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Sensex, Nifty trade marginally higher in early noon deals
May-06-2024

A heavy selling in Consumer Durables and PSU stocks kept Indian equity benchmarks near their neutral lines during early noon deals, with both Sensex and Nifty holding marginal gains, amid positive cues from other Asian markets. There was some cautiousness over the street, as the Reserve Bank of India (RBI) has proposed tighter rules to govern lending to projects under implementation. The central bank's draft rules include a classification of the projects as per their phase and higher provisioning of up to 5 per cent during the construction phase, even if the asset is standard.

Traders took a note of reports that India’s services sector activity growth eased during the month of April but still one of the strongest growth rates seen in just under 14 years, amid favourable economic conditions, demand strength and rising intakes of new work. According to the survey report, the seasonally adjusted HSBC India Services PMI Business Activity Index fell to 60.8 in April from 61.2 in March. Further, the HSBC India Composite PMI Output Index -- which measures both manufacturing and services -- also eased to 61.5 in April as against 61.8 in March. 

On the global front, Asian markets were trading in green, after the private sector in Hong Kong continued to expand in April, although at a slower pace, with a services PMI score of 50.6. That's down from 50.9 in March, although it remains above the boom-or-bust line of 50 that separates expansion from contraction. The growth in output was supported by businesses working through their existing orders, which led to a seventh successive monthly reduction in the level of outstanding work.

The BSE Sensex is currently trading at 73990.37, up by 112.22 points or 0.15% after trading in a range of 73973.79 and 74359.69. There were 18 stocks advancing against 12 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index fell by 0.88%, while Small cap index was down by 0.81%.

The top gaining sectoral indices on the BSE were Realty up by 1.86%, TECK up by 1.10%, IT up by 0.95%, Healthcare up by 0.36% and FMCG up by 0.34%, while Consumer Durables down by 3.15%, PSU down by 2.65%, Oil & Gas down by 1.74%, Utilities down by 1.54% and Energy down by 1.49% were the top losing indices on BSE.

The top gainers on the Sensex were Kotak Mahindra Bank up by 5.17%, TCS up by 2.14%, JSW Steel up by 1.42%, Infosys up by 1.35% and Mahindra & Mahindra up by 1.23%. On the flip side, Titan down by 6.72%, SBI down by 2.71%, NTPC down by 2.38%, Larsen & Toubro down by 0.94% and Power Grid down by 0.93% were the top losers.

Meanwhile, the Reserve Bank of India (RBI) has proposed tighter rules to govern lending to projects under implementation. The central bank's draft rules include a classification of the projects as per their phase and higher provisioning of up to 5 per cent during the construction phase, even if the asset is standard. It can be noted that in the last credit cycle, project loans were seen to have led to a build-up of stress on bank books. The standard asset provisioning otherwise stands at 0.40 per cent.

Under the proposed norms, a bank has to set aside 5 per cent of the exposure during the construction phase, which goes down as the project becomes operational. Once the project reaches the 'Operational phase', the provisions can be reduced to 2.5 per cent of the funded outstanding and then further down to 1 per cent if certain conditions are met. These include the project having a positive net operating cash flow that is sufficient to cover current repayment obligation to all lenders, and the total long-term debt of the project with the lenders has declined by at least 20 per cent from the outstanding at the time of achieving Date of Commencement of Commercial Operations.

The proposed guidelines also spell out details on stress resolution, specify the criteria for upgrading accounts, and invoke recognition. It expects lenders to maintain project-specific data in an electronic and easily accessible format. Lenders will update any change in the parameters of a project finance loan at the earliest but not later than 15 days from such change. The necessary system in this regard will be put in place within 3 months of the release of these directions. The public has been given time till June 15 to respond to the proposals.

The CNX Nifty is currently trading at 22483.80, up by 7.95 points or 0.04% after trading in a range of 22433.30 and 22588.80. There were 23 stocks advancing against 27 stocks declining on the index.

The top gainers on Nifty were Britannia up by 7.42%, Kotak Mahindra Bank up by 5.23%, TCS up by 2.15%, JSW Steel up by 1.48% and Infosys up by 1.45%. On the flip side, Titan down by 6.67%, Adani Enterprises down by 3.72%, SBI down by 2.55%, BPCL down by 2.44% and Adani Ports & SEZ down by 2.43% were the top losers.

Asian markets were trading in green; Hang Seng advanced 91.53 points or 0.5% to 18,567.45, Taiwan Weighted added 192.99 points or 0.94% to 20,523.31, Jakarta Composite gained 36.72 points or 0.51% to 7,171.44, Straits Times rose 9.83 points or 0.3% to 3,302.76 and Shanghai Composite strengthened 37.1 points or 1.19% to 3,141.92.
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