Erasing their initial gains, Indian markets settled in negative territory with Nifty and Sensex breaching their psychologically crucial 9150 and 29,400 mark, respectively. The equity benchmarks made a positive start and traded in fine fettle in early deals taking support from the International Monetary Fund’s (IMF) report on Fiscal Monitor which highlighted that India has recorded quite an impressive growth performance in recent years which makes room for tax broadening efforts by the government. The report also stated that India returned to fiscal consolidation in the fiscal year 2016-17 largely due to the near-elimination of fuel subsidies and enhanced targeting of social benefits, notwithstanding the impact of demonetization. Separately, after witnessing a decline in the month of February, the share of Foreign Portfolio Investments (FPI) in domestic capital markets through participatory notes (P-notes) have surprisingly surged to 4-month high of Rs 1.78 lakh crore at the end of March despite stringent norms put in place by SEBI to curb inflow of illicit funds.
Selling crept in after deputy governor of RBI SS Mundra stated that the Indian government and the Reserve Bank of India had not yet reached an agreement on a new plan to clean up the record troubled debt accumulated at the country’s lenders. Further, RBI’s monetary policy committee cited upside risks to inflation arising from price pressure excluding food and fuel as the main reason for keeping its policy rate unchanged, according to minutes of its April meeting released. The six-member monetary policy committee (MPC), which aims to bring down inflation to 4% in the medium term, maintained its hawkish stance on inflation, with most members expressing concern over upside risks to core inflation. Meanwhile, Fitch’s report raised concerns that RBI’s updated prompt corrective action (PCA) rules can potentially impact more than half of the NPA-laden state-run banks. It said that more than half of state-owned banks would breach at least one of the new thresholds, mainly owing to high NPLs, based on their latest financial reports.
On the global front, Asian markets closed mostly in green, barring Hong Kong stock exchange. Japan stocks closed higher as gains in the Automobiles & Parts, Rubber and Banking sectors led shares higher. Japanese manufacturing activity expanded at a stronger pace in April as export orders surged in a further sign of robust global demand. The Flash Markit/Nikkei Japan Manufacturing Purchasing Managers Index (PMI) rose to 52.8 in April on a seasonally adjusted basis, from a final 52.4 in the previous month. European markets were trading mostly in red after a suspected terrorist attack in France, just two days ahead of a key presidential vote.
The BSE Sensex ended at 29360.30, down by 62.09 points or 0.21% after trading in a range of 29259.42 and 29584.34. There were 7 stocks advancing against 23 stocks declining on the index. (Provisional)
The broader indices ended in green; the BSE Mid cap index was up by 0.01%, while Small cap index was up by 0.22%. (Provisional)
The top gaining sectoral indices on the BSE were Realty up by 2.34%, Energy up by 0.80%, Telecom up by 0.39%, Utilities up by 0.32% and Power up by 0.30%, while FMCG down by 1.00%, Healthcare down by 0.81%, Metal down by 0.75%, Basic Materials down by 0.48% and IT down by 0.44% were the top losing indices on BSE. (Provisional)
The top gainers on the Sensex were HDFC Bank up by 2.59%, Reliance Industries up by 2.38%, NTPC up by 1.83%, Asian Paints up by 0.42% and Larsen & Toubro up by 0.40%. (Provisional)
On the flip side, Sun Pharma down by 2.65%, Adani Ports & Special Economic Zone down by 1.85%, ITC down by 1.84%, Cipla down by 1.84% and Lupin down by 1.39% were the top losers. (Provisional)
Meanwhile, Fitch Ratings, the international ratings agency in its latest report has said that more than half of the country’s Public Sector Banks (PSBs) can be impacted by the Reserve Bank of India’s (RBI) revised Prompt Corrective Action (PCA) framework and they would breach at least one of the new thresholds, primarily due to high non-performing loans (NPLs).
The report stated that the RBI's PCA framework suggests a greater willingness to regulatory action to address problems of struggling banks. However, it noted that the implementation of the new rules is only expected to be effective if it is matched by credible plans to address banks' significant asset quality issues and capital shortages. The report underscored that the central bank has tightened the thresholds for capital ratios, NPLs, profitability and leverage at which banks enter the PCA framework. It also said that this appears to be an acknowledgement of stressed assets and that more banks need regulatory intervention. It observed that the RBI has given itself greater discretion in terms of the measures it can use to intervene in banks once they fall under the PCA framework.
Fitch further said that PCA was previously viewed as an extraordinary step which the central bank avoided but the same is set to change now. It also noted that under the previous framework, the central bank’s powers were restricted to bank lending but the scope for possible regulatory actions has been broadened under the amended framework and added that it remains uncertain to what extent the RBI will use the tools.
The CNX Nifty ended at 9119.30, down by 17.10 points or 0.19% after trading in a range of 9088.75 and 9183.65. There were 15 stocks advancing against 36 stocks declining on the index. (Provisional)
The top gainers on Nifty were Bharti Infratel up by 2.99%, Reliance Industries up by 2.52%, HDFC Bank up by 2.51%, NTPC up by 2.02% and Tech Mahindra up by 1.65%. (Provisional)
On the flip side, Wipro down by 2.68%, Sun Pharma down by 2.66%, Bank of Baroda down by 2.39%, Adani Ports & Special Economic Zone down by 1.93% and Grasim Industries down by 1.86% were the top losers. (Provisional)
The European markets were trading mostly in red; UK’s FTSE 100 decreased 9.83 points or 0.14% to 7,108.71, France’s CAC decreased 27.12 points or 0.53% to 5,050.79, while Germany’s DAX increased 6.97 points or 0.06% to 12,034.29.
Asian equity markets ended mostly in green on Friday after a strong session in the US that reflected solid corporate earnings and renewed expectations for tax cuts and fiscal stimulus from the Trump administration. US Treasury Secretary Steven Mnuchin indicated on Thursday that the Trump administration is close to bringing forward a major tax reform plan ‘very soon’, regardless of the outcome of a healthcare overhaul bill. The Japanese yen weakened and crude prices rose after four days of losses, further supporting sentiment heading toward the Sunday presidential election in France. The outcome is too close to call, although polls show centrist candidate Emmanuel Macron with a narrow lead. Investors also kept an eye on other developments in France after a French policeman was shot dead in Paris and two others were wounded in a suspected terrorist attack. Japanese shares ended higer as bets that US tax reforms are gaining traction and comments from a Federal Reserve official affirming that three Fed rate hikes this year remain appropriate helped weaken the yen against the dollar. Further, Chinese shares ended marginally higher but posted their worst weekly loss this year on concerns over cooling growth and tightening regulatory scrutiny.
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