Key benchmark indices slumped in early afternoon trade as global bond yields climbed to the highest levels this year. The barometer index, the S&P BSE Sensex, was currently trading below the psychological 27,000 mark, having alternately moved above and below that level in intraday trade so far. The Sensex hit its lowest levels in almost four weeks and the 50-unit CNX Nifty 3-week low. The broad market depicted weakness. There were more than five losers against every gainer on BSE.
The broad based losses for Indian stocks materialized today, 3 June 2015, after forecast of deficient rains this year from the India Meteorological Department. The market sentiment was also hit adversely after a survey showed contraction in India's services sector in May 2015. The Sensex was currently off 388.48 points or 1.43% at 26,799.90. The BSE Small-Cap index was off 3.32%. The BSE Mid-Cap index was off 2.41%. The decline in both these indices was higher than the Sensex's decline in percentage terms. A number of stocks which are the constituents of the BSE Small-Cap index were off 2% to 20%.
Metal shares edged lower. Bank stocks also witnessed selling pressure.
Global bond yields climbed to the highest levels this year as the selloff in sovereign debt spread to Asia. Higher bond yields tend to dent the attraction of stock investments relative to bonds. In overseas stock markets, Asian stocks were in red.
Foreign portfolio investors sold shares worth a net Rs 594.14 crore yesterday, 2 June 2015, as per provisional data released by the stock exchanges. Domestic institutional investors (DIIs) bought shares worth a net Rs 271.64 crore yesterday, 2 June 2015, as per provisional data released by the stock exchanges.
In overseas markets, Asian shares edged lower as global bond yields climbed to the highest levels this year. US stocks ended slightly lower yesterday, 2 June 2015, on caution ahead of the important monthly jobs report later in the week and ahead of a looming deadline for Greece and its lenders to find a solution to the country's debt crisis.
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At 12:19 IST, the S&P BSE Sensex was down 388.48 points or 1.43% at 26,799.90. The index fell 490.12 points at the day's low of 26,698.26 in early afternoon trade, its lowest level since 7 May 2015. The index rose 87.84 points at the day's high of 27,276.22 in early trade.
The 50-unit CNX Nifty was down 115.55 points or 1.40% at 8,120.90. The index hit a low of 8,094.15 in intraday trade, its lowest level since 13 May 2015. The index hit a high of 8,236.70 in intraday trade.
The BSE Mid-Cap index was down 251.97 points or 2.41% at 10,222.54. The BSE Small-Cap index was down 366.79 points or 3.32% at 10,680.39. The fall in both these indices was higher than the Sensex's decline in percentage terms.
The market breadth indicating the overall health of the market was quite weak, with more than five losers against every gainer on BSE. 2,024 shares fell and 381 shares rose. A total of 67 shares were unchanged.
Some side counters tumbled. Unitech (down 44.94%), Jaiprakash Associates (down 30.09%), Jaiprakash Power Ventures (down 21.07%), Reliance Power (down 18.33%) and GMR Infrastructure (down 18.50%), edged lower.
Metal shares edged lower. Jindal Steel & Power (down 10.7%), National Aluminum Company (down 6.75%), Bhushan Steel (down 5.62%), Vedanta (down 2.39%), Hindustan Copper (down 2.29%), NMDC (down 1.78%), Hindustan Zinc (down 1.47%), JSW Steel (down 0.86%), Tata Steel (down 0.85%), Hindalco Industries (down 0.73%) and Steel Authority of India (down 0.61%), edged lower.
Bank stocks also witnessed selling pressure. Among PSU banks, United Bank of India (down 5.7%), Andhra Bank (down 5.51%), IDBI Bank (down 5.31%), Allahabad Bank (down 3.43%), Bank of Maharashtra (down 3.42%), UCO Bank (down 3.39%), Vijaya Bank (down 3.33%), Punjab and Sind Bank (down 2.97%), Syndicate Bank (down 2.28%), Central Bank of India (down 2.03%), Corporation Bank (down 1.8%), Canara Bank (down 1.67%), Dena Bank (down 1.57%), Union Bank of India (down 1.55%), Indian Bank (down 1.29%), Punjab National Bank (down 0.99%) and Bank of India (down 0.82%), edged lower. Bank of Baroda was up 0.22%
State Bank of India (SBI) was down 2.80% to Rs 258.80. SBI reportedly reduced its base rate by 15 basis points after the Reserve Bank of India (RBI) cut repo rate by 25 basis points. SBI reduced its base rate or minimum lending rate to 9.70% from 9.85% effective 8 June 2015. While the Reserve Bank has cut its lending rates by 75 basis points (0.75%) in three installments, the SBI has done so by 30 bps (0.30%) in two tranches, reports added.
Among private sector banks, ICICI Bank (down 3.12%), City Union Bank (down 2.16%), Axis Bank (down 2.15%), Yes Bank (down 2.06%), Federal Bank (down 1.29%), Kotak Mahindra Bank (down 0.57%), IndusInd Bank (down 0.54%) and HDFC Bank (down 0.09%), edged lower.
