Market drops after policy actions by Fed, BoJ
Weak global cues triggered a fresh selling on the domestic bourses today, 16 June 2016. However, key indices managed to settle off their intraday lows as European stocks trimmed intraday losses. The barometer index, the S&P BSE Sensex lost 200.88 points or 0.75% to settle at 26,525.46. The Nifty 50 index lost 65.85 points or 0.8% to settle at 8,140.75. Key indices staged a recovery in latter half of the session after extending initial losses after opening on a weak note. Weakness in global stocks after the Bank of Japan and the US Federal Reserve decided to keep interest rates unchanged weighed on sentiment.
The Sensex lost 200.88 points or 0.75% to settle at 26,525.46, its lowest closing level since 14 June 2016. The index lost 411.43 points or 1.53% at the day's low of 26,314.91. The index fell 40.31 points or 0.15% at the day's high of 26,686.03.
The Nifty shed 65.85 points or 0.8% to settle at 8,140.75, its lowest closing level since 14 June 2016. The index lost 132.15 points or 1.61% at the day's low of 8,074.45. The index fell 25.95 points or 0.31% at the day's high of 8,180.65.
In overseas markets, European stocks and Asian stocks dropped as investors digested the US Federal Reserve's decision to keep interest rates on hold. In Japan, the Nikkei 225 index settled 3.05% lower after the Bank of Japan (BoJ) kept monetary policy steady as was widely expected. At the end of a two-day monetary policy review, the BoJ said it will continue to conduct money market operations so the monetary base increases at an annual pace of 80 trillion yen ($760 billion) and maintain a negative interest rate of minus 0.1% to the policy-rate balances in current accounts held by financial institutions at the bank. The BoJ said in a statement that the economy continued its moderate recovery trend, citing steady improvement in business fixed investment, employment and housing investment. In mainland China, the Shanghai Composite index settled 0.5% lower. In Hong Kong, the Hang Seng index ended 2.1% lower.
US stocks ended lower yesterday, 15 June 2016, marking a fifth session of losses, after the US Federal Reserve left interest rates unchanged and backed off an aggressive stance on future rate hikes. The US Federal Reserve after a conclusion of two-day meeting yesterday, 15 June 2016, left interest rates unchanged and signaled it's likely to take an even slower approach on raising the cost of borrowing against a backdrop of slower US job creation and fresh worries about economic events abroad. The Fed trimmed its estimate of US growth in 2016 to 2% from 2.2%, but left its long-run forecast intact. The Fed also tempered its future expectations for the economy. The central bank indicated it will raise rates three times apiece in 2017 and 2018 instead of four. And in the long run, the FOMC predicts the Fed-funds rate would rise to 3% instead of 3.3%. Fed officials also expect the labor market to show more improvement, with the unemployment rate remaining below 5% for the next three years.
Yellen also expressed concern in a press conference after the Fed meeting about the low level of US business investment and said that vulnerabilities in the global economy remain. She acknowledged the pending UK vote on 23 June 2016, known as Brexit, on whether to leave the European Union was a factor in the Fed's decision to stay its hand.
Closer home, the market breadth indicating the overall health of the market was weak. On BSE, 1,635 shares declined and 963 shares rose. A total of 168 shares were unchanged. The BSE Mid-Cap index declined 0.37%. The BSE Small-Cap index dropped 0.55%. The fall in both these indices was lower than the Sensex's decline in percentage terms.
The total turnover on BSE amounted to Rs 2836.24 crore, lower than turnover of Rs 2948.02 crore registered during the previous trading session.
Among sectoral indices on BSE, the S&P BSE Utilities index (down 0.23%), the S&P BSE Power index (down 0.49%), the S&P BSE Industrials index (down 0.68%), the S&P BSE Realty index (down 0.67%), the S&P BSE Healthcare index (down 0.42%), the S&P BSE FMCG index (down 0.49%), the S&P BSE Energy index (down 0.64%), the S&P BSE Oil & Gas index (down 0.31%), the S&P BSE Consumer Durables index (down 0.03%), the S&P BSE Basic Materials index (down 0.48%), the S&P BSE Consumer Discretionary Goods & Services index (down 0.65%), the S&P BSE Teck index (down 0.54%) and the S&P BSE IT index (down 0.23%), and the S&P BSE Metal index (up 0.41%) outperformed the Sensex.
