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Prospects of hike in US interest rates pull key indices lower


Capital Market
Prospects of increase in interest rates in the United States and data showing slowdown in India's services sector growth weighed on Indian stocks, with barometer index, the S&P BSE Sensex, falling below the psychological 26,000 mark. The Sensex lost 231.23 points or 0.89% to settle at 25,886.62. The Nifty 50 index shed 67.20 points or 0.85% to settle at 7,864.15. The Sensex and the Nifty, both, hit their lowest closing level in more than a week. Stocks of metal and auto companies, public sector banks and index heavyweight ITC led losses for the key benchmark indices. The Sensex and the Nifty dropped for the second day in a row.
The seasonally adjusted Nikkei Services Business Activity Index fell to 50.1 in November from October's eight-month high reading of 53.2, pointing to slowdown in growth in India's services sector. The reading of 50 separates contraction from expansion. Services companies displayed a lack of optimism with regards to the 12-month outlook for activity, as sentiment dropped to the lowest in the ten-year survey history. Difficult economic conditions and weak demand reportedly hit confidence.
In overseas stock markets, Asian stocks declined after hawkish comments from Federal Reserve Chairwoman Janet Yellen reinforced the case for an interest rate hike during the middle of this month. The Fed is widely expected to announce an increase of 25 basis points in the federal funds rate after a regular monetary policy review scheduled during the middle of this month.
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 Sensex lost 231.23 points or 0.89% to settle at 25,886.62, its lowest closing level since 24 November 2015. The Sensex lost 260.50 points or 0.99% at the day's low of 25,857.35. The barometer index rose 6.01 points 0.02% at the day's high of 26,123.86.
The Nifty shed 67.20 points or 0.85% to settle at 7,864.15, its lowest closing level since 24 November 2015. The Nifty lost 78.05 points or 0.98% at the day's low of 7,853.30. The Nifty fell 19.05 points or 0.24% at the day's high of 7,912.30.
The BSE Mid-Cap index fell 0.42%. The BSE Small-Cap index fell 0.5%. The decline in these indices was lower in percentage terms than the Sensex's fall.
The market breadth indicating the overall health of the market turned negative from positive in late trade. On BSE, 1,542 shares fell and 1,243 shares rose. A total of 138 shares were unchanged.
The total turnover on BSE amounted to Rs 3086 crore, higher than turnover of Rs 3030.55 crore registered during the previous trading session.
Among the sectoral indices on BSE, the S&P BSE Healthcare index (down 1.08%), the S&P BSE Metal index (down 1.35%), the S&P BSE Consumer Durables index (down 1.43%) and the S&P BSE FMCG index (down 1.48%), underperformed the Sensex. The S&P BSE Realty index (up 0.37%), the S&P BSE Utilities index (down 0.3%), the S&P BSE Telecom index (down 0.39%), the S&P BSE Consumer Discretionary Goods & Services index (down 0.48%), the S&P BSE IT index (down 0.53%), the S&P BSE Teck index (down 0.53%), the S&P BSE Energy index (down 0.54%), the S&P BSE Bankex (down 0.59%), the S&P BSE Capital Goods index (down 0.59%), the S&P BSE Oil & Gas index (down 0.63%), the S&P BSE Finance index (down 0.64%), the S&P BSE Power index (down 0.67%), the S&P BSE Industrials index (down 0.77%), the S&P BSE Basic Materials index (down 0.81%) and the S&P BSE Auto index (down 0.83%), outperformed the Sensex.
Index heavyweight and cigarette major ITC dropped 1.99% to Rs 343. The stock hit a high of Rs 350.80 and low of Rs 342.10.
Index heavyweight and housing finance major HDFC shed 0.8% to Rs 1,201.50. The stock hit high of Rs 1,226 and low of Rs 1,199.10 in intraday trade.
Auto stocks declined. Tata Motors (down 1.64%), Mahindra & Mahindra (M&M) (down 1.74%), Bajaj Auto (down 0.24%), Hero MotoCorp (down 1.62%), Ashok Leyland (down 0.81%) and TVS Motor Company (down 1.8%) edged lower. Maruti Suzuki India rose 0.11%.
Eicher Motors gained 2.18%. The company disclosed that due to heavy rains in Chennai, the company has shut down its manufacturing plants in Thiruvottiyur and Oragadam and its offices in the city since 1 December 2015. The company suffered a production loss of 4,000 motorcycles last month due to heavy rains. The company is monitoring the situation closely and hoping for normalcy to return soon.
FMCG stocks fell across the board. Dabur India (down 2.03%), Godrej Consumer Products (down 2.93%), Hindustan Unilever (down 0.85%), Marico (down 1.23%), Nestle India (down 0.78%), Britannia Industries (down 0.54%), Procter & Gamble Hygiene and Health Care (down 0.64%), GlaxoSmithkline Consumer Healthcare (down 0.39%), Colgate-Palmolive (India) (down 0.74%), Tata Global Beverages (down 1.21%), Jyothy Laboratories (down 1.55%) and Bajaj Corp (down 1.92%) fell.
Pharma stocks declined. Glenmark Pharmaceuticals (down 2%), Aurobindo Pharma (down 0.82%), Dr Reddy's Laboratories (down 0.49%), Cadila Healthcare (down 0.64%), Wockhardt (down 1.03%), Lupin (down 2.5%), Divi's Laboratories (down 1.37%) and Sun Pharmaceutical Industries (down 1.02%) declined.
