Key benchmark indices dropped on weak global cues after seeing a strong rally during the previous trading session. The barometer index, the S&P BSE Sensex lost 200.88 points or 0.75% at 26,525.46, as per the provisional closing data. The Nifty 50 index lost 65.85 points or 0.8% at 8,140.75, as per the provisional closing data. Key indices staged a recovery in second half after suffering steep losses in first half of the day's trading session. Weakness in global stocks after the Bank of Japan and the US Federal Reserve decided to keep interest rates unchanged weighed heavily on domestic bourses.
Earlier, key benchmark indices cut losses since hitting intraday low in early afternoon trade after opening with a downward gap. 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, European stocks and Asian stocks dropped as investors digested the US Federal Reserve's decision to keep interest rates on hold. In Japan, the Nikkei 225 index settled 3.05% lower 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 settled 0.5% lower. In Hong Kong, the Hang Seng index ended 2.1% lower. 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 market breadth indicating the overall health of the market was weak. On BSE, 1,638 shares declined and 958 shares rose. A total of 170 shares were unchanged. The BSE Mid-Cap index was currently off 0.37%. The BSE Small-Cap index was currently off 0.55%. The fall in both these indices was lower than the Sensex's decline in percentage terms.
The total turnover on BSE amounted to Rs 2836.24 crore, lower than turnover of Rs 2948.02 crore registered during the previous trading session.
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Index heavyweight and cigarette major ITC lost 1.33% to Rs 354.85. The stock hit high of Rs 359.65 and low of Rs 351.20 in intraday trade.
Bank stocks saw mixed trend, with shares of private sector banks declining while shares of PSU bank stocks gained. Among private bank stocks, ICICI Bank (down 3.6%), Kotak Mahindra Bank (down 1.59%), Axis Bank (down 1.04%), Federal Bank (down 2.11%), IndusInd Bank (down 1.87%), HDFC Bank (down 0.77%) and Yes Bank (down 1.23%) declined.
Among PSU bank stocks, UCO Bank (up 2.39%), Syndicate Bank (up 4.79%), IDBI Bank (up 0.64%), Bank of India (up 1.59%), Union Bank of India (up 1.59%), Indian Bank (up 1.69%), Vijaya Bank (up 4.07%), Punjab National Bank (up 2.49%) and Canara Bank (up 1.56%) rose. Bank of Baroda slipped 0.26%.
Shares of associate banks of SBI surged, extending gains registered during the previous trading session triggered by media reports that the government has given its go ahead for merger of 5 associate banks with SBI.
State Bank of Mysore (up 19.99%), State Bank of Travancore (up 13.8%) and State Bank of Bikaner and Jaipur (up 14.41%) surged. All these three stock rose by their respective 20% maximum permissible daily level yesterday, 15 June 2016.
The stock price of parent State Bank of India (SBI) fell 0.26% at Rs 215.10. The stock surged 3.9% to settle at Rs 215.65 yesterday, 15 June 2016. On 17 May 2016, SBI had announced that it was seeking in principle sanction of the Government of India (GoI) to enter into negotiation with its 5 subsidiary banks viz. State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala and State Bank of Travancore to acquire their businesses including assets and liabilities. At that time SBI also said that its board of directors will take a final call after evaluating all the relevant considerations. SBI also said at that time that it was considering acquisition of the newly-created Bharatiya Mahila Bank.
SBI holds 90% stake in State Bank of Mysore, 79.09% stake in State Bank of Travancore and 75.07% stake in State Bank of Bikaner and Jaipur. State Bank of Hyderabad and State Bank of Patiala are not listed on the bourses.
On the macro front, India's merchandise exports fell 0.79% at $22.17 billion in May 2016 over May 2015. Imports fell 13.16% at $28.44 billion in May 2016 over May 2015. The trade deficit fell to $6.27 billion in May 2016 from $10.41 billion in May 2015. Non-petroleum exports rose 1.01% at $20.19 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 commerce ministry released the trade data on provisional basis for May 2016 after trading hours yesterday, 15 June 2016.
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