The S&P BSE Bankex (down 1.38%), the S&P BSE Capital Goods index (down 1.02%), the S&P BSE Telecom index (down 2.21%), the S&P BSE Finance index (down 0.93%), and the S&P BSE Auto index (down 0.92%) underperformed the Sensex.
Index heavyweight and cigarette major ITC lost 1.33% to Rs 354.85. The stock hit high of Rs 359.65 and low of Rs 351.20 in intraday trade.
Bank stocks saw mixed trend, with shares of private sector banks declining while shares of PSU bank stocks gained. Among private bank stocks, ICICI Bank (down 3.6%), Kotak Mahindra Bank (down 1.59%), Axis Bank (down 1.04%), Federal Bank (down 2.11%), IndusInd Bank (down 1.87%), HDFC Bank (down 0.77%) and Yes Bank (down 1.23%) declined.
Among PSU bank stocks, UCO Bank (up 2.39%), Syndicate Bank (up 4.79%), IDBI Bank (up 0.64%), Bank of India (up 1.59%), Union Bank of India (up 1.59%), Indian Bank (up 1.69%), Vijaya Bank (up 4.07%), Punjab National Bank (up 2.49%) and Canara Bank (up 1.56%) rose. Bank of Baroda slipped 0.26%.
Shares of associate banks of SBI surged, extending gains registered during the previous trading session triggered by media reports that the government has given its go ahead for merger of 5 associate banks with SBI.
State Bank of Mysore (up 19.99%), State Bank of Travancore (up 13.8%) and State Bank of Bikaner and Jaipur (up 14.41%) surged. All these three stock rose by their respective 20% maximum permissible daily level yesterday, 15 June 2016.
The stock price of parent State Bank of India (SBI) fell 0.26% at Rs 215.10. The stock surged 3.9% to settle at Rs 215.65 yesterday, 15 June 2016. On 17 May 2016, SBI had announced that it was seeking in principle sanction of the Government of India (GoI) to enter into negotiation with its 5 subsidiary banks viz. State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala and State Bank of Travancore to acquire their businesses including assets and liabilities. At that time SBI also said that its board of directors will take a final call after evaluating all the relevant considerations. SBI also said at that time that it was considering acquisition of the newly-created Bharatiya Mahila Bank.
SBI holds 90% stake in State Bank of Mysore, 79.09% stake in State Bank of Travancore and 75.07% stake in State Bank of Bikaner and Jaipur. State Bank of Hyderabad and State Bank of Patiala are not listed on the bourses.
Capital goods stocks declined. Bharat Heavy Electricals (Bhel) (down 1.02%), BEML (down 0.93%), L&T (down 1.2%), Siemens (down 1.36%), Crompton Greaves (down 0.13%), ABB India (down 0.72%) and Thermax (down 0.48%) declined. Bharat Electronics rose 0.67%.
Telecom stocks also dropped. Reliance Communications (RCom) (down 2.19%), Bharti Airtel (down 1.65%), Tata Teleservices (Maharashtra) (down 2.5%) and Idea Cellular (down 0.6%) declined.
Shares of Bharti Infratel fell 4.71% on reports that a foreign brokerage has downgraded the stock to underperform from buy and also slashed its 12-month target price to Rs 232 from Rs 440 earlier. According to reports, the foreign brokerage has downgraded the Bharti Infratel stock as it expects slower than expected telecom data growth. The brokerage firm sees risk of rental renewals that may lead to telecom firms being offered discounts. The brokerage has reportedly slashed its projected earnings per share (EPS) for Bharti Infratel by 5-9% for a period of three years from FY 2017 to FY 2019 factoring in higher-than-expected inflation in rental costs.
Meanwhile, Bharti Infratel has set 16 June 2016 as the record date for buyback of equity shares through the tender offer route. In April this year, Bharti Infratel announced an up to Rs 2000 crore share buyback programme at maximum price of Rs 450 per share. Bharti Infratel is a provider of tower and related infrastructure and is a unit of Bharti Airtel.
