Benchmark indices lose further ground as chances of December Fed rate hike increase

Weakness in Asian markets triggered by disappointing Chinese economic data pulled Indian stocks sharply lower, with the barometer index, the S&P BSE Sensex, falling below the psychological 26,000 level. The Sensex slumped 378.14 points or 1.45% to settle at 25,743.26. The losses for Nifty 50 index were higher in percentage terms than those for the Sensex. The Nifty shed 131.85 points or 1.67% to settle at 7,783.35. The Sensex hit its lowest closing level in more than six weeks. The Nifty hit 9-week closing low. Oil and pharma sector stocks, state-run companies' shares and index heavyweights ITC, HDFC and Infosys led losses for key benchmark indices which remained in red throughout the trading session. The Sensex and Nifty declined for the fifth straight trading session.

The latest slide on the domestic bourses materialized as an unexpectedly strong US payrolls report ramped up expectations that the US Federal Reserve will raise interest rates as soon as December 2015. A stronger-than-expected US employment report for October 2015 has increased the odds of a Federal Reserve rate increase in December. The Fed-funds futures market is now pricing in 68% probability of an increase in US benchmark interest rate in December. Investors in emerging markets, including India are worried that once the Fed starts raising interest rates, it will drain liquidity from global emerging markets and redirect it to developed economies. The Fed has held its benchmark short-term interest rate near zero since December 2008. The ultra-loose monetary policy in the US has encouraged heavy investment in higher-yielding emerging markets. The next monetary policy review from the Fed is scheduled on 15-16 December 2015.

Metal and mining stocks declined as deceleration in China's consumer inflation in October 2015, in latest indication that domestic demand remains weak in the world's second biggest economy.Telecom stocks edged lower after Britain's Vodafone Group PLC announced that it has begun preparations for a potential initial public offer (IPO) of its Indian unit Vodafone India.

Dr Reddy's Laboratories tumbled after the company's management reportedly revealed in a conference call yesterday, 9 November 2015, that the US Food and Drug Administration (USFDA) has ordered a third-party audit across the manufacturing network of the company.

The Sensex slumped 378.14 points or 1.45% to settle at 25,743.26, its lowest closing level since 28 September 2015. The Sensex declined 412.17 points or 1.57% at the day's low of 25,709.23. The index lost 27.31 points or 0.1% at the day's high of 26,094.09.

The Nifty shed 131.85 points or 1.67% to settle at 7,783.35, its lowest closing level since 8 September 2015. The Nifty lost 142.35 points or 1.79% at the day's low of 7,772.85. The index lost 30.10 points or 0.38% at the day's high of 7,885.10.

The market breadth indicating the overall health of the market was weak. On BSE, 1,585 shares declined and 1,030 shares rose. A total of 120 shares were unchanged. The BSE Mid-Cap index dropped 1.68%. The decline in this index was higher than the Sensex's decline in percentage terms. The BSE Small-Cap index lost 0.81%. The decline in this index was lower than Sensex's decline in percentage terms.

The total turnover on BSE amounted to Rs 2395 crore, lower than turnover of Rs 2903.41 crore registered during the previous trading session.

Among the sectoral indices on BSE, the S&P BSE Realty index (down 2.42%), the S&P BSE Healthcare index (down 2.53%), the S&P BSE Teck index (down 1.71%), the S&P BSE Power index (down 1.77%), the S&P BSE IT index (down 1.78%), the S&P BSE Metal index (down 2.78%), and the S&P BSE Oil & Gas index (down 3.77%) underperformed the Sensex. The S&P BSE Capital Goods index (down 1.29%), the S&P BSE Bankex (down 1.06%), the S&P BSE Consumer Durables index (down 0.5%), the S&P BSE Auto index (up 0.1%) and the S&P BSE FMCG index (down 1.22%) outperformed the Sensex.

Index heavyweight ITC declined 1.67% to Rs 336.55. The stock hit high of Rs 345 and low of Rs 335.35.

Index heavyweight HDFC lost 1.37% to Rs 1,174.45. The stock hit high of Rs 1,195 and low of Rs 1,171.35.

Telecom stocks edged lower after Britain's Vodafone Group PLC announced that it has begun preparations for a potential initial public offer (IPO) of its Indian unit Vodafone India. Reliance Communications (down 8.93%), Idea Cellular (down 3.79%), Mahanagar Telephone Nigam (down 1.97%), Tata Teleservices (Maharashtra) (down 2.13%) and Bharti Airtel (down 1.03%) declined. Vodafone Group PLC made the announcement at the time of the release of its financial results for six months ended 30 September 2015 today, 10 November 2015.

Cement stocks declined. Ambuja Cements (down 3.9%), ACC (down 3.03%), Shree Cement (down 0.87%) and UltraTech Cement (down 1.91%) edged lower.