Cipla lost 1.16%. The company announced during market hours that it has launched a novel "5 in 1" anti-ageing skin care product Cutisera developed by Stempeutics.
PSU bank stocks declined. State Bank of India (SBI) (down 1.25%), Punjab National Bank (down 1.86%), Canara Bank (down 1.89%), Bank of India (down 1.81%) and Union Bank of India (down 1.58%) dropped. IDBI Bank rose 0.76%.
Bank of Baroda fell 1.47% to Rs 171.20, with the stock extending losses registered during the previous trading session triggered by government ordering a forensic probe into the alleged foreign exchange irregularities at the bank's Ashok Vihar branch. Finance Minister Arun Jaitley in a written reply in Rajya Sabha on Tuesday, 1 December 2015, said that a forensic probe has been ordered into the alleged irregularities in outward foreign remittances to the tune of about Rs 6000 crore from BoB's Ashok Vihar branch. The stock had fallen 2.06% to settle at Rs 173.75 yesterday, 2 December 2015.
Jaitley said that the Central Bureau of Investigation (CBI) and Enforcement Directorate (ED) have registered cases on the basis of complaint filed by BoB regarding irregularities in outward foreign remittances from its Ashok Vihar branch, New Delhi through newly opened accounts, to the tune of about Rs 6000 crore. He also said Ministry of Corporate Affairs has ordered investigation in respect of 11 companies involved in the transaction.
Private sector bank stocks were mixed. HDFC Bank (up 0.26%), Axis Bank (up 0.88%), IndusInd Bank (up 0.03%) rose. Kotak Mahindra Bank (down 1.3%), ICICI Bank (down 1.59%), and Yes Bank (down 0.05%) fell.
Metal and mining stocks declined. Jindal Steel & Power (down 3.32%), Vedanta (down 2.12%), Tata Steel (down 1.48%), NMDC (down 1.27%), Hindalco Industries (down 1.43%), Hindustan Copper (down 2.76%), Steel Authority of India (down 1.89%), JSW Steel (down 0.79%), Hindustan Zinc (down 0.62%) and National Aluminium Company (down 3.33%) edged lower.
Bhushan Steel jumped 12.44% after reports the company is in the process of getting Rs 3000 crore from sale and lease-back arrangements for two of its assets in Odisha. With debt of Rs 40000 crore, Bhushan had become a worry for banks.
Visa Steel rose by its maximum permissible daily limit of 20% to Rs 18.44 after Cresta Fund bought 33 lakh shares of the company at an average price of Rs 15.10 per share from Visa Infrastructure in a bulk deal on the NSE yesterday, 2 December 2015. Promoter group entity, Visa Infrastructure held 45.58% stake in Visa Steel as per the shareholding pattern as on 30 September 2015. Cresta Fund held 3.79% stake in Visa Steel as per the shareholding pattern as on 30 September 2015.
Power generation stocks were mixed. Reliance Infrastructure (up 2.64%), NTPC (up 0.68%), Reliance Power (up 1.62%) and Jaiprakash Power Ventures (up 0.14%) rose. Tata Power Company (down 1.43%), NHPC (down 1.73%), Adani Power (down 0.33%), JSW Energy (down 1.45%) edged lower.
CESC declined 2.42%. CESC after market hours yesterday, 2 December 2015, said that a memorandum of understanding has been executed with Silver Spring, a US-based company and a market leader in smart grid space across the globe, for exploring business opportunities in India in the space. As part of its ongoing drive for modernizing its transmission and distribution network, as a pilot project the company will work with Silver Spring on smart grid distribution models in parts of South Kolkata under its licensed area, CESC said.
Torrent Power fell 3.11% to Rs 191.50 on profit booking after the stock rose 7.54% in the preceding five trading session to Rs 197.65 on 2 December 2015, from a recent low of Rs 183.80 on 24 November 2015.
Reliance Communications (RCom) jumped 6.24% after the company said 6 crore shares or 2.41% of Reliance Communications stake pledged by one of its promoter group entities Reliance Communications Enterprises have been released. After the release of 6 crore pledged shares, the percentage of shares pledged by Reliance Communications Enterprises has fallen to 15.34% of RCom's equity. Reliance Communications Enterprises holds 29.05% stake in RCom.
Just Dial slumped 5.43% after reports a foreign brokerage has downgraded the stock to 'sell'. According to reports, the brokerage is worried about Search Plus (SP) execution risks and expects core search revenue growth to decelerate to 19% during the period from FY 2015 (year ending 31 March 2015) to FY 2018 (year ending 31 March 2018) due to inadequate investments in the past and rising competition. Successful execution of SP platform would be key to sustainability of core search business and will require significant incremental investments, according to the brokerage. The brokerage has also reportedly pointed out that the company may have to incur higher expenses to maintain growth, posing risks to street earnings per share (EPS) estimates.
Key benchmark indices fell for second day in a row today, 3 December 2015. The Sensex has declined 282.79 points or 1.08% in the preceding two trading sessions from its close of 26,169.41 on 1 December 2015. The Sensex has declined 231.23 points or 0.88% in the first three trading sessions of this month. The Sensex has fallen 1,612.80 points or 5.86% in this calendar year so far (till 3 December 2015). From a 52-week low of 24,833.54 hit on 8 September 2015, the Sensex has risen 1,053.08 points or 4.24%. The Sensex is off 4,138.12 points or 13.78% from a record high of 30,024.74 hit on 4 March 2015.
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First Published: Dec 03 2015 | 4:28 PM IST

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