Sensex little changed before Fed meeting, futures expiry

Stocks were little changed in a volatile session before the expiration of monthly derivative contracts and the Federal Reserve's monetary policy decision this week.

Sun Pharmaceutical Industries rallied to a three-month high after getting tentative approval for an antidepressant from the US drug authority. NTPC, the largest power producer, surged the most in four months. Bharat Heavy Electricals was the worst performer on the S&P BSE Sensex, while Hindustan Unilever fell the most in a week.

The Sensex swung between a gain of 0.7 per cent and a drop of 0.1 per cent, while the Nifty 50 Index changed direction at least a dozen times before the lapse of the monthly futures and options contracts on Thursday. The MSCI Asia Pacific Index jumped 1.7 per cent amid speculation US policy makers will back away on Wednesday from plans to raise interest rates four times in 2016 after tumultuous trading in January.

"The market is focused on what the Fed will say in view of the unprecedented volatility and disruption we've seen this month," Ajay Bodke, chief portfolio manager at Prabhudas Lilladher Pvt, said in an interview with Bloomberg TV India. "We've got positive signals from the European Central Bank and the Bank of Japan, while China has pumped in highest liquidity in three years."

Investors will scour the Fed's Wednesday statement for the impact of January's market turmoil on plans to hike borrowing costs this year.

The prospect that authorities in Europe and Japan may boost their already unprecedented stimulus underpinned some equity gains over the past two weeks. Even before this month's selloff, Fed fund futures were pricing in two increases by year-end. That's shrunk to one, data compiled by Bloomberg show.

Housing Development Finance Corp, the biggest mortgage lender, will probably say its third-quarter earnings rose 10 per cent to Rs 1,560 crore ($230 million), according to the median of 21 analyst estimates in a Bloomberg survey. The shares fell 0.4 per cent.

Six of the nine Sensex companies that have so far reported December-quarter earnings have beaten estimates. Fifty-seven per cent of the companies posted results that matched or beat estimates in the three months ended September, versus 60 per cent in June, data compiled by Bloomberg show.

Capital outflows
The cost of carrying forward Nifty futures contracts to the February series dropped to a seven-month low amid weakness in global equities. Foreigners have pulled $1.7 billion from Indian shares since January 1, bringing the benchmark indexes to within one per cent of a bear market on January 21.

"Nifty is in a downtrend due to the huge overseas outflows and we expect it to decline to 7,000 in February," Manish Sharma, chief trader at Derivative Trading Academy, said by phone from Mumbai. "We haven't reached the reversal point." Sharma's forecast implies a drop of about six per cent from Wednesday's close.

Sun Pharmaceutical advanced 1.7 per cent to its highest level since Nov 4. Dr Reddy's Laboratories added 2.4 per cent, the most since January 22. NTPC jumped 4.2 per cent, the most since September 14. Tata Steel, the biggest producer of the alloy, rose 1.1 per cent, taking its four-day gain to 11 per cent.

Bharat Heavy tumbled 3.9 per cent, taking this month's loss to 17.5 per cent. Asian Paints declined 2.1 per cent, ending three day of advances. Hindustan Unilever retreated two per cent, the steepest loss since January 21.

Overseas investors bought a net $18.1 million of local stocks on January 25, the first net inflow in eight sessions. They bought $3.3 billion of shares in 2015, the least in four years. Indian markets were closed for a public holiday on Tuesday.