After languishing in negative zone in early trade, key benchmark indices extended losses in morning trade. At 10:14 IST, the barometer index, the S&P BSE Sensex was down 233.70 points or 0.91% at 25,539.91. The Nifty 50 index was currently down 68.05 points or 0.86% at 7,822.70. Weakness in global stocks weighed on the domestic bourses. Prospects of higher interest rates in the United States pulled global markets lower after the latest data showed that US consumer prices rose in April at their fastest pace in three years. Additionally, hawkish comments from US Federal Reserve officials yesterday, 17 May 2016, increased expectations that the US central bank will pick up the pace of rate rises during the current calendar year.
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 Sensex dropped 267.50 points or 1.03% at the day's low of 25,506.11 in morning trade, its lowest level since 16 May 2016. The barometer index fell 102.13 points or 0.39% at the day's high of 25,671.48 in morning trade. The Nifty lost 79.25 points or 1% at the day's low of 7,811.50 in morning trade, its lowest level since 16 May 2016. The index fell 38.25 points or 0.48% at the day's high of 7,852.50 in morning trade.
In overseas markets, Chinese stocks led decline in Asian stocks after a top Chinese official made no mention of a stock trading link between Hong Kong and Shenzhen. In mainland China, the Shanghai Composite index was currently down 1.74%. In Hong Kong, the Hang Seng index was currently down 1.68%. US stocks dropped yesterday, 17 May 2016, after Federal Reserve officials implied that interest rates could be raised as early as next month. Atlanta Fed President Dennis Lockhart and San Francisco Fed President John Williams, both, yesterday, 17 May 2016, said the Fed's decision on whether to raise rates at the June 14-15 meeting hinges on the data. Lockhart said that June certainly could be a meeting at which action could be taken. Dallas Fed President Robert Kaplan, seen as a hawk, said he will push for an interest rate hike in June or July.
The consumer-price index increased a seasonally adjusted 0.4% in April from the prior month after rising 0.1% in March. That was the largest one-month increase since February 2013. A measure of underlying price pressures, which excludes the often-volatile categories of food and energy, rose 0.2% last month after ticking up 0.1% in March. Core prices were up 2.1% from a year earlier, a fifth consecutive month of annual growth above 2%the longest such streak in four years.
Closer home, the market breadth indicating the overall health of the market was negative. On BSE, 1,045 shares fell and 728 shares rose. A total of 98 shares were unchanged. The BSE Mid-Cap index was currently off 0.43%. The BSE Small-Cap index was currently off 0.1%. The fall in both these indices was lower than the Sensex's decline in percentage terms.
Auto stocks declined. Maruti Suzuki India (down 2.99%), Mahindra & Mahindra (M&M) (down 1.3%), Tata Motors (down 1.58%), Eicher Motors (down 0.65%), Ashok Leyland (down 1.22%), Bajaj Auto (down 1.06%), Hero MotoCorp (down 1.81%) and TVS Motor Company (down 0.09%) declined.
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Cement stocks fell. ACC (down 1.44%), Ambuja Cements (down 0.99%), UltraTech Cement (down 0.97%) and Shree Cement (down 1.64%) fell.
Grasim Industries was off 0.56% at Rs 4,260.25. Grasim has exposure to the cement sector through its holding in UltraTech Cement.
Mahindra Holidays & Resorts India was up 2.23% after net profit rose 208% to Rs 32.09 crore on 26.2% growth in net sales to Rs 234.37 crore in Q4 March 2016 over Q4 March 2015. The result was announced after market hours yesterday, 17 May 2016.
Vascon Engineers rose 2.65% after the company reported net profit of Rs 6.67 crore in Q4 March 2016 compared with net loss of Rs 75.62 crore in Q4 March 2015. Vascon Engineers' net sales rose 4.78% to Rs 180.52 crore in Q4 March 2016 over Q4 March 2015. The result was announced after market hours yesterday, 17 May 2016.
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