A range bound movement was witnessed as key benchmark indices languished in red in mid-morning trade after the outcome of a monthly survey showed that growth in India's services sector eased last month. At 11:21 IST, the barometer index, the S&P BSE Sensex, was off 135.05 points or 0.52% at 25,982.80. The Nifty 50 index was off 39.25 points or 0.49% at 7,892.10. The Sensex continued to hover below the psychological 26,000 mark after falling below that level in morning trade.
The seasonally adjusted Nikkei Services Business Activity Index fell to 50.1 in November from October's eight-month high reading of 53.2, pointing to slowdown in growth in India's services sector. The reading of 50 separates contraction from expansion. Services companies displayed a lack of optimism with regards to the 12-month outlook for activity, as sentiment dropped to the lowest in the ten-year survey history. Difficult economic conditions and weak demand reportedly hit confidence.
The market breadth indicating the overall health of the market was positive. On BSE, 1,215 shares rose and 1,086 shares fell. A total of 140 shares were unchanged. The BSE Mid-Cap index was currently off 0.12%. The BSE Small-Cap index was currently off 0.1%. The decline in both these indices was lower in percentage terms than the Sensex's fall.
In overseas stock markets, Asian stocks declined after hawkish comments from Federal Reserve Chairwoman Janet Yellen reinforced the case for an interest rate hike during the middle of this month. US stocks fell yesterday, 2 December 2015, as Yellen signalled a readiness to hike interest rates and US data indicated a solid labour market. Yellen said she was looking forward to a US rate hike that will be seen as a testament to the economy's recovery from recession, although she did not indicate if she still expected a hike would be warranted at the Fed's last policy meeting of the year on 15-16 December 2015.
Investors in emerging markets, including India are worried that once the Fed starts raising interest rates, it will drain liquidity from global emerging markets and redirect it to developed economies. The Fed has held its benchmark short-term interest rate near zero since December 2008. The ultra-loose monetary policy in the US has encouraged heavy investment in higher-yielding emerging markets.
Shares of oil exploration and production firms were mixed after a steep fall in global crude oil prices yesterday, 2 December 2015, triggered by data showing increase in US crude stocks last week. Cairn India (down 1.27%) and ONGC (down 1.4%) edged lower. Oil India (up 0.85%) and Reliance Industries (RIL) (up 0.4%) edged higher. Lower crude oil prices would result in lower realization from crude sales for oil exploration firms.
Shares of public sector oil marketing companies (PSU OMCs) advanced after a steep fall in global crude oil prices yesterday, 2 December 2015. BPCL (up 0.58%), HPCL (up 0.04%) and Indian Oil Corporation (up 0.9%) edged higher.
Lower crude oil prices could reduce under-recoveries of PSU OMCs on domestic sale of LPG and kerosene at controlled prices. However, a weakness in rupee against the dollar will restrict the benefit of falling global crude oil prices to that extent. A weak rupee raises the cost of imports. The government has already freed pricing of petrol and diesel.
In the global commodities markets, Brent for January 2016 settlement was currently up 35 cents at $42.84 a barrel. The contract had declined $1.95 a barrel or 4.38% to settle at $42.49 a barrel during the previous trading session.
In the foreign exchange market, the partially convertible rupee was currently hovering at 66.705, compared with its close of 66.595 during the previous trading session.
Shares of aviation firms rose as global crude oil prices tumbled yesterday, 2 December 2015. Jet Airways (India) (up 2.58%), SpiceJet (up 0.56%) and Interglobe Aviation (up 3.21%) edged higher. Aviation turbine fuel (ATF) or jet fuel typically constitutes about 50% of airlines' operating costs. Jet fuel prices are directly linked to international crude oil prices.
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