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Indices extend gaining momentum; Sensex climbs over 550 points
Aug-04-2021

Indian equity benchmarks extended their gaining momentum in the morning session with Sensex posting gain of more than 550 points and Nifty trading above 16,250 mark supported by buying in frontline blue chip stocks such as HDFC, ICICI Bank and Kotak Mahindra Bank among others. Sentiments remained up-beat with ratings agency ICRA’s statement that IT services companies are expected to see growth in revenue, driven by robust demand for digital technologies resulting in higher awards of contracts. Further, the growth in the financial year 2021-22 will be supported by the pent-up demand of the financial year 2020-21 that was lower due to the initial impact of COVID-19. Some support also came with private report that India's recruitment activity has been recovering steadily as the hiring rate in June 2021 was around 42 percent above the pre-pandemic levels in 2019. Meanwhile, with a view to mitigate risks and ensure continuity of service, the Reserve Bank of India (RBI) has issued a detailed framework for outsourcing of activities by Payment System Operators (PSOs).

On the global front, Asian markets were trading mostly in green led largely by strong U.S. corporate earnings, although the mood remained cautious as the rapidly spreading Delta variant of the coronavirus clouds the global economic outlook. Back home, on the sectoral front, auto component industry’s stocks remained in watch as industry body ACMA said the auto component industry is cautiously optimistic about growth prospects in the current fiscal amid various challenges like an increase in raw material cost and logistics continuing to hinder a smooth recovery.

The BSE Sensex is currently trading at 54384.56, up by 561.20 points or 1.04% after trading in a range of 54034.31 and 54407.26. There were 21 stocks advancing against 9 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index rose 0.21%, while Small cap index was up by 0.50%.

The top gaining sectoral indices on the BSE were Bankex up by 1.76%, Metal up by 0.86%, Power up by 0.77%, Energy up by 0.71% and Utilities up by 0.65%, while FMCG down by 0.33%, Telecom down by 0.32%, Consumer Durables down by 0.25% and Realty down by 0.20% were the top losing indices on BSE.

The top gainers on the Sensex were HDFC up by 4.05%, ICICI Bank up by 2.73%, Kotak Mahindra Bank up by 2.42%, Tata Steel up by 1.71% and Axis Bank up by 1.67%. On the flip side, Sun Pharma down by 0.77%, Titan Company down by 0.75%, Tech Mahindra down by 0.72%, Nestle down by 0.70% and Ultratech Cement down by 0.48% were the top losers.

Meanwhile, Domestic rating agency ICRA in its latest report has said that Non-Banking Financial Companies’ (NBFC) non-performing asset ratios will slip by up to 1 percentage point and the ratio of the loans recast will double to 3.3 percent in FY22. It attributed the asset quality impact largely to the reverses of the second wave of the pandemic, which has hit the collection efficiencies for the non-bank finance companies (NBFC) and housing finance companies (HFCs). It said with the abatement of the pandemic and the resumption in business activity, the collections are improving and will offer some succour to the financiers as the fiscal year progresses, and added that it has a ‘negative’ outlook on the sector.

According to the report, notwithstanding the near-term pressures, the net increase (adjusting for write-offs) in the 90+ dpd (days past due) in the current fiscal is expected to be about 0.50-1 per cent. ICRA draws comfort from the provisions maintained by the entities, which continue to remain about 1 per cent higher than the pre-Covid levels. It classified nearly a third of the overall non-bank exposures of Rs 24 lakh crore as being in ‘high risk category’, flagging microfinance, personal credit, unsecured SME, real estate finance as the ones at highest risk and gold and housing at the lowest risk.

From a loan restructuring perspective – the second window provided by the RBI following the second wave ends in September – rating agency expects the overall restructuring to come at between 3.1-3.3 per cent as of end-FY22 from the 1.6 per cent in FY21 end. The restructured book for the NBFCs is expected to move up to 4.1-4.3 per cent by March 2022 while the same for the HFCs is estimated to go up to 2.0-2.2 per cent. 

The CNX Nifty is currently trading at 16282.50, up by 151.75 points or 0.94% after trading in a range of 16176.15 and 16285.00. There were 35 stocks advancing against 15 stocks declining on the index.

The top gainers on Nifty were HDFC up by 4.01%, ICICI Bank up by 2.80%, Kotak Mahindra Bank up by 2.63%, Axis Bank up by 1.87% and Indusind Bank up by 1.81%. On the flip side, Tata Consumer Product down by 1.41%, Nestle down by 0.81%, Sun Pharma down by 0.79%, Titan Company down by 0.73% and Tech Mahindra down by 0.72% were the top losers.

Asian markets were trading mostly in green; Hang Seng increased 368.10 points or 1.41% to 26,562.92, Taiwan Weighted strengthened 54.46 points or 0.31% to 17,608.22, KOSPI rose 39.92 points or 1.23% to 3,277.06, Straits Times advanced 32.94 points or 1.05% to 3,182.19, Shanghai Composite gained 19.68 points or 0.57% to 3,467.67 and Jakarta Composite soared 18.22 points or 0.3% to 6,148.79.

On the flip side, Nikkei 225 slipped 70.64 points or 0.26% to 27,571.19.

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