Most auto stocks declined. Mahindra & Mahindra (M&M) (down 0.79%), Ashok Leyland (down 3.49%), Hero MotoCorp (down 1.39%), Bajaj Auto (down 1.37%) and TVS Motor Company (down 0.09%) declined. Eicher Motors (up 0.8%) and Tata Motors (up 0.4%) gained.
Car maker Maruti Suzuki India lost 2.93% as the Japanese yen strengthened against the dollar. The Japanese yen surged against the dollar on global risk aversion generated by Brexit fears. The Japanese currency is perceived as a haven in times of global financial and global economic worries. Brexit refers to the referendum on 23 June 2016 by British voters to decide whether the country should remain a member of the European Union or leave it. The latest strength in the Japanese currency materialized after Japan's central bank the Bank of Japan (BOJ) voted to leave its monetary policy unchanged after a policy review. The BOJ voted to keep its annual asset-purchase target unchanged at 80 trillion yen (around $760 billion) a year and its deposit rate steady at minus 0.1%. The decision was on expected lines.
A strong yen adversely impacts Maruti Suzuki India's (Maruti) operating profit margin. Maruti pays royalty to its Japanese parent Suzuki Motor Corporation in yen terms for some of its earlier models. Maruti has reportedly started paying royalty to its Japanese parent in rupee terms on all new models from 1 April 2016. Maruti also has an exposure to the yen to the extent it imports raw materials from Japan.
Meanwhile, the Sensex has dropped 142.50 points or 0.53% in this month so far (till 16 June 2016). The Sensex has risen 407.92 points or 1.56% in calendar year 2016 so far (till 16 June 2016). From a 52-week low of 22,494.61 hit on 29 February 2016, the barometer index has risen 4,030.85 points or 17.91%. The Sensex is off 2,052.87 points or 7.18% from a 52-week high of 28,578.33 hit on 23 July 2015. The Sensex is off 3,499.28 points 11.65% from a record high of 30,024.74 hit on 4 March 2015.
On the macro front, India's merchandise exports fell 0.79% at $22.17 billion in May 2016 over May 2015. Imports fell 13.16% at $28.44 billion in May 2016 over May 2015. The trade deficit fell to $6.27 billion in May 2016 from $10.41 billion in May 2015. Non-petroleum exports rose 1.01% at $20.19 billion in May 2016 over May 2015. Oil imports fell 30.45% at $5.93 billion. Non-oil imports fell 7.06% at $22.50 billion. The commerce ministry released the trade data on provisional basis for May 2016 after trading hours yesterday, 15 June 2016.
The Sensex lost 200.88 points or 0.75% to settle at 26,525.46, its lowest closing level since 14 June 2016. The index lost 411.43 points or 1.53% at the day's low of 26,314.91. The index fell 40.31 points or 0.15% at the day's high of 26,686.03.
The Nifty shed 65.85 points or 0.8% to settle at 8,140.75, its lowest closing level since 14 June 2016. The index lost 132.15 points or 1.61% at the day's low of 8,074.45. The index fell 25.95 points or 0.31% at the day's high of 8,180.65.
In overseas markets, European stocks and Asian stocks dropped as investors digested the US Federal Reserve's decision to keep interest rates on hold. In Japan, the Nikkei 225 index settled 3.05% lower after the Bank of Japan (BoJ) kept monetary policy steady as was widely expected. At the end of a two-day monetary policy review, the BoJ said it will continue to conduct money market operations so the monetary base increases at an annual pace of 80 trillion yen ($760 billion) and maintain a negative interest rate of minus 0.1% to the policy-rate balances in current accounts held by financial institutions at the bank. The BoJ said in a statement that the economy continued its moderate recovery trend, citing steady improvement in business fixed investment, employment and housing investment. In mainland China, the Shanghai Composite index settled 0.5% lower. In Hong Kong, the Hang Seng index ended 2.1% lower.
US stocks ended lower yesterday, 15 June 2016, marking a fifth session of losses, after the US Federal Reserve left interest rates unchanged and backed off an aggressive stance on future rate hikes. The US Federal Reserve after a conclusion of two-day meeting yesterday, 15 June 2016, left interest rates unchanged and signaled it's likely to take an even slower approach on raising the cost of borrowing against a backdrop of slower US job creation and fresh worries about economic events abroad. The Fed trimmed its estimate of US growth in 2016 to 2% from 2.2%, but left its long-run forecast intact. The Fed also tempered its future expectations for the economy. The central bank indicated it will raise rates three times apiece in 2017 and 2018 instead of four. And in the long run, the FOMC predicts the Fed-funds rate would rise to 3% instead of 3.3%. Fed officials also expect the labor market to show more improvement, with the unemployment rate remaining below 5% for the next three years.
