What's keeping Nifty afloat while banks crack under RBI's risk-weight action

Gainers also outnumbered laggards as about 1,786 shares rose, 1,333 fell, and 96 remained unchanged.

The equity benchmarks the Sensex and Nifty were trading flat in the afternoon on November 17, while banks and non-banking finance companies reeled under pressure as the Reserve Bank of India tightened norms for consumer loans.

Losses in SBI, Bajaj Finance and Axis Bank, which were the top laggards, weighed the Nifty down but gains in SBI Life, HDFC Life, and Asian Paints brought the index back to the flatline.

Around noon, the 3o-pack Sensex was down 117 points, or 0.18 percent, at 65,865, while the Nifty was flat at about 19,760. Gainers outnumbered laggards, as about 1,786 shares rose, 1,333 fell, and 96 remained unchanged.

On November 16, the central bank raised credit risk weights on unsecured consumer loans by increasing the capital requirements for such loans to keep the runaway growth in the segment under check. Concerns have been growing over these borrowings.

The move had a ripple effect on the bank and non-bank finance stocks, which dragged frontline names like SBI, Axis Bank, Bajaj Finance and HDFC Bank down 0.2-3 percent.

‘Insuring’ against a fall

The sharp cuts in frontline banking stocks also pulled the Nifty Bank index down by a percent.

But the benchmarks managed to avoid a drop even as the financials, which have the highest weightage, took a beating. The support came from insurance stocks, HDFC Life Insurance and SBI Life Insurance, which soared 3 percent and 5 percent, respectively.

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Strong sentiment for insurers, on the back of their strong growth in October, and the shift of flows from NBFCs to insurance prompted stellar gains in these stocks.

Aside from private insurers, Asian Paints also gained over 2 percent as a drop in crude prices to a four-month low sparked hopes of lower input costs.

"The Nifty50 has made a strong bullish candle on the daily chart but a sharp upmove has already been seen in the last two sessions and we feel that, there will be a profit-booking activity that may drag the index lower," said Aditya Gaggar, Director of Progressive Shares.

Gaggar pegged 19,850 as the immediate resistance and 19,580-19,550 as strong support for the Nifty."Overnight, bond yield and Crude oil corrected further which will restrict the downside for equities," he added.

Among other sectors, automobiles, and FMCG inched higher, as easing crude prices evoked optimism over stronger demand and softer logistics and input costs. Pharma names also moved higher on the back of defensive buying.

On the downside, Oil and Natural Gas Corporation dropped over 2 percent, bogged by the decline in oil prices.

Also Read | Bajaj Finance, HDFC Bank, ICICI Bank stocks tank as RBI's risk-weight move hits tier-1 capital

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