Indian benchmarks end with small losses after Fed rate hike

Indian stock markets wrapped Thursday’s trading session on a distressing note as investors tuned jittery after the US Federal Reserve raised interest rates by a quarter point on late Wednesday and signalled a faster pace of increases in 2017 and 2018, increasing fears that higher interest rates in US would trigger foreign investment outflows from emerging markets including India towards the US. On the domestic front, sentiments were undermined with industry body CII’s report that India's economic growth will see a 'significant fall' in the second half of the current fiscal on account of cash crunch following demonetisation. As far as corporate earnings are concerned, the consumer goods sector has seen sales drop by 20 per cent in the last month. Besides, depreciation in rupee value against dollar, also weighed on the sentiments. Indian rupee tumbled by 42 paise to 67.85 against the US dollar due to appreciation of the American currency globally. However, investors got some comfort with Chief Economic Advisor Arvind Subramanian’s word that the Indian economy is ‘well cushioned’ to absorb the impact of US Federal Reserve's rate hike. According to Subramanian, India is seen as better equipped than its other emerging market peers to weather the impact of higher U.S. interest rates because of its stronger economic growth and record high foreign exchange reserves of more than $300 billion. Some support also came with private report stating that the Reserve Bank is expected to meet its inflation target 'comfortably' as CPI inflation is likely to remain well below 5 per cent over the first half of 2017.

Meanwhile, liquor stocks such as Globus Spirits, Pincon Spirit, Radico Khaitan and United Spirits declined after the Supreme Court ordered closure of liquor shops along the national and state highways. According to Supreme Court, liquor shops must be 500 meters away from state and national highways and it has ordered immediate removal of all sign boards of liquor ads on national and state highways. However, shares of ports, shipping and logistics companies edged higher after the Cabinet approved a Major Port Trust Authorities Bill to replace the Major Port Trusts Act of 1963. This will empower the Major Ports to perform with greater efficiency on account of full autonomy in decision making and by modernizing the Institutional structure of Major Ports. Technology stocks also gained traction on speculation that export revenues will grow as U.S. dollar gained extended its rally for a third session.

On the global front, Asian equity markets ended mostly lower on Thursday after the Federal Reserve raised rates for the first time in a year and hinted at the risk of a faster pace of tightening than investors were positioned for. Yields on short-term US debt surged to the highest since 2009, sending the dollar to the peak which was not seen in almost 14 years. The drop in the yen could cushion Japanese stocks, lifting Japan's Nikkei 0.1 percent. However, other Asian markets had less luck, as they ended in negative terrain. The European markets though exhibited mixed trend with CAC 40 climbing over half a percent, being the top gainer. Back home, the local benchmark got off to a somber opening, extending the downtrend for the second straight session as pessimistic sentiments prevailed across Asian markets. The key gauges made some attempts to claw back into the green zone in late morning trades but profit booking at higher levels dragged the major indices again to lower levels in the noon session. Thereafter, the key indices failed to show any kind of fervor and traded near neutral line for remaining part of the session. Finally the NSE’s 50-share broadly followed index Nifty, declined by over three tens of a percent to settle tad above the crucial 8,150 support level, while Bombay Stock Exchange’s Sensitive Index Sensex deposed over eighty points and closed just above the psychological 26,500 mark.

The market breadth remained optimistic as there were 1315 shares on the gaining side against 1290 shares on the losing side while 173 shares remained unchanged. Finally, the BSE Sensex declined by 83.77 points or 0.31% to 26519.07, while the CNX Nifty dropped 28.85 points or 0.35% to 8,153.60.

The BSE Sensex touched a high and a low of 26737.86 and 26407.58, respectively and there were 8 stocks on gainers side against 22 stocks on the losers side on the index.  While the BSE Mid cap index ended on a flat note, the Small cap index was up by 0.21%.

The top gaining sectoral indices on the BSE were IT up by 0.59%, Bankex up by 0.29%, TECK up by 0.25%, PSU up by 0.08% and Capital Goods up by 0.05%, while FMCG down by 0.80%, Consumer Durables down by 0.79%, Auto down by 0.32%, Oil & Gas down by 0.13% and Power down by 0.03% were the top losing indices on BSE.

The top gainers on the Sensex were TCS up by 2.34%, Axis Bank up by 2.17%, ONGC up by 1.35%, Power Grid Corpn. up by 1.10% and Bajaj Auto up by 0.95%. On the flip side, Sun Pharma down by 4.36%, NTPC down by 2.02%, Tata Motors down by 1.94%, ITC down by 1.42% and Bharti Airtel down by 1.24% were the top losers.

Meanwhile, different sections of the government have slowly been conceding the fact of adverse impact of demonetization on the economy; the latest is commerce secretary Rita Teaotia who ahead of the release of the merchandise exports data for November, has said that the country’s exports will likely face a temporary “slowdown” due to the cash crunch following the announcement of demonetisation on November 8.

She said that the demonetisation process, as has been pointed out, may cause a momentary setback (to) or momentary slowdown (in exports). She however stated that demonetisation should be viewed as an opportunity for capitalising “on the benefits that we can get from a far more transparent, far more open and far less messy cash-based transactions. She added that the commerce ministry has initiated a broader consultative process with all export promotion councils to gauge the level of adaptation to demonetisation. She pointed that the engineering sector is actually leading the reversal of the decline of exports over the last two years and has allowed us in October to register a growth of 9.6 per cent overall in the exports from India.

Merchandise exports witnessed a rise in only three of the past 23 months through October. Small and medium enterprises, who deal mostly in cash, have been particularly worried after demonetisation. India's exports are expected to reach $ 280 billion by the end of this fiscal as against $ 261.13 billion in 2015-16.

The CNX Nifty traded in a range of 8,225.90 and 8,121.95. There were 18 stocks in green against 33 stocks in red on the index.

The top gainers on Nifty were Axis Bank up by 2.47%, TCS up by 2.22%, ONGC up by 1.28%, IndusInd Bank up by 1.22% and Mahindra & Mahindra up by 1.20%. On the flip side, Sun Pharma down by 4.18%, Tata Motors - DVR down by 2.50%, NTPC down by 2.17%, Grasim Industries down by 2.04% and Ambuja Cements down by 2.02% were the top losers.

The European markets were trading mostly in green; Germany’s DAX increased 59.64 points or 0.53% to 11,304.48, France’s CAC increased 31.07 points or 0.65% to 4,800.31, while UK’s FTSE 100 decreased 7.21 points or 0.1% to 6,941.98.

Asian equity markets ended mostly in red on Thursday after the Federal Reserve raised interest rates for the first time in a year. The quarter percentage point rate increase, the second in a decade, was widely expected although investors were surprised to see the Fed project three more increases for 2017. Japanese shares bucked the trend and ended marginally higher as the dollar surged against the yen after interest rate hike announcement.