Grasim Industries was off 1.17%. Grasim has exposure to cement sector through its holding in UltraTech Cement.

IT stocks dropped. Tech Mahindra (down 1.04%), HCL Technologies (down 3.62%), Oracle Financial Services Software (down 1.6%), MphasiS (down 1.95%), TCS (down 0.54%) and Infosys (down 2.43%), declined.

Wipro rose 0.15% at Rs 561. The stock hit a high of Rs 561.45 and a low of Rs 551.90. Wipro before market hours today, 10 November 2015, announced a partnership with Apttus, the category-defining Quote-to-Cash cloud solution provider, to deliver best-in-class Contract Lifecycle management (CLM), Configure-Price-Quote (CPQ) and Revenue Management solutions to clients across industries.

Shares of state-run companies declined. Coal India (down 3.76%), NTPC (down 1.16%), Power Grid Corporation of India (down 1.15%), GAIL (India) (down 0.97%) and Bharat Electronics (down 3.54%) declined.

Bharat Heavy Electricals (Bhel) lost 3.28% to Rs 178.35, with the stock extending recent losses triggered by the company reporting poor Q2 earnings. Bhel reported net loss of Rs 204.90 crore in Q2 September 2015 compared with net profit of Rs 124.84 crore in Q2 September 2014. Total income declined 0.45% to Rs 6311.23 crore in Q2 September 2015 over Q2 September 2014.

Pharma stocks declined. GlaxoSmithkline Pharmaceuticals (down 2.75%), Divi's Laboratories (down 1.51%), Lupin (down 3.92%), Cipla (down 0.99%), Ipca Laboratories (down 1.05%), Strides Arcolab (down 0.72%), Glenmark Pharmaceuticals (down 1.26%) and Wockhardt (down 0.2%) edged lower.

Dr Reddy's Laboratories declined after the company's management reportedly revealed in a conference call yesterday, 9 November 2015, that the US Food and Drug Administration (USFDA) has ordered a third-party audit across the manufacturing network of the company. The stock shed 5.24% at Rs 3,321. The stock hit a high of Rs 3,494.90 and a low of Rs 3,318 in intraday trade. The conference call was held in the wake of a warning from the USFDA on possible violations of manufacturing standards at three pharmaceutical plants of the company. Reacting to this development, shares of Dr Reddy's Laboratories had slumped 17.58% in the preceding two trading sessions to settle at Rs 3,504.60 yesterday, 9 November 2015, from Rs 4,252.60 on 5 November 2015.

Meanwhile, the company announced at the fag end of the trading session that a US district court has issued an order directing the company to temporarily stop sales of generic esomeprazole capsules in the US market with immediate effect. The order came about as a result of a motion moved by Astra Zeneca objecting to the usage of the colour purple in the generic product. The order has been passed pending further hearing or trial. Dr Reddy's Lab said that the company is evaluating all possible options to the resolve the matter at the earliest.

Sun Pharmaceutical Industries (Sun Pharma) lost 2.89% at Rs 735, with the stock extending previous trading session's decline triggered by the company reporting weak Q2 September 2015 results. The stock had fallen 5.82% to settle at Rs 756.90 yesterday, 9 November 2015.

Pfizer rose 0.31% after net profit surged 3402.3% to Rs 61.64 crore on 6.4% increase in net sales to Rs 506.45 crore in Q2 September 2015 over Q2 September 2014. The result was announced after market hours yesterday, 9 November 2015

Metal and mining stocks declined as deceleration in China's consumer inflation in October indicated that domestic demand remains weak in the world's second biggest economy. Hindustan Zinc (down 6.29%), Vedanta (down 3.68%), Tata Steel (down 1.89%), Jindal Steel & Power (down 0.9%), JSW Steel (down 0.51%), National Aluminium Company (down 3.34%) and Steel Authority of India (down 2.05%) edged lower. China is the world's largest consumer of steel, copper and aluminum.

China's consumer price index rose 1.3% in October 2015 from a year earlier, slower than a 1.6% rise in September 2015.

Meanwhile, copper prices fell in the global commodities markets. High Grade Copper for December 2015 delivery was currently off 0.7% at $2.2145 per pound on the COMEX.

Hindalco Industries edged lower in choppy trade after its US subsidiary Novelis Inc. reported a net loss of $13 million for Q2 September 2015 against net profit of $38 million in Q2 September 2014. The stock shed 0.69% at Rs 79.25. The stock hit a high of Rs 82.80 and a low of Rs 77.20 in intraday trade. Novelis' net sales declined 12.32% to $2482 million in Q2 September 2015 over Q2 September 2014.

