Benchmarks end with modest cut ahead of Fed outcome

Indian equity benchmarks ended the lackluster day of trade with marginal losses, as traders opted to book some of their profits after yesterday's rally. Frontline gauges swung between green and red throughout the day, as traders remained cautious ahead of the US Federal Reserve's rate decision. The Fed is almost universally expected to raise its benchmark interest rates, but investors are keen on seeing how much more tightening will happen this year. Traders remained on sidelines as the likelihood of a repo rate cut in April 2017 remained subdued. Those hoping that the Reserve Bank of India (RBI) would slash interest rates going ahead may just have to wait further as the inflation may have come back to haunt the economy. Higher food, fuel, non-fuel commodities and power prices, and playing out of base effect in February had led to both Wholesale Price Index (WPI) and Consumer Price Index (CPI) or retail inflation soaring northwards to 6.55% and 3.65%, respectively. The WPI inflation was highest in 39 months, while the retail inflation was at a 4-month high.

However, losses remained capped as Moody’s Investors Service said that BJP’s thumping victory in Uttar Pradesh and substantial gains made in other states will facilitate reforms as the ruling party inches closer to a majority in Upper House. It added that the 2017 state election results in India demonstrate broad-based popular support for the Indian government’s policy agenda and will facilitate the implementation of further reforms, a credit positive for the sovereign.

On the global front, European markets were trading in green ahead of a Federal Reserve rate-setting meeting in the U.S. However, Asian counters ended mostly in red as investors remained focused on what the Federal Reserve will say about tightening monetary policy during the rest of the year with markets already pricing in an immediate rise in US interest rates.

Back home, sharp rally in rupee hurt the shares of software companies. The rupee climbed at 65.40 per dollar on Wednesday, its strongest since November 2015, compared with its previous close of 65.80. The PSU oil marketing companies viz. HPCL, BPCL and IOC edged lower despite the international crude oil prices slid to the lowest since late November after OPEC reported a rise in global crude inventories and raised its forecast of production in 2017 from outside the group.

The NSE’s 50-share broadly followed index Nifty ended marginally lower and held the psychological 9,050 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex declined by around fifty points to finish below its psychological 29,400 mark. Broader markets however outperformed benchmarks and gained around a percent. The market breadth remained in favor of advances, as there were 1,426 shares on the gaining side against 1,384 shares on the losing side, while 187 shares remain unchanged.

Finally, the BSE Sensex declined 44.52 points or 0.15% to 29398.11, while the CNX Nifty was down by 2.20 points or 0.02% to 9084.80.

The BSE Sensex touched a high and a low of 29500.08 and 29358.91, respectively and there were 15 stocks each on both gainers and losers sides on the index.
The broader indices ended in green; the BSE Mid cap index gained by 1.06%, while Small cap index was up by 0.66%.

The top gaining sectoral indices on the BSE were Telecom up by 1.79%, Realty up by 0.72%, Auto up by 0.71%, Consumer Disc up by 0.65% and Basic Materials was up by 0.63%, while IT down by 1.81%, TECK down by 1.20% and Oil & Gas was down by 0.03% were the few losing indices on BSE.

The top gainers on the Sensex were Hero MotoCorp up by 1.24%, Tata Steel up by 1.24%, Reliance Industries up by 1.16%, SBI up by 0.98% and Tata Motors was up by 0.79%. On the flip side, TCS down by 2.42%, Infosys down by 2.21%, Hindustan Unilever down by 1.54%, Wipro down by 1.39% and Coal India was down by 0.85% were the top losers.

Meanwhile, the US Trade Representative (USTR) in its voluminous annual report on trade has said that India’s GDP growth along with indirect taxation reforms could support considerably more US exports to the country in future. It also said that the Goods and Services Tax (GST) regime in India, could provide an impetus to the creation of a common internal market that significantly lowers transaction costs.

USTR has stated that India's new National Intellectual Property Rights (IPR) Policy could protect US innovations. It also pointed out that while these reforms are encouraging, there has also been a general trend of tariff increases in India, which reflects an active pursuit of import substitution policies and also said that the US will press India to make meaningful progress in relation to these ambitious goals in 2017. However, it noted that the existing Indian trade and regulatory policies have inhibited the development of a more robust trade and investment relationship.

The report further said that, the US Trade Representative will follow through with work plans agreed on during the US India Trade Policy Forum (TPF) in October 2016, which will include convening digital video conferences and in-person meetings on intellectual property rights, promoting investment in manufacturing, agriculture and trade in goods and services. It added that India and US have set a target of increasing bilateral trade to $500 billion.

The CNX Nifty traded in a range of 9,075.50 and 9,106.55. There were 28 stocks in green as against 22 stocks in red, while one stock remained unchanged on the index.

The top gainers on Nifty were Idea Cellular up by 9.75%, BHEL up by 3.44%, Bank of Baroda up by 3.42%, Aurobindo Pharma up by 2.39% and Tata Power was up by 1.67%. On the flip side, TCS down by 2.70%, Infosys down by 2.21%, Hindustan Unilever down by 1.45%, Wipro down by 1.31% and HCL Tech was down by 1.25% were the top losers.

The European markets were trading in green; France’s CAC rose 0.93 points or 0.02% to 4,975.19, Germany’s DAX gained 7.77 points or 0.06% to 11,996.56 and UK’s FTSE 100 was up by 18.23 points or 0.25% to 7,376.08.

Asian equity markets ended mostly lower on Wednesday ahead of a rates decision from the US Federal Reserve and as Dutch voters head to the polls. Investors were focused on what the Federal Reserve will say about tightening monetary policy during the rest of the year with markets already pricing in an immediate rise in US interest rates. Japanese shares ended lower as the yen continued to strengthen against the dollar. Though, Chinese shares ended marginally higher after Premier Li Keqiang's news conference at the end of the annual meeting of China's parliament offered few surprises. A rebound in oil prices in Asian trading also helped to limit overall losses to some extent.