Indian markets reel under global pressure; settle with loss of over a percent

Stock markets in India capitulated by over a percent on Thursday after showing some signs of consolidation in last session. Discouraging leads from the Asian and European markets proved as a big dampener for the domestic bourses, as investors turned jittery after minutes of the U.S. Federal Reserve's latest monetary policy meeting hinted that the central bank could soon raise interest rates. The minutes of the US central bank’s April policy meeting showed that although several policymakers thought there were still risks to the economic outlook, a number of committee members believed it would be ‘appropriate’ to lift benchmark interest rates on June 15, if economic data and labour market conditions keep strengthening and inflation approaches the 2% target. Besides, a stronger US dollar weighed on commodity prices and dragged down resources stocks. On the domestic front, sentiments got undermined with the reports that Prices of many food items such as pulses, sugar, vegetables and poultry products are set to surge in India in the next three months on thin supplies, which could fuel inflation and give the central bank little room to cut rates. Depreciation in rupee value against the US dollar too weighed down sentiments. Indian rupee plummeted 34 paise against the US dollar to 67.32 at the time of equity markets closing, its weakest level since March, due to appreciation of the American currency overseas amid foreign fund outflows. Investors failed to draw any sense of relief with global rating agency Standard and Poor’s (S&P) statement that India is likely to remain insulated from the developments in the Chinese economy provided the government carries out structural reforms to take the economy to an eight per cent growth path.

On the global front, European markets opened sharply lower tracking losses in Asian markets amid concerns that the Fed may raise interest rates in the near term with June a possibility. Financial stocks were among the few holding their own as resource stocks continue to be hardest hit amid failing oil and metal prices. Airline, travel and leisure stocks also fell after Egyptair said that one of its planes, carrying 66 passengers and crew on a flight from Paris to Cairo, had gone missing.

Back home, the local benchmarks with a somber opening, extended the downtrend for the second straight session as pessimistic sentiments prevailed across Asian markets. Thereafter, the key indices failed to show any kind of fervor due to lack of encouraging leads. The key gauges suffered a setback in afternoon trades as sudden bouts of selling pressure emerged in the local markets immediately after a somber European market opening.  The indices barely managed to show signs of stabilizing in the second half of the session as the downward drift halted only with the session’s close after inflicting some serious losses. Finally the NSE’s 50-share broadly followed index Nifty, took a cut of over a percent to settle below the crucial 7,800 support level while Bombay Stock Exchange’s Sensitive Index, Sensex slipped by three hundred points and closed below the psychological 25,400 mark. Moreover, the broader markets too failed to show any kind of fervor and closed with losses of over a percent. On the BSE sectoral space, the Capital Goods and FMCG pockets remained among top laggards in the space, as they got lacerated by around two percent while the sectors like Metal and PSU too got pounded heavily in the session. Though there were no sectoral gainers in the space, shares of logistics companies rallied after Finance Minister Arun Jaitley said in an interview that the GST Bill will be put to vote in the monsoon session of Parliament if Congress continues to oppose the Legislation. The market breadth remained awful as there were 918 shares on the gaining side against 1628 shares on the losing side, while 170 shares remained unchanged.

Finally, the BSE Sensex ended lower by 304.89 points or 1.19% to 25399.72, while the CNX Nifty dropped 86.75 points or 1.10% to 7,783.40. 

The BSE Sensex touched a high and a low 25714.56 and 25351.99, respectively. The broader indices made a negative closing; the BSE Mid cap index ended down by 1.12%, while Small cap index declined by 1.01%.

The top losing sectoral indices on the BSE were Capital Goods down by 2.38%, FMCG down by 1.74%, Metal down by 1.61%, PSU down by 1.55% and Oil & Gas down by 1.22%, while there were no gainers on BSE sectoral index front.

The top gainers on the Sensex were Lupin up by 1.43%, Tata Motors up by 0.70%, Wipro up by 0.70%, Maruti Suzuki up by 0.32% and Hero MotoCorp up by 0.21%. On the flip side, Adani Ports &Special down by 6.14%, SBI down by 4.05%, Larsen & Toubro down by 3.24%, GAIL India down by 2.71% and HDFC down by 2.61% were the top losers.

Meanwhile, government’s latest success in passing of the New Bankruptcy Code has been applauded by the US officials too; stating that the move coupled with American tax authorities accepting bilateral advance pricing agreements (APA), will lead to US industry finding 'to do business' in India much easier. On May 12, the Rajya Sabha passed the Insolvency and Bankruptcy Code 2016, which the US believes will make it easier for American companies to do more business in India.

Director General, US and Foreign Commercial Service, and Assistant Secretary, Global Markets, US Department of Commerce Arun M Kumar said that “Many US companies are increasingly optimistic about the shift in tone, but are waiting to see further tangible progress in India’s business climate. Even as some states have moved swiftly up the rankings, India still ranks lowest among the G20 countries on the World Bank’s 2016 Doing Business report.”

He further added that to enhance its position in global supply chains and deepen its integration with the world economy, India will need to harmonise product standards with international rules. Standards barriers - such as certain testing, certification, and registration requirements - not only pose obstacles to US companies, but hamper the pace of India’s integration into the global economy.

He acknowledged India's e-commerce market as the fastest growing in the world and said that over the last two years, US businesses invested over $15 billion in India, and will reportedly sign deals worth another $27 billion over the next two years. However, according to him a high-standard Bilateral Investment Treaty (BIT) will help augment big-ticket investments from US into India. Recently India and the US held technical-level talks at the Finance Ministry on BIT.

The CNX Nifty traded in a range of 7,876.20 and 7,766.80. There were 9 stocks advancing against 42 stocks decliners on the index.

The top gainers on Nifty were Bharti Infratel up by 0.97%, BPCL up by 0.87%, Power Grid up by 0.84%, Wipro up by 0.71% and Zee Entertainment up by 0.37%. On the flip side, Adani Ports &Special down by 6.77%, SBI down by 4.20%, Bank of Baroda down by 4%, Larsen & Toubro down by 3.65% and Eicher Motors down by 3.13% were the top losers.

European markets were trading in red; Germany’s DAX decreased 157.2 points or 1.58% to 9,786.03, UK’s FTSE 100 declined 83.34 points or 1.35% to 6,082.46 and France’s CAC was down by 38.91 points or 0.9% to 4,280.39.

Asian equity markets ended mostly lower on Thursday, with risk sentiment hurt by falling commodity prices and a surging dollar, after the Federal Reserve's April meeting minutes revealed ‘most’ members have a strong bias for raising rates as early as June, based on how the economy evolves. Chinese shares ended flat in thin trading after a State Council executive meeting chaired by Premier Li Keqiang urged state-owned enterprises to boost their competitiveness. Japanese shares ended little changed on Thursday, moving in and out of positive territory as general caution offset some gains from Federal Reserve minutes that boosted the dollar and weakened the yen. Some investors stayed on the sidelines ahead of Group of Seven meetings to be held this week in Japan.