost of funds and downward revisions in lending rates are likely to compress the interest margins of the NBFC-MFIs in FY2025. This, along with asset quality pressure, is expected to moderate their earnings in FY2025.

The CNX Nifty is currently trading at 25120.35, down by 159.50 points or 0.63% after trading in a range of 25083.80 and 25158.40. There were 8 stocks advancing against 42 stocks declining on the index.

The top gainers on Nifty were Asian Paints up by 2.26%, Grasim Industries up by 1.30%, Hindustan Unilever up by 0.96%, Sun Pharma up by 0.43% and HDFC Bank up by 0.33%. On the flip side, Wipro down by 3.43%, Coal India down by 3.12%, ONGC down by 2.81%, Hindalco down by 2.23% and LTIMindtree down by 1.99% were the top losers.

Asian markets were trading mostly in red; Hang Seng declined 189.24 points or 1.08% to 17,462.25, Shanghai Composite weakened 13.59 points or 0.49% to 2,789.39, Straits Times fell 51.07 points or 1.49% to 3,429.27, KOSPI dropped 85.95 points or 3.33% to 2,578.68, Nikkei 225 slipped 1731.95 points or 4.69% to 36,954.36 and Taiwan Weighted lost 897.87 points or 4.24% to 21,194.34. However, Jakarta Composite gained 36.55 points or 0.48% to 7,653.07.