Markets trade choppy on Fed rate hike

Indian equity benchmarks have made a cautious start and are trading choppy in early deals on Thursday pressurized by weak global cues, as the US Federal Reserve raised interest rates, citing continued US economic growth and job market strength, and announced it would begin cutting its holdings of bonds and other securities this year. Sentiments also remained cautious after media reports that US President Donald Trump is being investigated by a special counsel for possible obstruction of justice and crude oil’s steep fall of about 3% to a seven-month low also added to the woes. However, traders were getting some solace with the Union Cabinet approving the proposal to introduce a Financial Resolution and Deposit Insurance Bill, 2017. The Bill would provide for a comprehensive resolution framework for specified financial sector entities to deal with bankruptcy situation in banks, insurance companies and financial sector entities.

Feeble global cues too dampened sentiments with Asian markets trading mostly in red at this point of time, tailing the US markets and on a report that investigators are probing whether President Donald Trump attempted to obstruct justice. The US markets made a mixed closing in the last session.

Back home, telecom stocks were ringing loud, as the four large banks, including the SBI, called on the government to boost liquidity in troubled telecom companies, cautioning that the financial stress may lead to potential defaults. Stocks related to agri and banking space too remained buzzing, as the Union Cabinet has also approved the interest subvention scheme (ISS) for farmers for the year 2017-18 which will help farmers getting short term crop loan up to Rs 3 lakh payable within one year at only 4 percent per annum.

The BSE Sensex is currently trading at 31180.58, up by 24.67 points or 0.08% after trading in a range of 31113.43 and 31229.44. There were 18 stocks advancing against 12 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index gained 0.20%, while Small cap index was up by 0.49%.

The top gaining sectoral indices on the BSE were Realty up by 1.50%, Healthcare up by 0.77%, Telecom up by 0.58%, Power up by 0.51% and FMCG up by 0.48%, while Oil & Gas down by 0.37%, Bankex down by 0.32%, IT down by 0.24%, PSU down by 0.17% and Capital Goods down by 0.15% were the top losing indices on BSE.

The top gainers on the Sensex were NTPC up by 1.22%, Sun Pharma up by 1.15%, Dr. Reddy’s Lab up by 1.14%, Adani Ports up by 1.08% and Bharti Airtel up by 1.01%. On the flip side, GAIL India down by 1.77%, Coal India down by 1.07%, Asian Paints down by 0.91%, TCS down by 0.81% and Larsen & Toubro down by 0.65% were the top losers.

Meanwhile, in a bid to protect clients of financial service providers in financial distress, the Union Cabinet cleared a proposal to introduce a Financial Resolution and Deposit Insurance Bill, 2017 in Parliament. The Bill, when enacted, will pave the way for setting up of the Resolution Corporation and will provide for a comprehensive resolution framework to handle any bankruptcy situation in banks, insurers and financial sector entities. The Bill aims to inculcate discipline in financial service providers in the event of a financial crisis by limiting the use of public money to bail out distressed entities.

According to the government’s statement, the Bill will lead to repeal or amendment of resolution-related provisions in sectoral Acts as listed in Schedules of the Bill. It will also result in the repealing of the Deposit Insurance and Credit Guarantee Corporation Act, 1961, to transfer the deposit insurance powers and responsibilities to the Resolution Corporation. The Resolution Corporation would ensure the stability and resilience of the financial system, protecting the consumers of covered obligations up to a reasonable limit and public funds to the extent possible.

The government had recently enacted the Insolvency and Bankruptcy Code, 2016 ('Code') for the insolvency resolution of non- financial entities. The proposed Bill complements the Code by providing a resolution framework for the financial sector. Once implemented, the Bill together with the Code will provide a comprehensive resolution framework for the economy.

The Bill seeks to give comfort to consumers of financial service providers during any financial distress. It would also help in maintaining financial stability in the economy by ensuring adequate preventive measures while at the same time providing necessary instruments for dealing with a post-crisis situation. The Bill aims to strengthen and streamline the current framework of deposit insurance for the benefit of a number of retail depositors.

The CNX Nifty is currently trading at 9612.00, down by 6.15 points or 0.06% after trading in a range of 9589.40 and 9621.40. There were 23 stocks advancing against 28 stocks declining on the index.

The top gainers on Nifty were Aurobindo Pharma up by 3.34%, NTPC up by 1.13%, Sun Pharma up by 1.05%, Bharti Airtel up by 1.05% and Adani Ports up by 1.02%. On the flip side, GAIL India down by 1.96%, BPCL down by 1.27%, Asian Paints down by 1.17%, Coal India down by 1.13% and HCL Tech down by 1.01% were the top losers.

Asian markets were trading mostly in red; Hang Seng declined 274.22 points or 1.06% to 25,601.68, Nikkei 225 dropped 57.71 points or 0.29% to 19,825.81, KOSPI Index decreased 14.13 points or 0.6% to 2,358.51, Jakarta Composite slipped 9.08 points or 0.16% to 5,783.81, Taiwan Weighted shed 8.6 points or 0.09% to 10,063.86 and Shanghai Composite was down by 3.49 points or 0.11% to 3,127.19.

On the flip side, FTSE Bursa Malaysia KLCI was up by 0.88 points or 0.05% to 1,793.23.