Key indices slide as December Fed rate hike odds move up

Increased possibility of an interest-rate hike from the US Federal Reserve at its next policy meeting in December 2015 pulled Indian stocks lower. The barometer index, the S&P BSE Sensex, lost 201.62 points or 0.75% at 26,838.14, as per the provisional closing data. The Nifty lost 59.45 points or 0.73% at 8,111.75, as per the provisional closing data. The Sensex provisionally settled below the psychological 27,000 mark after falling below that level earlier during the trading session. Stocks of state-run companies, banking stocks and index heavyweights ITC, L&T and Infosys led losses for key benchmark indices.

The Sensex hit its lowest level in more than two weeks when it fell 245.66 points or 0.9% at the day's low of 26,794.10 at the fag end of the trading session. The Nifty also hit its lowest level in more than two weeks when it fell 73.20 points, or 0.89% at the day's low of 8,098 at the fag end of the trading session. The Sensex and the Nifty edged lower for the fourth straight trading session.

Asian and European stocks edged lower as the Federal Reserve left open the possibility of an interest-rate hike in December at its latest meeting. After a hawkish statement from the Fed, the Fed-funds futures market is now pricing in 43% probability of an increase in US benchmark interest rate in December 2015, compared with a 34% chance before the announcement. The Fed kept its benchmark interest rate unchanged near zero after the conclusion of a two-day monetary policy meeting yesterday, 28 October 2015. The next monetary policy review from the Fed is scheduled on 15-16 December 2015.

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 market breadth indicating the overall health of the market was negative. On BSE, 1,442 shares fell and 1,228 shares rose. A total of 180 shares were unchanged. The BSE Mid-Cap index provisionally fell 0.44%. The BSE Small-Cap index provisionally fell 0.42%. The fall in both these indices in percentage terms was lower than the Sensex's decline.

The total turnover on BSE amounted to Rs 2761.59 crore, higher than turnover of Rs 2701.94 crore registered during the previous trading session.

Capital goods stocks declined. Bharat Heavy Electricals (Bhel) (down 4.49%), L&T (down 1.5%), Siemens (down 0.13%), BEML (down 1.38%), ABB India (down 0.2%) and Crompton Greaves (down 3.16%) declined. Bharat Electronics (up 1.86%) and Thermax (up 0.81%) rose.

Shares of state-run companies declined. Power Finance Corporation (down 2.69%), Power Grid Corporation of India (down 1.68%), Container Corporation of India (down 1.62%), Coal India (down 2.65%), GAIL (India) (down 0.46%), Rural Electrification Corporation (down 2.33%), and ONGC (down 0.02%) edged lower.

NTPC fell in volatile trade after reporting Q2 September 2015 results. The stock lost 1.35% at Rs 127.80. The stock hit a high of Rs 131.25 and a low of Rs 127.30 in intraday trade. The company's net profit rose 39.9% to Rs 2898.28 crore on 5.25% rise in total income to Rs 18173.90 crore in Q2 September 2015 over Q2 September 2014.

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