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Markets continue to rally; Sensex jumps over 200 points

Indian local benchmarks continued their rally in late morning session after industrial output strengthened in August 2017 to record robust 4.3 per cent growth. Also, India’s retail inflation for September 2017 eased to 3.28%, as compared to 4.39% in the same month previous year and 3.36% in August 2017, added to the gains. Traders also took some encouragement with the World Bank chief’s statement that the reforms undertaken by Prime Minister Narendra Modi have been significant and the results would be reflected in the mid and long-term growth figures. Sentiments remained up-beat with Minister of State for Electronics and IT - K.J. Alphons’ statement that the Digital India programme has the potential to provide an incremental 20-30 per cent increase in India’s GDP by 2025. Domestic sentiments were also buoyed by firm Asian cues along with buying in Telecom, Banking and TECK stocks.

On the global front, Asian markets were trading mostly in green, though gains were modest, as investors await the release of China's trade data for the month of September later in the day. US retail sales and consumer price inflation data are also due later in the trading session. Back home, in scrip specific development, Steel Strips Wheels (SSWL) gained after the company bagged another exports order for supply of Steel wheels for EU Caravan market. This order covers supplies of around 40,000 steel wheels. Wheels will be shipped from SSWL’s Chennai plant from next month onwards.

The BSE Sensex is currently trading at 32423.06, up by 240.84 points or 0.75% after trading in a range of 32247.74 and 32445.22. There were 22 stocks advancing against 9 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index was up by 0.12%, while Small cap index was up by 0.48%.

The top gaining sectoral indices on the BSE were Telecom up by 4.54%, Bankex up by 1.32%, TECK up by 1.06%, Consumer Durables up by 0.70% and Metal up by 0.69%, while FMCG down by 0.32%, Healthcare down by 0.13% and Oil & Gas down by 0.05% were the few losing indices on BSE.

The top gainers on the Sensex were Bharti Airtel up by 6.74%, ICICI Bank up by 2.04%, Tata Steel up by 1.89%, HDFC Bank up by 1.88% and Power Grid Corporation up by 1.73%. On the flip side, Dr. Reddy’s Lab down by 0.90%, ITC down by 0.81%, NTPC down by 0.76%, Sun Pharma down by 0.50% and ONGC down by 0.50% were the top losers.

Meanwhile, the rating agency, CRISIL in its latest report has said that Indian banks may need to set aside as much as Rs 3.3 lakh crore as provisioning, mainly for large corporate non-performing assets (NPAs) in the financial year 2018. It observed that the economic value of assets underlying NPAs is eroding with time, and resolutions are hard to come by, therefore, banks would need to do well to bite the bullet and step up on provisioning. It also believes that this will facilitate faster clean-up of their balance sheets.

The rating agency has said that it arrived at the Rs 3.3-lakh-crore number after an account-by-account analysis of the economic value of assets underlying large corporate bad loans. It also showed that potential write-downs could be in the 25% to 75% range. Further, it pointed out that while some of the NPA accounts have been adequately provided for, the majority of them will require higher provisioning compared with current levels, based on the residual economic value of the assets. The report also estimated that this could lead to a net loss of nearly Rs 60,000 crore for the banking sector this fiscal with public sector banks (PSBs) bearing the brunt of the increase in provisions and the resultant impact on profitability because of their higher stock of NPAs.

Adding further, the report has noted that operating profits of banks, calculated before making loan and tax provisions, is likely to stabilise by the end of this fiscal, largely due to improvement in the net interest income. It also expects that pressure on the earnings profiles of banks would reduce from next fiscal if banks increase provisioning on large corporate NPAs this fiscal. It added that stabilization in operating profitability and mitigation of asset quality stress would then set the stage for earnings revival, especially of PSBs, as they focus more on credit growth.

The CNX Nifty is currently trading at 10162.30, up by 65.90 points or 0.65% after trading in a range of 10120.10 and 10168.75. There were 32 stocks advancing against 18 stocks declining on the index.

The top gainers on Nifty were Bharti Airtel up by 6.73%, Bharti Infratel up by 3.99%, ICICI Bank up by 2.00%, Power Grid Corporation up by 1.90% and Tata Steel up by 1.81%. On the flip side, Zee Entertainment down by 1.19%, GAIL India down by 1.11%, Dr. Reddy’s Lab down by 0.88%, NTPC down by 0.79% and BPCL down by 0.72% were the top losers.

Asian markets were trading mostly in green; Shanghai Composite increased 0.95 points or 0.03% to 3,387.05, Hang Seng increased 3.67 points or 0.01% to 28,462.70, Jakarta Composite increased 8.63 points or 0.15% to 5,934.84, Taiwan Weighted increased 12.65 points or 0.12% to 10,724.09 and Nikkei 225 increased 200.71 points or 0.96% to 21,155.43.

On the flip side, KOSPI Index decreased 3.51 points or 0.14% to 2,471.25 and FTSE Bursa Malaysia KLCI decreased 2.08 points or 0.12% to 1,751.92.

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