Market remains choppy as FOMC decision looms

Benchmark indices ping pong between red and green as looming FOMC decision keeps mood uncertain

In a volatile session ahead of the forthcoming Fed taper decision, benchmark indices inched higher in the green zone after slipping in red in early trade on Wednesday.

Goldman Sachs remains "underweight" on Indian shares in its Asia Pacific portfolio and maintains its Nifty target at 5,700, saying the macro outlook remains challenged which coupled with tighter financial conditions may lead to lower valuations. The investment bank says India's corporate health, and asset quality of banks will remain under pressure while positioning risk and election uncertainties are likely to linger as well. Also, the bank adds that major emerging market/Asia active managers are still overweight on India by 3-4 percentage points and so any meaningful retail redemptions or decrease in allocations could put pressure on equities.

At 11:18am, the 30-share BSE Sensex was up 32.72 points or 0.17% at 19,836.75 while NSE Nifty was up 6 points or 0.1% at 5,855. Broader markets remain are up too with BSE mid-cap and small cap up 0.3%-0.4%. In the broader markets, the mid and smallcap indices started higher by 0.3% each, outperforming the BSE benchmark index, which was up 0.2%.
    

Among sectors, Realty, Consumer Durables, FMCG, Healthcare are the gaining while Power, Auto and Bank stocks are the laggards.

Top Sensex-30 gainers were Dr Reddys Lab, Cipla, Hindustan Unilever, Wipro, Tata Power, Coal India, SBI RIL while top losers are HDFC, BHEL, M&M, HDFC Bank and     Hero Motocorp.

The market breadth was positive. 1030 stocks advanced while 832 stocks declined on the BSE.

The rupee was trading at Rs 63.17 compared with previous close of Rs 63.37 per dollar. The rupee was trading strong against the dollar in early trades due to dollar sale by foreign banks.

Gold on MCX is trading below Rs 30,000 per 10 grams on concerns of QE tappering by Federal Reserve. Also, the appreciation in the rupee has gold prices to come under pressure.

Asian markets remained flat on Wednesday as markets expect Federal Reserve to launch only a modest scaling back of stimulus later in the day.

The policy-setting Federal Open Market Committee (FOMC) began meeting on Tuesday to discuss whether to trim its bond purchases, or quantitative easing. FOMC is expected to announce the beginning of the tapering of its $85 billion-a-month asset buying program, by $10-$15 bilion every month, in this September meet. This is already factored in by markets worldwide but assets will be vulnerable to a hawkish stance by US Federal Reserve. All purchases are expected to end by the middle of next year.

Expectations are that the Federal Open Market Committee (FOMC) will be measured with any cuts to its $85 billion in monthly asset buying, while also seeking to reassure investors that the day of an actual policy tightening is still distant.

That kept the dollar pinned near a four-week trough against a basket of major currencies. The euro idled at $1.3350, near the week's peak of $1.3385.

On the yen, the greenback inched ahead to 99.24 and near the middle of its recent 98.45-100.62 range.

Caution ruled in most stock markets, with MSCI's broadest index of Asia-Pacific shares outside Japan off a slight 0.3%. Shanghai shares eased 0.2% while Australia lost 0.4%.

Japan's Nikkei was the main standout with a jump of 1.8%, reaching its highest since late July.

Smart Moves

Shares in jewellery companies trading higher in morning trade after the government increased the customs duty on gold and silver jewellery by five percentage points to 15% to protect the domestic industry.

Titan Industries, Tribhovandas Bhimji Zaveri (TBZ), PC Jeweller, Gitanjali Gems, Shree Ganesh Jewellery House (India) and Goenka Diamonds are up between 1-7% on the BSE.

Dr Reddy’s Laboratories is trading higher by 1.3% at Rs 2,335, extending its previous day’s nearly 4% rally, after the company secured the approval of the US Food and Drug Administration (USFDA) to launch injectible medicine azacitidine, which is used in the treatment of bone marrow cancer and blood cell disorders.

SKS Microfinance has surged nearly 11% to Rs 137 after the company said it has received A ratings for Rs 2,000 crore of bank facilities from a leading rating agency, which could help it enhance credit availability and reduce cost of borrowings.