Yellen also expressed concern in a press conference after the Fed meeting about the low level of US business investment and said that vulnerabilities in the global economy remain. She acknowledged the pending UK vote on 23 June 2016, known as Brexit, on whether to leave the European Union was a factor in the Fed's decision to stay its hand.
Closer home, the market breadth indicating the overall health of the market was weak. On BSE, 1,635 shares declined and 963 shares rose. A total of 168 shares were unchanged. The BSE Mid-Cap index declined 0.37%. The BSE Small-Cap index dropped 0.55%. The fall in both these indices was lower than the Sensex's decline in percentage terms.
The total turnover on BSE amounted to Rs 2836.24 crore, lower than turnover of Rs 2948.02 crore registered during the previous trading session.
Among sectoral indices on BSE, the S&P BSE Utilities index (down 0.23%), the S&P BSE Power index (down 0.49%), the S&P BSE Industrials index (down 0.68%), the S&P BSE Realty index (down 0.67%), the S&P BSE Healthcare index (down 0.42%), the S&P BSE FMCG index (down 0.49%), the S&P BSE Energy index (down 0.64%), the S&P BSE Oil & Gas index (down 0.31%), the S&P BSE Consumer Durables index (down 0.03%), the S&P BSE Basic Materials index (down 0.48%), the S&P BSE Consumer Discretionary Goods & Services index (down 0.65%), the S&P BSE Teck index (down 0.54%) and the S&P BSE IT index (down 0.23%), and the S&P BSE Metal index (up 0.41%) outperformed the Sensex.
The S&P BSE Bankex (down 1.38%), the S&P BSE Capital Goods index (down 1.02%), the S&P BSE Telecom index (down 2.21%), the S&P BSE Finance index (down 0.93%), and the S&P BSE Auto index (down 0.92%) underperformed the Sensex.
Index heavyweight and cigarette major ITC lost 1.33% to Rs 354.85. The stock hit high of Rs 359.65 and low of Rs 351.20 in intraday trade.
Bank stocks saw mixed trend, with shares of private sector banks declining while shares of PSU bank stocks gained. Among private bank stocks, ICICI Bank (down 3.6%), Kotak Mahindra Bank (down 1.59%), Axis Bank (down 1.04%), Federal Bank (down 2.11%), IndusInd Bank (down 1.87%), HDFC Bank (down 0.77%) and Yes Bank (down 1.23%) declined.
Among PSU bank stocks, UCO Bank (up 2.39%), Syndicate Bank (up 4.79%), IDBI Bank (up 0.64%), Bank of India (up 1.59%), Union Bank of India (up 1.59%), Indian Bank (up 1.69%), Vijaya Bank (up 4.07%), Punjab National Bank (up 2.49%) and Canara Bank (up 1.56%) rose. Bank of Baroda slipped 0.26%.
Shares of associate banks of SBI surged, extending gains registered during the previous trading session triggered by media reports that the government has given its go ahead for merger of 5 associate banks with SBI.
State Bank of Mysore (up 19.99%), State Bank of Travancore (up 13.8%) and State Bank of Bikaner and Jaipur (up 14.41%) surged. All these three stock rose by their respective 20% maximum permissible daily level yesterday, 15 June 2016.
The stock price of parent State Bank of India (SBI) fell 0.26% at Rs 215.10. The stock surged 3.9% to settle at Rs 215.65 yesterday, 15 June 2016. On 17 May 2016, SBI had announced that it was seeking in principle sanction of the Government of India (GoI) to enter into negotiation with its 5 subsidiary banks viz. State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala and State Bank of Travancore to acquire their businesses including assets and liabilities. At that time SBI also said that its board of directors will take a final call after evaluating all the relevant considerations. SBI also said at that time that it was considering acquisition of the newly-created Bharatiya Mahila Bank.
