Nifty, Sensex muted, set for fourth day of declines

By Arnab Paul

(Reuters) - Indian shares dipped on Wednesday, poised for a fourth straight session of declines ahead of China-U.S. trade talks, but losses were curbed as upbeat quarterly results by ICICI Bank Ltd and Axis Bank Ltd helped lift optimism.

Investors are hopeful the Sino-U.S. trade talks later in the day will help de-escalate a trade war that has hurt Asian exporters.

Housing Development Finance Corp Ltd, the biggest drag on the index, slipped as much as 2.4 percent after posting a 60 percent plunge in net profit.

Meanwhile, investors' focus had shifted to a media report, which alleged financial misappropriation by the controlling shareholders of Dewan Housing Finance Corp.

 

Following the report, shares plunged as much as 9.5 percent to 153.55 rupees in early trade, their lowest since Feb. 29, 2016. However, stock recovered to trade 6.33 percent down after the housing finance company said the allegations are "unfounded and malicious".

"The problems related to DHFL is purely company-based and you can see that in its stock and bond performance. There is no domino effect per se at the moment in other sectors," said Saurabh Jain, assistant vice-president (research), SMC Global Securities.

This comes at a time when a string of defaults at Infrastructure Leasing and Financial Service Ltd (IL&FS) triggered sharp falls in the Indian stock and debt markets last year amid fears of contagion spreading to the rest of the financial sector.

"Overall, talks in the markets suggest liquidity pressure in non-banking finance companies (NBFCs), some of these companies are not giving loans and growing their balance sheet. Markets do not expect growth levels to sustain in the following quarters," he added.

Indiabulls Housing Finance Ltd was down 3.76 percent.

The broader NSE Nifty was down 0.13 percent at 10,637.85, as of 0637 GMT, while the benchmark BSE Sensex was little changed at 35,595.71.

Meanwhile, Axis Bank climbed up to 4 percent after its quarterly net profit more than doubled, driven by higher interest income and recoveries from written-off accounts.

ICICI Bank was the top percentage gainer on the broader Nifty, trading 4.2 percent firmer. It is scheduled to report its quarterly results later in the day.

Bank of Baroda, who said its exposure to Dewan Housing is 40 billion rupees ($561.28 million), was up 0.5 percent. The state-backed lender's quarterly net profit more than quadrupled and its asset quality showed signs of improvement.

Shares in Bajaj Auto Ltd and Indian Oil Corp Ltd dropped 0.6 percent and 0.76 percent, respectively, ahead of December-quarter earnings later in the day.

($1 = 71.2660 Indian rupees)

(Reporting By Arnab Paul in BENGALURU, Editing by Sherry Jacob-Phillips)