Meanwhile, the India Meteorological Department (IMD) said in its second stage Long Range Forecast (LRF) for Southwest Monsoon 2015 issued after trading hours yesterday, 2 June 2015, that the rainfall over the country as a whole for the 2015 southwest monsoon season is likely to be deficient. Quantitatively, the season rainfall for the country as a whole is likely to be 88% of the long period average (LPA) with a model error of plus/minus 4%. In April 2015, the IMD had forecast this year's monsoon rainfall to be 93% of the long period average with a model error of plus/minus 5%.
From April 2015 weak El Nino conditions are established over equatorial Pacific Ocean. Atmospheric conditions like weakened trade winds, negative Southern Oscillation Index (SOI) values etc. generally associated with El Nino conditions are also observed, the IMD said. The latest forecast from IMD-IITM coupled model indicates El Nino conditions are likely to strengthen further and reach to moderate strength during the monsoon season. There is about 90% probability of El Nino conditions to continue during the southwest monsoon season, the IMD said.
The IMD said that there is 66% probability of deficient rains, 27% probability of below normal rains and 7% probability of normal rains this year.
The season rainfall is likely to be 85% of LPA over North-West India, 90% of LPA over Central India, 92% of LPA over South Peninsula, and 90% of LPA over North-East India, all with a model error of plus/minus 8%, the IMD said. The monthly rainfall over the country as whole is likely to be 92% of its LPA during July and 90% of LPA during August both with a model error of plus/minus 9%.
The annual monsoon is critical for the country's agriculture. Scarce seasonal rains can adversely affect agriculture production and push prices up in India, because a considerable part of the country's farmland is dependent on the rains for irrigation.
The onset of monsoon in Kerala has been delayed. The IMD in its daily monsoon report yesterday, 2 June 2015, said that conditions are becoming favourable for the onset of southwest monsoon over Kerala around 5 June, four days after the scheduled onset date of 1 June.
The IMD's downgrade of the monsoon forecast came on a day when Reserve Bank of India (RBI) Governor Dr. Raghuram Rajan said that the central bank will wait for more certainty on the monsoon outturn after cutting the benchmark lending rate viz. the repo rate by 25 basis points to 7.25% after a monetary policy review yesterday, 2 June 2015.
Meanwhile, India's services sector fell back into contraction in May 2015 after experiencing growth for six successive months, the outcome of a survey from Markit Economics today, 3 June 2015, showed. The seasonally adjusted HSBC India Services Business Activity Index declined to 49.6 in May 2015, from 52.4 in April 2015. Although indicative of falling output, the latest reading pointed to a marginal rate of contraction. Leading services activity to decline was a reduction in incoming new work, the first since April 2014. Competitive pressures and natural disasters were blamed for the decrease in new business inflows. Service providers' optimism was maintained during May, as improved marketing strategies and better economic conditions are expected to lead to business activity growth over the course of the next year.
Pollyanna De Lima, Economist at Markit said in a statement that India's services sector is expected to see a rebound in coming months. An upturn in employment combined with improved business confidence further add to the evidence that prospects may brighten, he said.
In global commodity markets, Brent crude oil futures edged lower today, 3 June 2015. Brent for July settlement was off 42 cents at $65.07 a barrel. The contract had risen 61 cents or 0.94% to settle at $65.49 a barrel during the previous trading session.
Oil cartel OPEC is expected to keep its production target of 30 million barrels of oil per day unchanged at a meeting scheduled in Vienna on Friday, 5 June 2015. The OPEC meeting is being closely watched for clues about the organization's next moves.
In overseas markets, Asian shares edged lower today, 3 June 2015, as global bond yields climbed to the highest levels this year. Key benchmark indices in China, South Korea, Taiwan, Japan and Indonesia were down by 0.36% to 1.42%. Key benchmark indices in Hong Kong and Singapore and were up by 0.10% to 0.70%.
The HSBC China Services Purchasing Managers' Index rose to an eight-month high of 53.5 in May, HSBC Holdings PLC said today, with both new orders and employment in the sector rising to multi-year highs. Activity outside the nation's factories during the month also came in above April's 52.9 reading. A reading above 50 indicates month-over-month expansion.
US stocks ended slightly lower yesterday, 2 June 2015, on caution ahead of the important monthly jobs report later in the week and ahead of a looming deadline for Greece and its lenders to find a solution to the country's debt crisis.
In Europe, Greece's creditors reportedly reached a consensus on the terms of a proposed deal to put to the Greek government. However, Athens has yet to agree on the terms. The country has to repay 300 million euros ($329 million) to the International Monetary Fund (IMF) by Friday, 5 June 2015. Greece is scheduled to repay a total of euro 1.6 billion ($1.76 billion) to the International Monetary Fund (IMF) over the period between June 5-19.
Meanwhile, the European Central Bank (ECB) is widely expected to reaffirm its commitment to its quantitative easing scheme after a monetary policy meeting today, 3 June 2015.
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