SBI holds 90% stake in State Bank of Mysore, 79.09% stake in State Bank of Travancore and 75.07% stake in State Bank of Bikaner and Jaipur. State Bank of Hyderabad and State Bank of Patiala are not listed on the bourses.
Capital goods stocks declined. Bharat Heavy Electricals (Bhel) (down 1.02%), BEML (down 0.93%), L&T (down 1.2%), Siemens (down 1.36%), Crompton Greaves (down 0.13%), ABB India (down 0.72%) and Thermax (down 0.48%) declined. Bharat Electronics rose 0.67%.
Telecom stocks also dropped. Reliance Communications (RCom) (down 2.19%), Bharti Airtel (down 1.65%), Tata Teleservices (Maharashtra) (down 2.5%) and Idea Cellular (down 0.6%) declined.
Shares of Bharti Infratel fell 4.71% on reports that a foreign brokerage has downgraded the stock to underperform from buy and also slashed its 12-month target price to Rs 232 from Rs 440 earlier. According to reports, the foreign brokerage has downgraded the Bharti Infratel stock as it expects slower than expected telecom data growth. The brokerage firm sees risk of rental renewals that may lead to telecom firms being offered discounts. The brokerage has reportedly slashed its projected earnings per share (EPS) for Bharti Infratel by 5-9% for a period of three years from FY 2017 to FY 2019 factoring in higher-than-expected inflation in rental costs.
Meanwhile, Bharti Infratel has set 16 June 2016 as the record date for buyback of equity shares through the tender offer route. In April this year, Bharti Infratel announced an up to Rs 2000 crore share buyback programme at maximum price of Rs 450 per share. Bharti Infratel is a provider of tower and related infrastructure and is a unit of Bharti Airtel.
Most auto stocks declined. Mahindra & Mahindra (M&M) (down 0.79%), Ashok Leyland (down 3.49%), Hero MotoCorp (down 1.39%), Bajaj Auto (down 1.37%) and TVS Motor Company (down 0.09%) declined. Eicher Motors (up 0.8%) and Tata Motors (up 0.4%) gained.
Car maker Maruti Suzuki India lost 2.93% as the Japanese yen strengthened against the dollar. The Japanese yen surged against the dollar on global risk aversion generated by Brexit fears. The Japanese currency is perceived as a haven in times of global financial and global economic worries. Brexit refers to the referendum on 23 June 2016 by British voters to decide whether the country should remain a member of the European Union or leave it. The latest strength in the Japanese currency materialized after Japan's central bank the Bank of Japan (BOJ) voted to leave its monetary policy unchanged after a policy review. The BOJ voted to keep its annual asset-purchase target unchanged at 80 trillion yen (around $760 billion) a year and its deposit rate steady at minus 0.1%. The decision was on expected lines.
A strong yen adversely impacts Maruti Suzuki India's (Maruti) operating profit margin. Maruti pays royalty to its Japanese parent Suzuki Motor Corporation in yen terms for some of its earlier models. Maruti has reportedly started paying royalty to its Japanese parent in rupee terms on all new models from 1 April 2016. Maruti also has an exposure to the yen to the extent it imports raw materials from Japan.
Meanwhile, the Sensex has dropped 142.50 points or 0.53% in this month so far (till 16 June 2016). The Sensex has risen 407.92 points or 1.56% in calendar year 2016 so far (till 16 June 2016). From a 52-week low of 22,494.61 hit on 29 February 2016, the barometer index has risen 4,030.85 points or 17.91%. The Sensex is off 2,052.87 points or 7.18% from a 52-week high of 28,578.33 hit on 23 July 2015. The Sensex is off 3,499.28 points 11.65% from a record high of 30,024.74 hit on 4 March 2015.
On the macro front, India's merchandise exports fell 0.79% at $22.17 billion in May 2016 over May 2015. Imports fell 13.16% at $28.44 billion in May 2016 over May 2015. The trade deficit fell to $6.27 billion in May 2016 from $10.41 billion in May 2015. Non-petroleum exports rose 1.01% at $20.19 billion in May 2016 over May 2015. Oil imports fell 30.45% at $5.93 billion. Non-oil imports fell 7.06% at $22.50 billion. The commerce ministry released the trade data on provisional basis for May 2016 after trading hours yesterday, 15 June 2016.
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