Benchmarks snap three-day winning streak after Fed rate hike

Thursday turned-out to be a dismal day of trade for Indian equity benchmarks, where frontline gauges snapped their three days winning streak to end below their crucial  35,600 (Sensex) and 10,850 (Nifty) levels after the US Federal Reserve raised borrowing costs and struck a hawkish tone in its latest policy statement. Markets started the session on a pessimistic note with report showing that the country’s current account deficit (CAD) rose to $13 billion (Rs 878 billion and 1.9 per cent of gross domestic product, or GDP) in the fourth and final quarter (Q4 of 2017-18), compared to $2.6 billion (Rs 176 billion and 0.4 per cent of GDP) in the same period of 2016 -17. Traders also remained concerned on report that Reserve Bank of India to hike rates once again at its August monetary policy review as headline inflation surging to a four-month high of 4.87 per cent in May. Markets extended losses due to higher Wholesale Price Index (WPI) data. India’s wholesale inflation shot up to a 14-month high of 4.43 percent in May on increasing prices of petrol and diesel as well as vegetables. The WPI based inflation stood at 3.18 percent in April and 2.26 percent in May last year.

Some anxiety also persist among investors with a private report stating that the Centre and some states strongly disagree on the inclusion of certain petroleum products -- natural gas and aviation turbine fuel -- under the ambit of Goods and Services Tax (GST). Sentiments also remained pessimistic with State Bank of India’s (SBI) latest report stating that India has only a decade to get into the developed country tag. However, markets managed to prune some of their losses in last leg of trade as market participants took some solace with report that Fitch Ratings raised India growth forecast for 2018-19 to 7.4 per cent from 7.3 per cent, but cited higher financing costs and rising oil prices as risks to growth. For 2019-20, it estimated the country to grow at 7.5 per cent. Traders also get some relief with Commerce and industry minister Suresh Prabhu’s statement that India’s purchases of commercial aircraft and gas from the US would help bridge the trade deficit between the two countries even as they agreed to hold official talks soon to address trade and economic irritants between them.

Weak global cues too dampened sentiments with European markets trading in red, after the US Federal Reserve lifted short-term interest rate a quarter percentage point and forecast two additional rate hikes this year, citing a strengthening economy. All the Asian markets ended in red, as concerns about US-China trade frictions kept investors on edge.

Back home, some of the real estate stocks edged higher on report that government incentives to boost the residential real estate sector, especially budget housing, may push housing credit growth to 17-19 per cent in the current fiscal year. Overall housing credit grew 39 per cent in the year to March 2018, which was pushed by new mortgage players in the affordable housing segment. Telecom stocks exhibited mixed trend after Communications Minister Manoj Sinha said that the new telecom policy is expected to be cleared by the Union Cabinet by the end of next month. However, majority of oil & gas stocks remained under pressure as India’s oil imports from Iran surged to about 705,000 barrels per day (bpd) in May, their highest level since October 2016.

Finally, the BSE Sensex declined 139.34 points or 0.39% to 35,599.82, while the CNX Nifty was down by 48.65 points or 0.45% to 10,808.05.

The BSE Sensex touched a high and a low of 35,749.88 and 35,488.55, respectively and there were 14 stocks on gaining side as against 17 stocks on losing side on the index.

The broader indices ended mixed; the BSE Mid cap index slipped 0.08%, while Small cap index was up by 0.07%.

The few gaining sectoral indices on the BSE were Healthcare up by 1.47%, Consumer Discretionary Goods & Services up by 0.05%, Auto up by 0.05% and Energy was up by 0.03%, while IT down by 1.40%, TECK down by 1.32%, PSU down by 1.05%, Consumer Durables down by 0.89% and Capital Goods was down by 0.81% were the top losing indices on BSE.

The top gainers on the Sensex were Sun Pharma up by 2.57%, Yes Bank up by 1.17%, Indusind Bank up by 1.00%, Dr. Reddys Lab up by 0.73% and Reliance Industries up by 0.54%. On the flip side, Infosys down by 2.93%, ICICI Bank down by 2.11%, Adani Ports down by 1.75%, TCS down by 1.75% and SBI down by 1.72% were the top losers.

Meanwhile, State Bank of India (SBI) in its latest report has said that India has only a decade to get into the developed country tag and will need to broaden its base in the sphere of education, failing which the much-hailed 'demographic dividend' could actually turn into a disadvantage by 2030. It cautioned that if the country is not able to get its act together, it will never be able to go into the developed group of nations.

The report suggested that the government and policymakers will have to emphasis on the young people to ensure they become good citizens and invest in education in order to achieve the objective and realise the demographic dividend. It pointed out that the population growth trend shows that incremental population growth has been stagnant in the last two decades at about 18 crore, and fertility rates are quite diverse across states. It added that Karnataka, which has seen a decline in birth rate over the last few decades that has led to the share of those over 60 years increasing to 9.5 percent in 2011, from 6.1 percent in 1971, is best representative of the need to focus on education.

According to the report, with the affluence that comes as a result of slower population growth, people are preferring to put their children in private schools and not the government ones, on which a large number of population still depends. Suggesting a slew of changes needed in order to make the state-run schools perform better, it said that the need of the hour is thus to improve the overall situation of government schools across states.

The CNX Nifty traded in a range of 10,833.70 and 10,773.55. There were 20 stocks in green as against 30 stocks in red on the index.

The top gainers on Nifty were Lupin up by 3.57%, Sun Pharma up by 2.44%, HCL Tech up by 1.33%, Cipla up by 1.32% and Yes Bank up by 1.99%. On the flip side, Tech Mahindra down by 2.16%, TCS down by 2.15%, Adani Ports down by 2.15%, Indiabulls Housing Finance down by 2.14% and Indian Oil Corporation down by 2.06% were the top losers.

The European markets were trading in red; UK’s FTSE 100 decreased 36.51 points or 0.47% to 7,667.20, Germany’s DAX shed 29.35 points or 0.23% to 12,861.23 and France’s CAC was down by 8.39 points or 0.15% to 5,444.3.

Asian equity markets ended lower on Thursday as trade war fears resurfaced and the US Federal Reserve sounded slightly more hawkish after raising official interest rate for the second time this year. Investors also adopted a cautious stance ahead of the European Central Bank's monetary policy announcement later in the day amid expectations the central bank will signal a winding down of its vast bond-buying program by the end of this year. Chinese shares dropped after reports suggested the Trump administration is preparing to proceed with tariffs on Chinese goods. Further, a slew of economic data from China too disappointed investors. Industrial production in China was up an annual 6.8 percent in May, the National Bureau of Statistics said. That was shy of expectations for 7.0 percent, which would have been unchanged from the April reading. Retail sales grew an annual 8.5 percent in May - also missing expectations for 9.6 percent and down from 9.4 percent in the previous month. Fixed asset investment gained 6.1 percent year-on-year, missing forecasts for 7.0 percent, which would have been unchanged from the April reading. Japanese shares ended lower as a firmer yen on worries about global trade and faster pace of interest rate hikes sapped investors' appetite for risk. Japan's industrial production climbed 0.5 percent month-over-month in April, faster than the 0.3 percent estimated earlier, final data from the Ministry of Economy, Trade and Industry showed today. This marked the third successive monthly rise. Meanwhile, the Indonesian market was closed for Eid-ul-Fitr.