Indian equities nosedive on weak global causes

The Penultimate trading day of the week turned out to be a disappointment for the Indian frontline equity indices, as they remained choppy throughout the session and ended near day’s lows. The benchmarks suffered hefty bouts of profit booking especially in Oil & Gas, PSU and IT counters and got dragged below the psychological 9,600 (Nifty) and 31,100 (Sensex) levels.  Sentiments remained weak with the report that the likely increase in farm loan waivers will weigh on PSU banks, NBFCs. The agri stress indicates that Tamil Nadu, Karnataka and Haryana may follow up with farm loan waivers, taking the total farm loan waivers to about $28 billion from $10 billion. Besides, soft US economic data, a relatively hawkish Federal Reserve statement and worries of political turmoil in the world's largest economy also weighed on the sentiments.

Adding pessimism among traders, Moody’s Investors Services in its report indicated that Reserve Bank of India’s (RBI’s) move to reduce the amount of money that banks have to set aside (as security) on home loans is negative from the perspective of the ratings of lenders. According to the rating agency, the move is credit negative for Indian banks because lower capital requirements will weaken their protection related to the exposure to the housing sector and encourage greater lending. Some concerns also came with report that foreign portfolio investors (FPIs) sold shares worth a net Rs 161.13 crore on June 14, 2017. Meanwhile, with less than two weeks to go, the Centre and States are hoping to wrap up discussions on the goods and services tax (GST) this weekend. The GST Council will meet on June 18 to finalize the tax rate on lottery and will discuss the remaining draft rules.

On the global front, Asian markets ended mostly lower on Thursday, after the Federal Reserve raised interest rates as expected. The Federal Open Market Committee voted to raise fed funds to between 1% and 1.25%, and will start ‘gradual’ shrinking of its $4.5 trillion balance sheet ‘this year.’ Lower oil prices took a toll on energy-related shares across the region, while Japan's benchmark slipped as the yen gained against the dollar. Oil prices wallowed near their lowest levels in seven months early on Thursday, hurt by high global inventories and doubts over OPEC’s ability to implement production cuts. Meanwhile, European stocks dropped to their lowest in nearly two months, rattled as investors questioned the Federal Reserve’s outlook for monetary policy as signs of flagging consumer demand have cropped up.

Back home, the market breadth remained optimistic, as there were 1375 shares on the gaining side against 1271 shares on the losing side, while 172 shares remained unchanged.

Finally, the BSE Sensex declined 80.18 points or 0.26% to 31075.73, while the CNX Nifty was down by 40.10 points or 0.42% to 9,578.05. 

The BSE Sensex touched a high and a low of 31229.44 and 31026.48, respectively and there were 8 stocks on gainers side against 22 stocks on the losers side on the index.

The broader indices ended mixed; the BSE Mid cap index declined 0.12%, while Small cap index was up by 0.37%.

The top gaining sectoral indices on the BSE were Realty up by 2.16%, Healthcare up by 0.86%, FMCG up by 0.14%, Basic Materials up by 0.08% and Power up by 0.05%, while Oil & Gas down by 1.15%, PSU down by 1.02%, IT down by 0.92%, TECK down by 0.92% and Capital Goods down by 0.68% were the top losing indices on BSE.

The top gainers on the Sensex were Reliance Industries up by 2.11%, Wipro up by 1.86%, Cipla up by 1.74%, Dr. Reddys Lab up by 1.27% and Sun Pharma up by 1.08%. On the flip side, TCS down by 2.42%, Larsen & Toubro down by 1.46%, ONGC down by 1.18%, Mahindra & Mahindra down by 1.16% and Coal India down by 1.13% were the top losers.

Meanwhile, in a bid to boost agricultural productivity and production in the country, the Union Cabinet headed by Prime Minister Narendra Modi, has approved the Interest Subvention Scheme (ISS) and earmarked a sum of Rs 20,339 crore for this purpose. Under the scheme, the Centre will provide an interest subvention of 5% per annum to all prompt payee farmers for short term crop loan up to one year for loan up to Rs 3 lakh borrowed by them during the year 2017-18. Thus, farmers will have to effectively pay only 4% as interest. In case farmers do not repay their loan in time, they would be eligible for interest subvention of 2% instead of 5%.

For providing relief to farmers affected by natural calamities, the government has also decided to give 2% interest subsidy for first year on the restructured amount. Apart from this, farmers will also get loans for post-harvest storage of their produce at a subsidised interest rate of 7% for six months. The Cabinet decision to continue the interest subvention comes at a time when farmers are in agitation mode in several parts of the country, especially in Madhya Pradesh, demanding loan waiver. Uttar Pradesh and Maharashtra have already announced such waiver.

The interest subvention will be given to Public Sector Banks (PSBs), Private Sector Banks, Cooperative Banks and Regional Rural Banks (RRBs) on use of own funds and to NABARD for refinance to RRBs and Cooperative Banks. The Interest Subvention Scheme will continue for one year and it will be implemented by NABARD and RBI.

The CNX Nifty traded in a range of 9,621.40 and 9,560.80. There were 12 stocks in green as against 39 stocks in red on the index.

The top gainers on Nifty were Aurobindo Pharma up by 6.97%, Wipro up by 1.56%, Cipla up by 1.50%, Reliance Industries up by 1.46% and Dr. Reddys Lab up by 1.11%. On the flip side, IOC down by 3.35%, BPCL down by 3.10%, TCS down by 2.44%, Bharti Infratel down by 2.03% and Hindalco down by 1.90% were the top losers.

The European markets were trading in red; UK’s FTSE 100 decreased 53.41 points or 0.71% to 7,420.99, Germany’s DAX decreased 88.08 points or 0.69% to 12,717.87 and France’s CAC decreased 43.06 points or 0.82% to 5,200.23.

Asian equity markets ended mostly in red on Thursday, with a sharp overnight fall in crude oil prices, the Federal Reserve's relatively hawkish tone and a widening probe into Russia's role in the US election weighing on markets. The Federal Reserve raised its key interest rate by 25 basis points, as widely expected despite the recent weakness of core inflation. Japanese shares fell slightly in choppy trade as the yen's strength pressured exporters and an overnight drop in US Treasury yields dragged down financial stocks. The dollar dropped to an eight-week low against the yen after a Washington Post report said that the special counsel overseeing the federal investigation into Russian interference in the 2016 election is looking into whether US President Donald Trump tried to obstruct justice. However, Chinese shares closed marginally higher after the International Monetary Fund on Wednesday raised China's growth projections but called for deep reforms to transition its economy to more sustainable growth.