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Indian benchmarks display spirited performance on Friday
Sep-25-2020

Snapping their six-session losing run, Indian equity benchmarks displayed spirited performance on Friday by clocking handsome gains of over two percent in the session, due to across-the-board buying even as the risks and worries over Covid-19 and economy remained. Key gauges traded on positive note since the beginning, as traders took encouragement with report that the government has extended the suspension of insolvency proceedings for any COVID-19 related default by a period of three months, effective from September 25. The Insolvency & Bankruptcy Code (IBC) was suspended for a period of six months with effect from March 25, 2020, by the government earlier, to protect those experiencing financial distress on account of the pandemic. However, Indian equities climbed off the opening highs in late morning deals as domestic rating agency India Ratings and Research (Ind-Ra) has maintained a negative outlook on non-banking financial companies (NBFCs) and housing finance companies (HFCs) for the second half of 2020-21 (2HFY21) amid Coronavirus disease (COVID-19) related business disruptions.

Though, domestic indices regained traction by adding more strength in second half of the session, supported by stronger Asian peers on hopes of US stimulus. Some support came in with report that the Reserve Bank of India (RBI) has announced it will conduct simultaneous purchase and sale of government securities under open market operation (OMO) for an aggregate amount of Rs 10,000 crore each on October 1. Adding the optimism among the investors, International Monetary Fund (IMF) said that Prime Minister Narendra Modi’s ‘Aatmanirbhar Bharat’ is an important initiative. The economic package under this self-reliant India initiative, which was announced in the aftermath of the coronavirus shock, has supported the Indian economy and mitigated significant downside risks. 

On the global front, Asian Markets ended mostly higher on Friday, with investor sentiment lifted by reports that U.S. Democrats are drafting a new $2.4 trillion relief bill, aimed at resuming the stalled stimulus talks with Republicans. European markets were trading lower, as investors fretted over new coronavirus restrictions and the potential impact on economic growth. Authorities have warned of tougher times in Spain as the country's cumulative tally of confirmed coronavirus infections passed 700,000 on Thursday. Back home, on the sectoral front, majority of stocks related to pharma sector ended higher as ratings agency CRISIL stated that higher exports will help the Indian pharmaceutical sector come out ‘unscathed’ from the coronavirus pandemic and deliver a marginally lower 9 percent revenue growth. It noted that exports and domestic formulations account for an almost equal share in the Rs 2.8-lakh crore domestic pharma sector. Stocks related to steel sector also were buzzing as the government stressed the need to cut import dependence for special grade steel, exhorting the domestic players to go for research and development activities and take required measures to make India self-reliant in value-added steel production.

Finally, the BSE Sensex rose 835.06 points or 2.28% to 37,388.66, while the CNX Nifty was up by 244.70 points or 2.26% to 11,050.25.

The BSE Sensex touched high and low of 37,471.17 and 36,730.52, respectively and all 30 stocks were advancing on the index. 

The broader indices ended in green; the BSE Mid cap index rose 2.90%, while Small cap index was up by 2.31%.

The top gaining sectoral indices on the BSE were Telecom up by 5.73%, TECK up by 4.02%, IT up by 3.63%, Auto up by 3.40% and Capital Goods up by 3.10%, while there were no losing sectoral indices on the BSE.

The top gainers on the Sensex were Bajaj Finserv up by 6.64%, HCL Technologies up by 5.01%, Bharti Airtel up by 4.98%, Indusind Bank up by 4.97% and Larsen & Toubro up by 4.58%, while there were no losers.

Meanwhile, domestic rating agency India Ratings and Research (Ind-Ra) has maintained a negative outlook on non-banking financial companies (NBFCs) and housing finance companies (HFCs) for the second half of 2020-21 (2HFY21) amid Coronavirus disease (COVID-19) related business disruptions. It said growth in assets under management would be flattish for NBFCs as against its earlier estimate of 8-10 percent y-o-y, and in lower single digits for HFCs in 2020-21. It noted that considering the unabated spread of the virus at pan-India level, time required for NBFC operations to return to normalcy could be prolonged. 

According to the report, although the liquidity and funding environment has improved for better-rated entities after July, there would be asset quality issues impacting overall profitability in 2020-21 and beyond. It also said the sector's capitalisation remains reasonable, given the muted growth outlook, to absorb moderate asset quality stress. It stated that NBFCs have increased their focus on collections and have tightened underwriting standards, and so portfolio growth would take a back seat.

The report further said to that extent, there could be some relief on credit costs; however, slippages could be higher for certain segments, resulting into higher credit costs. For NBFCs, it said the proportion of restructured book of the total assets under management could be in high single digits. Some of the segments which can witness higher asset quality pressure are commercial vehicles (CV), real estate loans and big ticket loans to SMEs.  

The CNX Nifty traded in a range of 11,072.60 and 10,854.85 and there were 47 stocks advancing against 3 stocks declining on the index.

The top gainers on Nifty were Bajaj Finserv up by 6.60%, HCL Technologies up by 5.30%, Cipla up by 5.12%, Bharti Airtel up by 4.94% and Larsen & Toubro up by 4.44%. On the flip side, SBI Life Insurance down by 1.11%, BPCL down by 0.86% and UPL down by 0.58% were the few losers.

European markets were trading lower; UK’s FTSE 100 decreased 32.68 points or 0.56% to 5,790.10, France’s CAC fell 80.66 points or 1.69% to 4,681.96 and Germany’s DAX was down by 210.18 points or 1.67% to 12,396.39.

Asian Markets ended mostly higher on Friday, tracking Wall Street gains overnight despite worries about surging corona virus pandemic cases globally. Further, hopes for new economic stimulus in the United States with encouraging housing data too supported market sentiment. New home sales occurred at a seasonally-adjusted, annual rate of 1.011 million, the Census Bureau reported . That represents a 4.8% increase from an upwardly-revised pace of 965,000 homes in July. Compared with last year, new home sales are up 43%. US Federal Reserve Chair Jerome Powell and Treasury Secretary Steven Mnuchin said that the new economic relief package could help households and businesses. Reports showed that US Democrats are drafting a new $2.4 trillion relief bill, aimed at resuming the stalled stimulus talks with Republicans. Shanghai shares fluctuated before settling tad lower amid worries over resurgence of covid-19 cases globally.

Asian Indices

Last Trade           

Change in Points

Change in %

Shanghai Composite

3,219.42
-3.76
-0.12

Hang Seng

23,235.42
-75.65
-0.32

Jakarta Composite

4,945.79
103.03
2.13

KLSE Composite

1,509.14

8.34

0.56

Nikkei 225

23,204.62
116.80
0.51

Straits Times

2,472.28
21.46
0.88

KOSPI Composite

2,278.79
6.09
0.27

Taiwan Weighted

12,232.91
-31.47
-0.26
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