Benchmarks pare early gains; continue trade in green

Indian equity benchmarks, despite paring their early morning gains continued to trade in the green in the afternoon session amid buying witnessed in risk-sensitive stocks such as banking and auto as investors’ sentiments got support after the Reserve Bank of India (RBI) reduced the marginal standing facility (MSF) rate by a 50 basis points (bps) to 9%. Further, gain in rupee value against the dollar and firm Asian cues also added to the optimistic sentiments. Buying was also witnessed in Capital Goods and Consumer Durable stocks. However, markets came down from their day’s high level as investors were seen selling stocks of IT, Media and Metal stocks. On stock specific movement, L&T, ICICI Bank and Bharti Airtel were trading up by over 2%, while, Coal India and Hindalco Inds were trading down by over 1%.

On the global front, most of the Asian markets were trading in green with Japanese index Nikki up by 0.30% as investors opted to buy beaten down but fundamentally strong stocks, the gains, however remained capped amid concerns about the looming U.S. debt ceiling deadline. Back home, the NSE Nifty and BSE Sensex were trading above their psychological 5900 and 20,000 levels respectively. The market breadth on BSE was positive, out of 2,059 stocks traded, 1,141 stocks advanced, while 797 stocks declined on the BSE. 

The BSE Sensex is currently trading at 20,018.00 up by 122.90 points or 0.62% after trading in a range of 20,150.27 and 19,983.90. There were only 18 stocks advancing against 12 declines on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.41%, while Small cap index up by 0.53%.

The gaining sectoral indices on the BSE were Capital Goods up by 1.64%, Realty up by 1.52%, Bankex up by 1.37%, Consumer Durables up by 0.93% and Auto up by 0.89%. While, Metal down by 0.42% and oil and Gas down by 0.09% were remained the only losing indices on BSE.

The top gainers on the Sensex were L&T up by 2.55%, ICICI Bank up by 2.35%, Bharti Airtel up by 2.25%, Tata Motors up by 1.90% and Tata Power up by 1.65%. On the flip side, Coal India down by 1.72%, Hindalco Inds down by 1.23%, Tata Steel down by 0.58%, SSLT down by 0.56% and Cipla down by 0.52% were the only losers on the Sensex.

Meanwhile, concerned over the rising cases of loan defaults, Indian banks have set strict norms for offering loan restructuring to promoters who have run businesses aground. After Reserve Bank of India governor Raghuram Rajan's stern message against defaulters and failed managements, lenders have started taking more careful steps while restructuring loans and have decided to go ahead with restructuring on a loan only after ascertaining that the project is viable and the promoter has not siphoned off funds, or diverted funds to any other project.

Further, banks are now seeking upfront commitment from borrowers in form of guarantee. At Corporate Debt Restructuring (CDR), banks have made it mandatory that promoters' contribution at 25% of bank’s loan should be made upfront and if the borrower fails to repay loans, the CDR package is withdrawn and lenders can take legal action for recovery of loans.

Recently, the RBI has noted that promoters don’t have the right to use the banking system to recapitalize their failed ventures and suggested the banks to take careful steps while restructuring loans, a method used by banks with outstanding debt obligations to alter the terms of the debt agreements to avoid default on existing debt. The stress on the asset quality is a reflection of slowdown in the economy of the country and over the past two years, non-performing Assets (NPAs) of banks have been increasing on account of prevailing economic downturn. In the April- June quarter, 2013, gross NPAs in the banking system grew by 12.02 percent to Rs. 2.06 trillion and formed 3.85 percent of the industry’s advances.

The CNX Nifty is currently trading at 5,929.70 up by 23.55 points or 0.40% after trading in a range of 5,981.70 and 5,929.15. There were 32 stocks advancing against 18 declines on the index.

The top gainers of the Nifty were L&T up by 2.55%, ICICI Bank up by 2.09%, Tata Motors up by 1.84%, Indusin Bank up by 1.81% and Bharti Airtel up by 1.67%. On the flip side, BPCL down by 2.05%, Coal India down by 1.83%, Hindalco down by 1.11%, HCL Tech down by 0.86% and SSLT down by 0.85% were the major losers on the index.

The Asian equity indices were trading in green; Jakarta Composite up by 1.05%, Shanghai Composite up by 0.98%, Seoul Composite up by 0.42%, Hang Seng up by 1.04%, Straits Times up by 0.34%, Nikki 225 up by 0.30%, Taiwan Weighted up by 0.50%. While, KLSE Composite down by 0.07%.