Market breadth turns negative from positive

A bout of volatility was witnessed as key benchmark indices trimmed losses after extending intraday slide in afternoon trade. At 13:20 IST, the barometer index, the S&P BSE Sensex, was down 162.56 points or 0.63% at 25,542.05. The Nifty 50 index was currently down 52.10 points or 0.66% at 7,818.05. Weakness in global stocks weighed on the domestic bourses. World stocks edged lower after minutes from the US Federal Reserve's April policy meeting signalled the US central bank could raise rates as soon as next month if data supported the case that the American economy is getting stronger. The Federal Open Market Committee (FOMC) next undertakes monetary policy review on 14-15 June 2016.

Investors in emerging markets, including India are worried that higher interest rates in the US will drain liquidity from emerging markets and redirect it to developed economies. The US central bank had lifted rates in December 2015 for the first time in nearly a decade.

The Sensex dropped 209.79 points or 0.81% at the day's low of 25,494.82 in afternoon trade, its lowest level since 16 May 2016. The barometer index rose 9.95 points or 0.03% at the day's high of 25,714.56 at the onset of trading session. The Nifty lost 63.65 points or 0.8% at the day's low of 7,806.30 in afternoon trade, its lowest level since 16 May 2016. The index rose 6.05 points or 0.07% at the day's high of 7,876.20 at the onset of trading session.

The market breadth indicating the overall health of the market turned negative from positive in afternoon trade. On BSE, 1,235 shares fell and 1,072 shares rose. A total of 164 shares were unchanged. The BSE Mid-Cap index was currently down 0.33%. The decline for this index was lower than the Sensex's decline in percentage terms. The BSE Small-Cap index was currently up 0.01%, outperforming the Sensex.

In overseas stock markets, Asian and European stocks edged lower after minutes from the US Federal Reserve's April policy meeting signalled the US central bank could raise rates as soon as next month if data supported the case that the American economy is getting stronger. US stocks finished little-changed after seeing high intraday volatility yesterday, 18 May 2016, after minutes from the Federal Reserve's April 26-27 meeting indicated that most of its members are ready to lift rates as early as June if economic data points to stronger US second-quarter economic growth along with higher inflation and employment. Expectations of a rate hike soared after the minutes. The Fed funds futures market is now pricing in a roughly 34% chance of a rate hike at the Federal Open Market Committee's (FOMC) next monetary policy meeting on 14-15 June 2016, which is sharply higher than 4% possibility at the beginning the week. The US central bank had lifted rates in December 2015 for the first time in nearly a decade.

Capital goods stocks were mixed. BEML (down 1.17%), Havells India (down 0.41%), L&T (down 1.16%), Crompton Greaves (down 0.17%) and Siemens (down 0.69%) declined. Thermax (up 0.83%) and ABB (India) (up 0.47%) gained.

Bharat Heavy Electricals (Bhel) rose 1.09% after the company during market hours today, 19 May 2016, said that it has commissioned a 250 megawatts thermal power plant in Maharashtra.

IT stocks were mixed. Tech Mahindra (down 0.11%) and HCL Technologies (down 0.37%) declined. Infosys rose 0.06%.

TCS shed 0.17%. The company after market hours yesterday, 18 May 2016, announced forming five-year partnership with Lidingoloppet, the legendary Swedish sports event, widely regarded as the world's largest cross-country race. Under the terms of the agreement, TCS will become the title sponsor and official technology partner for the event.

Wipro rose after the company announced that Vestas Wind Systems selected the company as its strategic IT partner to provide workplace services. The stock rose 0.67%. Headquartered in Aarhus, Denmark, Vestas is a global energy company that delivers best in class wind energy solutions in over 75 countries. The announcement was made after market hours yesterday, 18 May 2016.

Universal Cables surged 11.95% after the company reported net profit of Rs 11.94 crore in Q4 March 2016 compared with net loss of Rs 2.15 crore in Q4 March 2015. The result was announced after market hours yesterday, 18 May 2016. Universal Cables' net sales rose 12.4% to Rs 214.46 crore in Q4 March 2016 over Q4 March 2015.

On the political front, the trends announced so far for assembly elections in Assam showed that Bharatiya Janata Party (BJP), Asom Gana Parishad and Bodoland People's Front alliance was set to form government in the state dislodging Congress, which has ruled the state for three consecutive terms. The trends for the assembly elections in West Bengal showed that Chief Minister Mamata Banerjee was all set to retain power in the state with her party Trinamool Congress heading for an emphatic victory. In Tamil Nadu, the trends showed that All India Anna Dravida Munnetra Kazhagam (AIADMK) was set to retain power in the state. In Kerala, the trends showed that the Communist Party of India-Marxist (CPM)-led Left Democratic Front (LDF) was set to oust Congress led United Democratic Front government. In Puducherry, the Congress-DMK alliance won 11 seats and was leading in 2 seats. The All India N.R. Congress won 7 seats and was leading in 1 seat as per results and leads for 25 out of 30 constituencies in Puducherry. The counting of votes for assembly elections held in these four states and the Union territory of Puducherry began early morning and final results are expected later in the day.

A win for the BJP led coalition in Assam will put BJP in the right shape for the 2017 assembly election in Uttar Pradesh (UP). The UP assembly has 403 seats. The number of seats in Rajya Sabha, or the upper house of parliament, depends on representation in states. A lack of a majority for the BJP led National Democratic Alliance (NDA) in the Rajya Sabha has delayed passage of a key tax reform bill viz. the Goods and Services Tax (GST) bill in the upper house. The NDA rules the central government after an emphatic victory in the 2014 Lok Sabha election.

Finance Minister Arun Jaitley said in an interview to All India Radio recently that the GST Bill will be put to vote in the monsoon session of Parliament if Congress continues to oppose the Legislation. The GST bill, which has been approved by the Lok Sabha, is pending in the Rajya Sabha because of stiff resistance by the Congress. For the GST bill to become a law, the GST bill also needs to be approved by half the state assemblies.

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