Benchmarks extend early gains as RBI keeps key rate unchanged

Indian equity benchmarks extended early gains to trade near their intra-day high levels in the afternoon session as investors’ sentiments got a boost after the Reserve Bank of India (RBI) decided to keep repo rates unchanged at 7.75 percent. The central bank has also kept MSF rate unchanged at 8.75 percent and cash reserve ratio as 4 percent. All sectoral indices witnessed buying on BSE with realty as top gainer up by over 2.13% followed by bankex and capital goods both up by over 1.60%. On stock specific movement, HDFC 2.66%, SBI and Hero MotoCorp were trading up by over 2.30%, while, Jindal Steel, SSLT and Tata Motors were trading marginally lower on BSE. Among the banking stocks, Canara Bank surged around 6%, Bank of India up by 5%, SBI surged 6% and ICICI bank up by 5%.

Among other stocks, Kishore Biyani's Future Retail Limited was trading higher at Rs 350 crore following the sale of 22.5% stake in its life insurance venture to Industrial Investment Trust Limited (IITL). Multi Commodity Exchange ( MCX), rallied as much as 8.8 percent after the Forward Markets Commission (FMC) cleared Blackstone's proposal for increasing the stake. On the other hand, Sun Pharma Advanced Research Company (SPARC) slipped as much as 8.4 per cent in trade after the US health regulator disapproved its New Drug Application (NDA) for an anti-depressant product in its present form.

On global front, Asian markets were trading in green with Jakarta Composite up by 0.27%, while, Taiwan Weighted down by 0.05% and KLSE Composite down by 0.11%. Back home, the NSE Nifty and BSE Sensex were trading up their psychological 6,200 and 20,500 levels respectively. The market breadth on BSE was positive, out of 2,018 stocks traded, 1,173 stocks advanced, while 724 stocks declined on the BSE.

The BSE Sensex is currently trading at 20,816.39 up by 204.25 points or 0.99% after trading in a range of 20,917.57 and 20,568.70. There were 24 stocks advancing against only 6 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.90%, while Small cap index up by 0.54%.

The gaining sectoral indices on the BSE were Realty up by 2.13%, Bankex up by 1.81%, Capital Goods up by 1.69%, Auto up by 1.08%, Power up by 1.00% and Consumer Durable up by 0.59%. There were no losing indices on BSE.

The top gainers on the Sensex were HDFC up by 2.66%, SBI up by 2.64%, Hero MotoCorp up by 2.39%, BHEL up by 2.36% and Bajaj Auto up by 2.18%. On the flip side, Jindal Steel down by 1.13%, SSLT down by 0.67%, Tata Motors down by 0.46%, Wipro down by 0.30% and Cipla down by 0.14%.

Meanwhile, in an effort to ease the financial stress on banks amidst economic slowdown, the Reserve Bank of India (RBI) has floated a discussion paper on ‘Early recognition of financial distress, prompt steps for resolution and fair recovery for lenders: framework for revitalizing distressed assets in the economy’. The discussion paper outlines a corrective action plan that will incentivize early identification of problem cases, timely restructuring of accounts, which are considered to be viable, and taking prompt steps by banks for recovery or sale of unviable accounts.

The development comes amidst fear of bad loans hitting a record high of around Rs 2.9 trillion by the end of the fiscal or 4.5% of the total banking assets. Meanwhile, RBI Governor Raghuram Rajan too had earlier expressed his resolve to correct imbalances in the system.

Further, the discussion paper, which is open for public comments till January 1, suggests an early formation of a lenders' committee with timelines to agree to a plan for resolution and incentives for lenders to agree quickly to a plan through 'better regulatory treatment' of stressed assets. On the flip side, it also suggests more expensive borrowing for borrowers who do not co-operate with lenders in resolution. The proposals include an independent evaluation of large value restructuring with a focus on viable plans and fair sharing of losses between promoters and creditors. It also suggests takeout financing/refinancing possible over a longer period, without construing it as restructuring. Apart from the liberal attitude in allowing leveraged buyouts, the proposal encourages sector specific companies and private equity firms to play active role in stressed assets market.

The CNX Nifty is currently trading at 6,200.85 up by 61.80 points or 1.01% after trading in a range of 6,236 and 6,129.95. There were 42 stocks advancing against 8 declining on the index.

The top gainers of the Nifty were Indusind Bank up by 3.26%, PNB up by 3.22%, HDFC up by 2.70%, DLF up by 2.63% and BHEL up by 2.56%. On the flip side, Jindal Steel down by 0.85%, SSLT down by 0.69%, Ranbaxy down by 0.50%, Tata Motors down by 0.49% and Wipro down by 0.27% were the major losers on the index.

The Asian equity indices were trading mixed; Hang Seng up by 0.37%, Nikkei 225 up by 2.03%, Seoul Composite up by 0.62%, Jakarta Composite up by 0.27%. While, Taiwan Weighted down by 0.05%, KLSE Composite down by 0.11%, Straits Times down by 0.15% and Shanghai Composite down by 0.11%.