Weakness persisted on the bourses as the key benchmark indices hit fresh intraday low in early afternoon trade. At 13:25 IST, the barometer index, the S&P BSE Sensex was down 360.16 points or 1.35% at 26,366.18. The Nifty 50 index was currently down 119.15 points or 1.45% at 8,087.45. Weakness in Asian stocks after the Bank of Japan and the US Federal Reserve decided to keep interest rates on hold weighed heavily on domestic bourses.
The Sensex lost 411.43 points or 1.53% at the day's low of 26,314.91 in early afternoon trade, its lowest level since 14 June 2016. The index fell 40.31 points or 0.15% at the day's high of 26,686.03 in early trade. The Nifty lost 132.15 points or 1.61% at the day's low of 8,074.45, its lowest level since 14 June 2016. The index fell 25.95 points or 0.31% at the day's high of 8,180.65 in early trade.
In overseas markets, Asian stocks dropped as investors digested the US Federal Reserve's decision to keep interest rates on hold. In Japan, the Nikkei 225 index was currently down 3.05% after the Bank of Japan (BoJ) kept monetary policy steady as was widely expected. At the end of a two-day monetary policy review, the BoJ said it will continue to conduct money market operations so the monetary base increases at an annual pace of 80 trillion yen ($760 billion) and maintain a negative interest rate of minus 0.1% to the policy-rate balances in current accounts held by financial institutions at the bank. The BoJ said in a statement that the economy continued its moderate recovery trend, citing steady improvement in business fixed investment, employment and housing investment.
In mainland China, the Shanghai Composite index was currentlyoff 0.47%. In Hong Kong, the Hang Seng index was currently down 2.2%. US stocks ended lower yesterday, 15 June 2016, marking a fifth session of losses, after the US Federal Reserve left interest rates unchanged and backed off an aggressive stance on future rate hikes. The US Federal Reserve after a conclusion of two-day meeting yesterday, 15 June 2016, left interest rates unchanged and signaled it's likely to take an even slower approach on raising the cost of borrowing against a backdrop of slower US job creation and fresh worries about economic events abroad. The Fed trimmed its estimate of US growth in 2016 to 2% from 2.2%, but left its long-run forecast intact. The Fed also tempered its future expectations for the economy. The central bank indicated it will raise rates three times apiece in 2017 and 2018 instead of four. And in the long run, the FOMC predicts the Fed-funds rate would rise to 3% instead of 3.3%. Fed officials also expect the labor market to show more improvement, with the unemployment rate remaining below 5% for the next three years.
Yellen also expressed concern in a press conference after the Fed meeting about the low level of US business investment and said that vulnerabilities in the global economy remain. She acknowledged the pending UK vote on 23 June 2016, known as Brexit, on whether to leave the European Union was a factor in the Fed's decision to stay its hand.
Closer home, the broad market depicted weakness. There were more than two losers for every gainer on BSE. 1,739 shares declined and 605 shares rose. A total of 121 shares were unchanged. The BSE Mid-Cap index was currently off 0.92%. The BSE Small-Cap index was currently off 1.02%. The fall in both these indices was lower than the Sensex's decline in percentage terms.
Stocks of companies involved in oil exploration and production activities fell as global crude oil prices dropped. Cairn India (down 1.35%), ONGC (down 1.36%), Oil India (down 0.43%) and Reliance Industries (down 1.2%) declined. Lower crude oil prices will result in lower realization from crude oil sales for oil exploration & production (E&P) firms if the prices are sustained at lower level. Crude oil prices edged lower on risk aversion in global markets ahead of a referendum in UK on 23 June 2016 that could end Britain's membership in the European Union. Brent for August 2016 settlement was currently off 48 cents at $48.49 a barrel. Brexit refers to the referendum on 23 June 2016 by British voters to decide whether the country should remain a member of the European Union or leave it. The Brent August contract lost 86 cents or 1.73% to settle at $48.97 a barrel yesterday, 15 June 2016.
Shares of public sector oil marketing companies (PSU OMCs) declined after prices of petrol and diesel were revised with effect from midnight of 15 June 2016. BPCL (down 0.58%), HPCL (down 0.89%) and Indian Oil Coporation (down 0.79%) edged lower.
