Selling continues to hit Indian markets

In early afternoon deals, a selling pressure continued in Indian equity markets, as weak commodity prices, concerns about global economic growth and uncertainty about the pace of U.S. interest rate cuts weighed on the markets. Traders were cautious, as think tank GTRI said that the World Bank's suggestion for India to reconsider joining RCEP (Regional Comprehensive Economic Partnership) is based on flawed assumptions and outdated projections. It said that for developing countries like India, policy decisions must be rooted in real-world data and a thorough understanding of the long-term implications. Adding some concerns, a private report stated that despite robust macro-economic growth, India grapples with micro unpredictability due to technology among others.

On the global front, Asian markets were trading mostly in red, as China's service sector continued to expand but the pace of expansion eased since July on softening incoming new business. The headline Caixin services Purchasing Managers' Index posted 51.6 in August, down from 52.1 in July and forecast of 51.9. The index has remained above the threshold of 50.0 for the 20th straight month but growth in activity was among the lowest in the year-to-date.

The BSE Sensex is currently trading at 82171.17, down by 384.27 points or 0.47% after trading in a range of 81833.69 and 82199.94. There were 9 stocks advancing against 21 stocks declining on the index.

The broader indices were trading mixed; the BSE Mid cap index fell 0.44%, while Small cap index was up by 0.21%.

The few gaining sectoral indices on the BSE were Healthcare up by 0.47%, Basic Materials up by 0.02% and FMCG up by 0.01%, while IT down by 1.46%, Metal down by 1.30%, TECK down by 1.29%, Telecom down by 0.86% and PSU down by 0.80% were the top losing indices on BSE.

The top gainers on the Sensex were Asian Paints up by 2.80%, Hindustan Unilever up by 1.12%, Ultratech Cement up by 0.61%, Sun Pharma up by 0.45% and Nestle up by 0.26%. On the flip side, Infosys down by 1.86%, Mahindra & Mahindra down by 1.56%, Axis Bank down by 1.36%, Larsen & Toubro down by 1.24% and TCS down by 1.16% were the top losers.

Meanwhile, CRISIL Ratings in its latest report has said that education loans, primarily those to fund courses overseas, will continue to be among the fastest-growing segments for non-banking financial companies (NBFCs) because of rising demand for higher education. After robust growth of over 80% and 70% in fiscals 2023 and 2024, respectively, NBFCs’ education loan assets under management (AUM) rose to around Rs 43,000 crore as on March 31, 2024. Their AUM is expected to grow at a healthy clip of 40-45% to cross Rs 60,000 crore this fiscal. On the asset quality front, metrics should remain stable despite country-specific concerns.

According to the report, strong micro-market intelligence and fast turnaround times have allowed NBFCs to carve out a niche in the education loans space. Their specialised business model - backed by strong understanding of relevant geographies, courses, universities, tenures and profiles of students and their families -affords customisation of products, enabling better assessment of employability and risk-adjusted pricing. The portfolio performance of these NBFCs have been resilient so far based on strong credit underwriting. Their 90 plus days’ past due (dpd), for education loans, was around 0.2% as on March 31, 2024, whereas for private and public sector banks, gross non-performing assets were 2.0% and 3.9%, respectively. Peak quarterly delinquency on the vintage pool of 90 plus dpd for NBFCs was also below 1%.

Nevertheless, it said these NBFCs have shown agility in navigating country-specific concerns. For instance, while the US, the UK and Canada are preferred destinations, NBFCs have reduced exposure to Indian students studying in Canada to around 15% as on March 31, 2024, from around 21% two years ago. This has been in response to changes in the regulatory and operating environment there. That said, healthy capitalisation supported by investor interest has backed the credit risk profile and growth of these NBFCs. Their ability to continue growing while maintaining asset quality--even as a higher portion of the portfolio comes out of moratorium amid the evolving global macro environment--will bear watching.

The CNX Nifty is currently trading at 25140.55, down by 139.30 points or 0.55% after trading in a range of 25083.80 and 25158.40. There were 14 stocks advancing against 36 stocks declining on the index.

The top gainers on Nifty were Asian Paints up by 2.86%, Hindustan Unilever up by 1.01%, Grasim Industries up by 0.92%, Apollo Hospital up by 0.72% and Ultratech Cement up by 0.60%. On the flip side, Wipro down by 3.23%, ONGC down by 3.09%, Coal India down by 2.74%, Hindalco down by 2.02% and LTIMindtree down by 1.93% were the top losers.

Asian markets were trading mostly in red; Hang Seng declined 235.58 points or 1.35% to 17,415.91, Shanghai Composite weakened 18.84 points or 0.68% to 2,784.14, Straits Times fell 49.38 points or 1.44% to 3,430.96, KOSPI dropped 83.83 points or 3.25% to 2,580.80, Nikkei 225 slipped 1638.7 points or 4.42% to 37,047.61 and Taiwan Weighted lost 999.46 points or 4.74% to 21,092.75, while Jakarta Composite gained 45.7 points or 0.6% to 7,662.22.