Benchmarks extend losses in morning deals

Indian equity benchmarks extended losses in morning deals, due to sustained selling by foreign institutional investors (FIIs) and the weak Q2 numbers. Traders remained cautious as Union Finance Minister Nirmala Sitharaman stressed that job creation is the most critical issue worldwide, particularly given the persistent economic challenges and rapid technological advancements that are reshaping the labor market. Some concern also came with ratings agency ICRA’s report stating that the slew of regulatory measures and tighter funding conditions in the domestic markets to result in a steady slowdown in credit growth for the lenders, i.e. banks and non-bank financial companies (NBFCs). It estimates the incremental bank credit growth to slow down to Rs. 19.0-20.5 trillion in FY2025, which will translate into a YoY growth of around 12%, compared to Rs. 22.3 trillion in FY2024 (YoY growth of 16.3%). On the global front, Asian markets are trading mostly in green even as a cautious undertone prevailed due to investor anxiety over the impending U.S. election and heightened tensions in the Middle East.

The BSE Sensex is currently trading at 79620.55, down by 444.61 points or 0.56% after trading in a range of 79598.25 and 80253.19. There were 12 stocks advancing against 18 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index fell 1.78%, while Small cap index was down by 2.15%.

The few gaining sectoral indices on the BSE were FMCG up by 1.30% and IT up by 0.02%, while Consumer Durables down by 2.69%, PSU down by 2.64%, Metal down by 2.62%, Oil & Gas down by 2.45% and Auto down by 2.33% were the top losing indices on BSE.

The top gainers on the Sensex were ITC up by 4.12%, Axis Bank up by 1.10%, Asian Paints up by 1.01%, Nestle up by 0.97% and TCS up by 0.90%. On the flip side, Indusind Bank down by 17.84%, Mahindra & Mahindra down by 3.93%, Tata Steel down by 2.18%, Adani Ports &SEZ down by 2.13% and NTPC down by 2.13% were the top losers.

Meanwhile, Ratings agency ICRA has said that the slew of regulatory measures and tighter funding conditions in the domestic markets to result in a steady slowdown in credit growth for the lenders, i.e. banks and non-bank financial companies (NBFCs). It estimates the incremental bank credit growth to slow down to Rs. 19.0-20.5 trillion in FY2025, which will translate into a YoY growth of around 12%, compared to Rs. 22.3 trillion in FY2024 (YoY growth of 16.3%). 

For the NBFCs, the growth in assets under management (AUM) is expected to slow down sharply to 16-18% in FY2025 from 25% in FY2024. The recent regulatory actions on certain entities are expected to push others to adjust their business practices and models, which shall also have a bearing on near-term growth. The share of the retail segment and the NBFCs in the incremental credit flow of banks declined to 42.9% in 12 months ending August 2024 from 48.9% for the corresponding period of the previous year, driven by slower flow of credit to the NBFCs. As a sizeable portion of bank credit flow to the NBFCs is towards on-lending to the retail segments, overall credit to the retail segment may slow down in the next 12-18 months. 

Anil Gupta, Senior Vice President & Co-Group Head - Financial Sector Ratings, ICRA said ‘The regulatory measures to slow down bank credit growth will be crucial for banks to cut their deposit rates, once the rate cut cycle starts. This will especially be important for maintaining the margins, as the cut in policy rates expected in H1 CY2025 will exert a downward pressure on lending rates. However, the proposed changes in guidelines for liquidity coverage ratio could mean that the immediate cut in deposit rates may not be very substantial, resulting in delayed transmission.’

The CNX Nifty is currently trading at 24214.50, down by 184.90 points or 0.76% after trading in a range of 24211.45 and 24440.25. There were 11 stocks advancing against 39 stocks declining on the index.

The top gainers on Nifty were ITC up by 4.13%, Britannia Industries up by 1.14%, Axis Bank up by 1.11%, Nestle up by 1.07% and TCS up by 0.89%. On the flip side, Indusind Bank down by 17.90%, Shriram Finance down by 4.18%, Mahindra & Mahindra down by 3.81%, Bharat Electronics down by 3.54% and BPCL down by 3.50% were the top losers.

Asian markets are trading mostly in green; Shanghai Composite strengthened 26.88 points or 0.81% to 3,307.14, Taiwan Weighted added 80.61 points or 0.35% to 23,273.13, Hang Seng advanced 230.98 points or 1.11% to 20,720.60 and KOSPI increased 2.50 points or 0.1% to 2,583.53.

On the flip side, Straits Times fell 18.04 points or 0.5% to 3,586.91, Jakarta Composite plunged 10.51 points or 0.14% to 7,706.04 and Nikkei 225 slipped 320.79 points or 0.84% to 37,822.50.