IGI Logo

Indian equity benchmarks extended their gains to the fifth consecutive session and ended with gains of over one and half percent on Monday, led by gains in Banking, IT, TECK and Finance shares, shrugging off weakness across most global markets. The start of the day was positive, aided by Chief Economic Advisor (CEA) V Anantha Nageswaran’s statement that prudent budget assumptions for FY23 will ensure that the macro-fundamentals will be able to hold-up in the near-term amid heightened concerns over the impact of the Russian invasion of Ukraine on the Indian economy. Buying also crept in as India’s factory production measured in Index of Industrial Production (IIP) expanded by 1.3 per cent on an annual basis in January 2022 on account of better performance by mining and manufacturing sectors, though capital goods segment remained in contraction mode.  Some support also came as India's foreign exchange (forex) reserves rose by $394 million to $631.92 billion in the week ended March 4 led by a sharp jump in foreign currency assets. The forex reserves had declined by $1.425 billion in the previous week.

Domestic sentiments remained upbeat throughout the day, taking support from Fitch Ratings’ report that strengthening economic recovery and stable financial metrics will help state-owned banks have stable earnings during the next financial year, aided by the gradual unwinding of regulatory forbearance through the year. It also said private sector banks are better placed to reap the benefits of recovery and will continue to increase their market share both in credit as well as deposits. Adding optimism among the market participants, India’s merchandise exports rose 25.10 per cent to $34.57 billion in February 2022 as compared to $27.63 billion in February 2021, on account of healthy growth in sectors like engineering, petroleum and chemicals. Traders shrugged off report stating that wholesale price-based inflation grew at 13.11 per cent in February as food prices hardened. The high rate of inflation in February, 2022 is primarily due to rise in prices of mineral oils, basic metals, chemicals and chemical products, crude petroleum & natural gas, food articles and non-food articles etc. as compared to the corresponding month of the previous year. 

On the global front, Asian markets end mostly lower on Monday as the Russia-Ukraine war dragged on and investors awaited the outcome of the Federal Reserve's policy meeting this week for clues about further interest rate hikes and policy tightening for the rest of the year. European markets were trading higher as investors pinned hopes for a diplomatic solution to end a weeks-long conflict. The next round of peace talks is scheduled for today with officials on both sides offering cautious optimism. Back home, there was some buzz in the jewelry industry stocks with government data showing that India’s gold imports surged by about 73 per cent to $45.1 billion during April-February this fiscal on account of higher demand. Tea industry stocks also were in watch as a body of tea planters said exports of the commodity will be adversely impacted due to the Russia-Ukraine conflict.

Finally, the BSE Sensex rose 935.72 points or 1.68% to 56,486.02 and the CNX Nifty was up by 240.85 points or 1.45% to 16,871.30.   

The BSE Sensex touched high and low of 56,545.83 and 55,556.47, respectively. There were 26 stocks advancing against 4 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index rose 0.02%, while Small cap index was up by 0.31%.

The top gaining sectoral indices on the BSE were Bankex up by 2.31%, IT up by 2.16%, TECK up by 2.15%, Finance up by 1.80% and Auto up by 0.90%, while Realty down by 1.73%, Oil & Gas down by 0.85%, Power down by 0.60%, Utilities down by 0.56% and Metal down by 0.40% were the losing indices on BSE.

The top gainers on the Sensex were Infosys up by 3.76%, HDFC Bank up by 3.25%, SBI up by 3.14%, Maruti Suzuki up by 2.92% and Axis Bank up by 2.78%. On the flip side, Hindustan Unilever down by 1.66%, Sun Pharma down by 1.09%, Dr. Reddy's Lab down by 0.52% and Tata Steel down by 0.33% were the top losers.

Meanwhile, Fitch Ratings in its latest report has said that strengthening economic recovery and stable financial metrics will help state-owned banks have stable earnings during the next financial year, aided by the gradual unwinding of regulatory forbearance through the year. It also said private sector banks are better placed to reap the benefits of recovery and will continue to increase their market share both in credit as well as deposits. Noting that regulatory forbearance has suppressed state-owned banks' immediate capital requirements by deferring recognition of stressed loans, the report said private banks are most competitive on this front, too.

It expects earnings and profitability of banks to recover next fiscal on the back of falling loan impairment charges that improved to 1.2% in H1 of FY22, from 1.7% a year ago, because forbearance will limit fresh loan impairments. Asset quality pressure will ease on the back of improving recoveries from impaired loans, while earnings are supported by adequate pre-provision profit of 3.6% in H1, up 10 basis points against a year ago, thanks to stable net interest margins and operating costs.

But, it said waning forbearance is likely to pressure profitability, and average operating profit/risk-weighted assets will remain commensurate with banks' current earnings and profitability scores. On the other hand, it stated earnings of private banks should continue to outperform state-owned banks, supported by higher pre-provisioning income buffers and more profitable loan mix along with greater diversification of income base. However, it warned any rise in loan impairment charges after forbearance unwinds should be somewhat offset by robust loan growth and rising fee income amid steady cost/income ratios. It said the banking market is focused on traditional banking, as reflected in the high share of loans at 55% of assets.

The CNX Nifty traded in a range of 16,887.95 and 16,606.50. There were 37 stocks advancing against 13 stocks declining on the index. 

The top gainers on Nifty were Infosys up by 3.79%, HDFC Bank up by 3.25%, SBI up by 3.22%, Axis Bank up by 2.98% and ICICI bank up by 2.89%. On the flip side, Indian Oil Corporation down by 2.59%, ONGC down by 2.33%, Hindustan Unilever down by 1.65%, Tata Motors down by 1.35% and HDFC Life Insurance down by 1.17% were the top losers.

European markets were trading higher; UK’s FTSE 100 increased 17.88 points or 0.25% to 7,173.52, France’s CAC increased 109.41 points or 1.75% to 6,369.66 and Germany’s DAX increased 374.37 points or 2.75% to 14,002.48.

Asian markets ended mostly lower on Monday amid rising worries about the economic impact of the ongoing Russian invasion of Ukraine and the various sanctions imposed on Russia by the U.S. and the Western allies. Meanwhile, investors awaited the outcome of the Federal Reserve's policy meeting this week for clues about further interest rate hikes and policy tightening for the rest of the year. Chinese and Hong Kong markets succumbed to heavy selling pressure as the spreading new coronavirus outbreaks in China added to global uncertainties. Sentiment was also dented after data showed a sharp drop in February's new bank lending in China. However, Japanese shares advanced as oil prices continued to retreat and investors remained optimistic over the Russia-Ukraine peace talks.

Above views are of the author and not of the website kindly read disclaimer