US rate hike fears drag benchmarks lower; Sensex breaches 25,900 mark

Thursday turned out to be a disappointing session for the Indian equity indices which got pounded by over a percentage point as investors sold stocks across sectors amid worries that a hike in US interest rates would lead to capital outflows. After a cautious start, domestic bourses entered into red terrain and never looked in recovery mood and ended the trade near two intraday lows, breaching their crucial support levels of 25,900 (Sensex) and 7,900 (Nifty). Selling was both brutal and wide-based as, barring realty; none of sectoral indices on BSE could manage a green close. Counters which featured in the list of worst performers included fast moving consumer goods, consumer durables metal and metal.

Sentiments came under pressure after India’s services industry barely expanded in November, growing at its weakest pace in five months, as firms grew increasingly gloomy about the coming year. The Nikkei/Markit Services Purchasing Managers’ Index (PMI) fell sharply to 50.1 in November from October’s eight-month high of 53.2. Investors failed to draw any sense of relief from Standard & Poor's Ratings Services’ statement that India's economy will grow at 7.4 percent in the current fiscal, which will further improve to over 8 percent in 2016-17. The Asian Development Bank (ADB) too kept its economic growth forecast for India unchanged at 7.4 percent for the current financial year and 7.8 per cent for the next fiscal.

On the global front, European markets traded in the green in early deals as the ECB is expected to further reduce its deposit rate and expand asset purchases and the euro dropped toward a seven-month low. Also, a UK services gauge rose more than expected in November as new business picked up. Markit Economics’ purchasing-managers’ index rose to 55.9, indicating the fastest pace of growth in four months. However, most of the Asian equity indices ended in red on Thursday after hawkish comments from Federal Reserve Chair Janet Yellen reinforced the case for an interest rate hike later this month.

Back home, traders overlooked government’s statement that the current regulatory framework on Participatory Notes (P-Notes) is strict and robust, hinting that there may not be any change required in the rules at the moment. The comments assume significance following the Supreme Court-appointed SIT on black money asking Sebi to review its regulations on P-Notes and identify their end-users. Depreciation in Indian rupee too dampened the sentiments. Rupee was trading at 66.65 per dollar at the time of equity markets closing compared with its previous close of 66.59 per dollar. Meanwhile, shares of IT and auto companies operating from Chennai were hit badly as incessant rains have marooned the capital city of the Tamil Nadu.

The NSE’s 50-share broadly followed index Nifty declined by around seventy points to end below the psychological 7,900 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex declined by over two hundred and thirty points to end below its crucial 25,900 mark. Broader markets too struggled to get any traction during the trade and ended the session with a cut of around half a percent. The market breadth remained in favor of decliners, as there were 1,243 shares on the gaining side against 1,542 shares on the losing side while 138 shares remain unchanged.

Finally, the BSE Sensex plunged by 231.23 points or 0.89% to 25886.62, while the CNX Nifty declined by 67.20 points or 0.85% to 7864.15. 

The BSE Sensex touched a high and a low 26123.86 and 25857.35, respectively. The BSE Mid cap index was down by 0.42%, while Small cap index was down by 0.50%.    The top gaining sectoral index on the BSE was Realty up by 0.37%, while FMCG down by 1.48%, Consumer Durables down by 1.43%, Metal down by 1.35%, PSU down by 1.09% and Healthcare down by 1.08% were the losing indices on BSE.

The top gainers on the Sensex were Axis Bank up by 0.70%, NTPC up by 0.56%, Maruti Suzuki up by 0.17%, HDFC Bank up by 0.05% and Reliance Industries up by 0.02%. On the flip side, ONGC down by 2.65%, Lupin down by 2.64%, BHEL down by 2.48%, Vedanta down by 2.23% and Hero MotoCorp down by 2.15% were the top losers.

Meanwhile, the national Intellectual Property Rights (IPR) policy being prepared by government will help India become an innovative economy over the next 10 years. Secretary in the Department of Industrial Policy and Promotion (DIPP) Amitabh Kant further elaborating said that recognising the need to scale up the process of IP creation and increase commercialisation of the technology, the government has embarked on the process of preparing a national IPR Policy and it has been formulated with a mission to foster innovation, accelerate economic growth, employment and entrepreneurship besides protecting public health, food security and environment.

Kant said that there is a need to improve the level of IP awareness across all sectors and it is critical that the need for IP creation and protection percolates down across industries, institutions and PSUs. However, he added that it is important to have an innovative ecosystem which supports translation of inventions into commercial use. This ecosystem can only be created and nurtured through initiatives of the government in collaboration with industry. He also said that the government has taken several measures to improve the delivery of services provided by IP office such as processing of IP applications.

IPR is widely recognised as a key component for a company's growth and in improving its competitiveness. A draft policy is in the public domain, which seeks to encourage innovation by providing tax incentives and modifying intellectual property rights.

The CNX Nifty touched a high and low 7912.30 and 7853.30 respectively.  The top gainers on Nifty were Axis Bank up by 0.72%, Tech Mahindra up by 0.54%, NTPC up by 0.41%, Indusind Bank up by 0.25% and Maruti Suzuki up by 0.25%. On the flip side, BHEL down by 2.89%, ONGC down by 2.76%, Lupin down by 2.46%, PNB down by 2.40% and Vedanta down by 2.33% were the top losers. 

European Markets were trading in green; France’s CAC was up by 1.00%, Germany’s DAX was up by 0.92% and UK’s FTSE was up by 0.15%.   

Asian markets ended mostly in red on Thursday after crude oil prices fell below the $40 a barrel mark overnight and hawkish comments from Federal Reserve Chair Janet Yellen reinforced the case for an interest rate hike later this month. Yellen said the US economy had ‘recovered substantially’ and consumer spending was ‘particularly solid’. Hong Kong stocks weakened, as investors assessed the effects of diverging global monetary policies after the market rallied this week on the Chinese yuan's global reserve currency status. However, Shanghai Composite ended higher brushing aside a Caixin/Markit Purchasing Managers' Index showing China's services sector growth cooling in November. Weak indicators often stir hopes of government stimulus, providing a burst of support for Chinese shares. Japanese stocks ended littlechanged in choppy trade as investors were content to adopt a conservative approach before the European Central Bank's policy decision later in the day.