Sensex, Nifty show no trend still: Thursday closing report

The market has to close beyond Nifty’s recent trading band of 6,220-6,150 to signal a trend

As we mentioned on Wednesday, the market outlook seems still negative. The indices, after trading in the negative for most of the part of the session closed lower on Thursday.


The indices opened marginally higher, BSE 30-share Sensex at 20,756 and the NSE Nifty at 6,182.  Immediately the benchmark rose to the day’s high before it could plunge into the negative. The Sensex hit a high of 20,778 while the Nifty hit a high of 6,188. At around 1.10pm the indices hit the days low from where it made an immediate recovery and entered into the positive zone, but couldn’t sustain it and ended the day marginally down. The Sensex hit the low of 20,653 while the Nifty hit the low of 6,148. The Sensex closed 20,713 (down 16 points or 0.08%) while the Nifty closed 6,168 (down 6 points or 0.10%). The NSE recorded a volume of 67.68 crore shares.


Among the other indices on the NSE, the top five gainers were PSE (1.26%); Metal (1.03%); Energy (0.85%); Pharma (0.71%) and Commodities (0.61%) while the top five losers were Realty (2.56%); PSU Bank (1.60%); Nifty Midcap 50 (1.22%); Infra (1.13%) and Smallcap (1.06%).


Of the 50 stocks on the Nifty, 19 ended in the green. The top five gainers were Sesa Sterlite (4.44%); HCL Technologies (3.20%); NTPC (3.05%); ONGC (2.86%) and Coal India (2.79%). The top five losers were Jaiprakash Associates (4.22%); ACC (2.78%); LT (2.61%); Ambuja Cements (2.35%) and Hindalco Industries (2.21%).


Of the 1,231 companies on the NSE, 341 closed in the positive, 842 companies closed in the negative while 48 closed flat.


Oil secretary Vivek Rae on Thursday said that the oil ministry is considering a partial rollback of bulk diesel prices as sales have dropped significantly. "We are circulating the Kirit Parikh report for inter-ministerial consultation," Rae told reporters on the sidelines of an industry event. He also said there is a need to review the subsidy sharing mechanism to ensure that upstream companies get about $65 a barrel on sale of crude oil.


India will soon invite foreign businesses to fully own new services in suburban areas, high speed tracks, and connections to ports, mines and power installations, said two senior officials involved in the deliberations. The government officials said the move could attract up to $10 billion of foreign investment over the next five years.


US indices closed mostly lower. The last Federal Open Market Committee meeting showed that a majority of officials judged the effects of the monthly asset purchases to be diminishing over time. The minutes showed that policymakers wanted to stress to the public that further reductions to bond buying would depend on progress in the labor market and on inflation, as well as on how well the program was judged to work in the months ahead.


Automatic Data Processing said on Wednesday that private employers created 238,000 jobs in December.


Except for Jakarta Composite (up 0.01%) and NZSE 50            (up 0.73%) all the other Asian indices closed in the negative. Nikkei 225 was the top loser which fell 1.50%.


China’s producer prices extended the longest slide since the 1990s in December, adding to evidence that the world’s second-largest economy weakened last month. The producer-price index fell 1.4% from a year before, the 22nd straight drop, and consumer-price gains trailed estimates at 2.5%, government reports showed in Beijing. Today’s releases followed declines in gauges of manufacturing and services based on surveys of purchasing managers. Food prices rose 4.1% from a year earlier, the least since May, today’s report from the National Bureau of Statistics showed. Services prices increased 3.3%, the same pace as November, which was the biggest gain since August 2011.


South Korea's central bank left its key interest rate unchanged for an eighth straight month after a monetary policy review today.


European indices are trading in the green while the US Futures were also trading higher.


Euro zone rose to a more than two-year high in December in another sign that the recovery is beginning to take hold after a prolonged down-turn. An index of executive and consumer sentiment rose to 100 from a revised 98.4 in November, the European Commission in Brussels said today. The commission’s industrial confidence index rose to minus 3.4 from minus 3.9 in November. The gauge of consumer confidence improved to minus 13.6 from minus 15.4 in November, the commission said. The commission’s gauge of employment expectations in the manufacturing industry rose to minus 4.7 in December from minus 6.3, today’s report showed.


Refinancing of loans worth Rs2 lakh crore will be challenging for banks

About 50% of the refinancing amount, equivalent to 13% of the banking system net worth as on FY13, may present a significant underwriting challenge to bankers under the prevailing macroeconomic situation, says Ind-Ra

Bank loans worth an estimated Rs1.9 lakh crore to Rs2.1 lakh crore belonging to top 100 corporates, including non-financial and non-public sector, are due for refinancing in the next 12-15 months. About 50% of this refinancing amount, equivalent to 13% of the banking system net worth as of FY13, may present a significant underwriting challenge to bankers under the prevailing macroeconomic situation, says India Ratings and Research (Ind-Ra).


According to the ratings agency, around 24% of the refinancing requirement (about 4%-5% of the banking system net worth) is attributed to the 20 companies already in distress. While another 26% of the refinancing requirement attributed to 20 corporates, belongs to a category which Ind-Ra has termed as elevated refinancing risk (ERR).

Companies at ERR have weak credit metrics. Generally, as a group, their asset coverage ratios are low and financial flexibility of the promoter is also limited. Under normal market conditions, they should be able to refinance at a high cost or with stringent covenants. However, this group may face significant challenges in debt refinancing during stressed market conditions, Ind-Ra said.


The ratings agency feels around 34 corporates have refinancing risks which is manageable. "Of these, 12 accounting for 27% of the refinancing requirement will be able to refinance debt at a reasonable cost even under stressed market conditions. This category can be termed as high ease of refinancing (HER)," it said.


Ind-Ra said, "The other 22 corporates accounting for 23% of the refinancing amount, which can referred to as moderate ease of refinancing (MER), will also be able to refinance debt but with moderate ease. However, they may have to bear a high cost, especially under stressed market conditions."


According to the ratings agency, nearly 26 of the 100 top corporates considered have no significant refinancing exposure or are at negligible refinancing risk (NRR) till FY15. They have moderate levels of debt maturing or are likely to have sufficient free cash flows to service the maturing debt.


"While driven possibly by credit rationing (at the bankers’ end), banks’ exposure to the MER and ERR group has grown at a much more muted level. The potentially low eagerness on the part of bankers may prove to be a challenge in debt refinancing to such categories. While the cautious approach adopted by bankers has an intuitive explanation, the banking system may face the dilemma that if refinancing decisions are not taken promptly (when required), some of the large-value loans belonging to the ERR category may become distressed," Ind-Ra said.


"In addition," it said, "some corporates, particularly those with a low asset cover, may face underwriting challenges. Furthermore, given the low interest coverage of the corporates in the ERR category, a higher interest rate (possibly reflective of their risk) may affect their debt servicing ability further. As such, among these top 100 corporates, those in the NRR, HER and MER categories have shown a reduced dependency on the Indian banking system, while the dependency of those in the ERR and stressed categories has broadly remained unchanged."


Here is the list of top 100 corporate borrowers…




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