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Indian markets remain firm in early noon
Jan-15-2025

Indian equity benchmarks remained firm in early afternoon deals, with both Sensex and Nifty holding notable gains, on the back of heavy buying at Utilities, Power and Realty counters, despite negative cues from other Asian markets. Sentiments remained optimistic, amid a private report stating that India stands out as a promising market with vast untapped potential, as the country remains below the global average in product penetration across several key sectors. Besides, Commerce and Industry Minister Piyush Goyal has said that India is finalising free trade agreements (FTAs) only after extensive consultations with all the concerned stakeholders, noting that unlike in the past, these pacts are now fair, equitable and balanced. Citing the agreement with the four-European nation bloc EFTA, Goyal said that for the first time in the history of FTAs, India has received a commitment of $100 billion FDI (foreign direct investment) in this pact. 

On the global front, Asian markets were trading mostly in red, after South Korea's unemployment rate rose to the highest level in three-and-a-half years in December as political turmoil added economic uncertainty and weighed on business sentiment. The unemployment rate rose to a seasonally adjusted 3.7 percent in December from 2.7 percent in the previous month. This was the highest since June 2021.

The BSE Sensex is currently trading at 76759.16, up by 259.53 points or 0.34% after trading in a range of 76555.94 and 76991.05. There were 18 stocks advancing against 12 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index rose by 0.60%, while Small cap index was up by 0.85%.

The top gaining sectoral indices on the BSE were Utilities up by 3.03%, Power up by 2.59%, Realty up by 1.89%, PSU up by 1.45% and Telecom up by 1.33%, while Healthcare down by 0.97%, Auto down by 0.17% and FMCG down by 0.14% were the few losing indices on BSE.

The top gainers on the Sensex were Power Grid up by 3.98%, Zomato up by 3.98%, NTPC up by 3.62%, Maruti Suzuki up by 2.32% and Kotak Mahindra Bank up by 2.25%. On the flip side, Mahindra & Mahindra down by 2.38%, Axis Bank down by 2.30%, Bajaj Finance down by 2.19%, Bajaj Finserv down by 2.09% and Nestle down by 1.51% were the top losers.

Meanwhile, credit rating agency ICRA in its latest report has said that the small finance banks (SFBs) had witnessed a strong growth momentum in FY2023 and FY2024, with expansion being driven by buoyant credit demand and improved product offerings by them. However, given the industrywide headwinds, specifically in the microfinance segment, ICRA expects the SFB growth to moderate in FY2025 to 18-20% from 24% in FY2024 and subsequently pick up in FY2026 to 20-23%.  

The report said after registering an improvement in the asset quality indicators in FY2024, the trend reversed in H1 FY2025, with the SFBs reporting a 50-bps increase in Gross Non-Performing Asset (GNPA) to 2.8% as of September 2024, driven by slippages, primarily in the microfinance loans. ICRA believes that the stress in the microfinance loans and seasoning will weigh upon asset quality indicators of the SFBs in FY2025. Elevated risk of the stress spillover to other asset classes would keep asset quality volatile. 

From a funding perspective, it said the SFBs have been gradually increasing the share of current account and savings accounts (CASA) deposits over the years and the same stood at around 28% as of the end of September 2024, albeit significantly lower than universal banks. The CD ratio stood at around 89% as of September 2024 (reduced from 97% in March 2023), which at present is comparable to the private sector bank average. However, it is expected to reduce further. In line with the trend seen in universal banks, there has been a move towards term deposits offering higher interests, thus leading to a drop in the share of CASA deposits across most SFBs in H1 FY2025. Increasing the share of these deposits will be a challenge for the SFBs. The trend is likely to continue over the near term.

ICRA projects the SFBs’ margins to witness compression as the cost of funds remains elevated and the share of secured loans goes up. Operating expenses, in relation to average assets, rose in FY2024 because of the branch expansion, higher employee expenses and increasing efforts towards recoveries from delinquent customers. With a more calibrated expansion in the current fiscal, the operating ratios shall benefit from higher efficiency. Higher credit costs, however, shall lead to a moderation in the overall profitability in FY2025.

The CNX Nifty is currently trading at 23237.70, up by 61.65 points or 0.27% after trading in a range of 23165.30 and 23293.65. There were 30 stocks advancing against 20 stocks declining on the index.

The top gainers on Nifty were Trent up by 5.09%, Power Grid up by 3.82%, NTPC up by 3.69%, Coal India up by 2.36% and Maruti Suzuki up by 2.32%. On the flip side, Axis Bank down by 2.47%, Mahindra & Mahindra down by 2.37%, Bajaj Finserv down by 2.24%, HDFC Life Insurance down by 2.19% and Bajaj Finance down by 2.18% were the top losers.

Asian markets were trading mostly in red; Shanghai Composite weakened 14.66 points or 0.45% to 3,226.28, Straits Times fell 20.08 points or 0.53% to 3,768.69, KOSPI dropped 0.59 points or 0.02% to 2,496.81, Nikkei 225 slipped 29.72 points or 0.08% to 38,444.58 and Taiwan Weighted lost 282.95 points or 1.26% to 22,514.57, while Hang Seng advanced 30.19 points or 0.16% to 19,249.97 and Jakarta Composite gained 59.03 points or 0.84% to 7,015.70.
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