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Petrol price was raised by Rs 0.05 a litre at Delhi (including state levies) with corresponding price revision in other states. With this change, the price of Petrol in Delhi rose to Rs 65.65 a litre. Diesel price was raised by Rs 1.26 a litre at Delhi (including state levies) with corresponding price revision in other states. With this change, the price of diesel in Delhi rose to Rs 55.19 a litre.
The government decontrolled petrol and diesel prices. PSU OMCs undertake fuel price review twice during the month based on the trend in international oil market. The first price review takes place during the middle of the month and the second on the last day of the month.
Aviation stocks declined. SpiceJet (down 1.73%), Jet Airways (India) (down 0.89%) and InterGlobe Aviation (down 0.69%) fell.
The Union Cabinet has approved the long awaited civil aviation policy. The official announcement of the government's nod for the civil aviation policy was made in the Press Information Bureau website after trading hours yesterday, 15 June 2016. The civil aviation policy aims to enhance regional air connectivity through fiscal support. This will be implemented by way of revival of airstrips/airports as No-Frills Airports at an indicative cost of Rs 50 crore to Rs 100 crore. The selection of airports/airstrips for revival will be based on expected demand and in consultation with state government and airlines. Regional Connectivity Scheme (RCS) will available only in those states which reduce VAT on ATF to 1% or less, provide other support services and bear 20% of Viability Gap Funding (VGF). There will be no airport charges and lower services tax on tickets on 10% of the taxable value for 1 year initially. Airlines can avail lower excise duty at 2% on ATF picked at RCS airports.
The Viability Gap Funding (VGF) will be funded by a small levy per departure on all domestic routes other than Cat II/Cat IIA routes, RCS (Regional Connectivity Scheme) routes and small aircraft at a rate as decided by the Ministry of Civil Aviation from time to time. A detailed scheme will be put up in the public domain for stakeholders' consultations. The VGF will be shared between the Ministry of Civil Aviation (MoCA) and state governments in the ratio of 80:20. For the North Eastern states, the ratio is 90:10.
In a major policy change, the government has abolished the requirement of 5 years of domestic flying as one of the two key prerequisites for starting international operations by an Indian carrier. Henceforth, an airline can commence international operations provided it deploys 20 aircrafts or 20% of its total capacity (in term of average number of seats on all departures put together), whichever is higher, for domestic operations.
The regime of bilateral rights and code share agreements will be liberalised leading to greater ease of doing business and wider choice to passengers. "Open skies" policy will be implemented on a reciprocal basis for SAARC countries and countries beyond 5,000 kilometer from Delhi. A method will be recommended by a committee headed by the Cabinet Secretary for the allotment of additional capacity entitlements wherever designated Indian carriers have not utilised 80% of their bilateral rights but the foreign airlines/countries have utilised their part and are pressing for increase in the capacity.
The civil aviation ministry will continue to encourage development of airports by the state government or the private sector or in public private partnership (PPP) mode and endeavour to provide regulatory certainty. Future greenfield and brownfield airports will have cost efficient functionality with no compromise on safety and security. Meanwhile, the existing ground handling policy is being replaced with a new framework to ensure fair competition. All domestic scheduled airline operators including helicopter operators will be free to carry out self-handling at all airports.
Realty stocks dropped. DLF (down 2.79%), Indiabulls Real Estate (down 2.25%), Housing Development and Infrastructure (down 2.28%), D B Realty (down 0.42%), Unitech (down 1.43%), Sobha (down 1.32%), Godrej Properties (down 1.88%), Oberoi Realty (down 2.04%) and Parsvnath Developers (down 3.16%) declined.
On the macro front, India's merchandise exports fell 0.79% at $22.17 billion in May 2016 over May 2015. Non-petroleum exports rose 1.01% at $20.19 billion in May 2016 over May 2015. Imports fell 13.16% at $28.44 billion in May 2016 over May 2015. Oil imports fell 30.45% at $5.93 billion. Non-oil imports fell 7.06% at $22.50 billion. The trade deficit fell to $6.27 billion in May 2016 from $10.41 billion in May 2015. The commerce ministry released the trade data on provisional basis for May 2016 after trading hours yesterday, 15 June 2016.
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