Separately, Hindalco Industries' standalone net profit rose 30.37% to Rs 103 crore on 4.33% growth in revenue from operations to Rs 8925 crore in Q2 September 2015 over Q2 September 2014. On year on year basis, net profit was higher in Q2 September 2015 due to base effect: net profit in Q2 September 2014 was pulled lower by one-time exceptional expenses amounting to Rs 431 crore.

With macro-economic headwinds continuing, the company's focus will be on operational excellence and cash conservation in the coming quarters, Hindalco Industries said in a statement.

Oil stocks witnessed across the board decline. Among oil exploration and production (E&P) firms, Cairn India (down 5.04%), ONGC (down 4.9%) and Reliance Industries (down 3.96%) edged lower.

In the global commodities markets, Brent for December settlement was currently off 3 cents at $47.16 a barrel. The contract had fallen 23 cents or 0.48% to settle at $47.19 a barrel during the previous trading session.

Oil India edged lower in volatile trading after announcing second quarter results. The stock fell 1.43% at Rs 393. The stock hit a high of Rs 404 and a low of Rs 388.50 in intraday trade. Oil India's net profit rose 10.92% to Rs 674.80 crore on 12.82% rise in total income to Rs 2956.51 crore in Q2 September 2015 over Q2 September 2014. The result was announced after market hours yesterday, 9 November 2015. Oil India's net revenue was adversely impacted to the tune of Rs 84.50 crore in Q2 September 2015 on account of the sharing of under-recoveries of downstream oil companies. There was an adverse impact of Rs 2238.30 crore on net revenue due to the sharing of under-recoveries of downstream oil companies during the corresponding period of the previous year.

Among public sector oil marketing companies (PSU OMCs), BPCL (down 3.05%) and Indian Oil Corporation (down 3.64%) edged lower.

HPCL tumbled 7.41% at Rs 735 after the company reported reverse turnaround in Q2. HPCL reported net loss of Rs 320.50 crore in Q2 September 2015 compared with net profit of Rs 850.21 crore in Q2 September 2014. Total income fell 18.43% to Rs 42367.60 crore in Q2 September 2015 over Q2 September 2014. The result was announced after market hours yesterday, 9 November 2015.

During Q2 September 2015, the company accounted for zero subsidy from the Government of India (GOI) on sale of PDS Kerosene and domestic liquified petroleum gas (LPG) compared to subsidy of Rs 366.25 crore received from the GOI during Q2 September 2014. During Q2 September 2015, discount from ONGC amounted to Rs 377.99 crore on purchase of crude oil. During Q2 September 2014, discount amounted to Rs 7359.63 crore from ONGC and GAIL (India) on purchase of kerosene, crude oil and domestic LPG from them. Based on the approval from GOI, the company has accounted for budgetary support of Rs 840.89 crore during Q2 September 2015 towards under-recovery on sale of PDS kerosene. During Q2 September 2014, budgetary support amounted to Rs 3918.95 crore towards under-recoveries on sale of kerosene, LPG and diesel.

Bank stocks declined. Among public sector banks, UCO Bank (down 2.38%), Syndicate Bank (down 1.26%), Punjab National Bank (down 1.11%), Corporation Bank (down 0.35%), Allahabad Bank (down 1.98%), Bank of India (down 1.01%), State Bank of India (SBI) (down 1.95%), Union Bank of India (down 1.74%), Canara Bank (down 1.34%), and United Bank of India (down 0.23%) edged lower. Bank of Baroda rose 0.94%.

Among private sector banks, HDFC Bank (down 1.1%), ICICI Bank (down 0.19%), Kotak Mahindra Bank (down 2.15%), Federal Bank (down 0.92%), Yes Bank (down 2.98%) and IndusInd Bank (down 3.28%) edged lower. Axis Bank rose 0.76%.

The Sensex and the Nifty edged lower for the fifth straight trading session today, 10 November 2015. The Sensex has fallen 847.33 points or 3.18% in the preceding five trading trading sessions from its close of 26,590.59 on 3 November 2015. The Sensex has declined 913.57 points or 3.42% in this month so far (till 10 November 2015). The Sensex has fallen 1,756.16 points or 6.38% in this calendar year so far (till 10 November 2015). From a 52-week low of 24,833.54 hit on 8 September 2015, the Sensex has risen 909.72 points or 3.66%. The Sensex is off 4,281.48 points or 14.25% from a record high of 30,024.74 hit on 4 March 2015.

The stock exchanges are conducting one hour special Muhurat trading session tomorrow, 11 November 2015, evening for Diwali Laxmi Pujan. Trading will be conducted for an hour from 17:45 IST to 18:45 IST. There is no regular trading due to a holiday on account of Diwali. The stock market also remains closed on Thursday, 12 November 2015, for Diwali Balipratipada holiday.

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