Key benchmark indices extended recovery in mid-afternoon trade after suffering steep intraday slide earlier. At 14:18 IST, the barometer index, the S&P BSE Sensex was down 247.86 points or 0.93% at 26,478.48. The Nifty 50 index was currently down 79.05 points or 0.96% at 8,127.55. Weakness in global stocks after the Bank of Japan and the US Federal Reserve decided to keep interest rates unchanged weighed 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 broad market depicted weakness. There were almost two losers for every gainer on BSE. 1,625 shares declined and 850 shares rose. A total of 160 shares were unchanged. The BSE Mid-Cap index was currently off 0.5%. The BSE Small-Cap index was currently off 0.53%. The fall in both these indices was lower than the Sensex's decline in percentage terms.
Index heavyweight and cigarette major ITC lost 1.2% to Rs 355.35. The stock hit high of Rs 359.65 and low of Rs 351.20 so far during the day.
Capital goods stocks declined. Bharat Heavy Electricals (Bhel) (down 1.14%), BEML (down 0.7%), L&T (down 1.14%), Siemens (down 0.41%), ABB India (down 0.97%) and Thermax (down 0.09%) declined. Crompton Greaves (up 0.94%) and Bharat Electronics (up 0.6%) rose.
GAIL (India) was up 0.99% ahead of divestment of a part of its stake in Mahanagar Gas through an initial public offer. GAIL (India) and BG Asia Pacific Holdings Pte, the two promoters of Mahanagar Gas (MGL), are selling about 1.23 crore shares each of MGL via an initial public offer (IPO) of MGL. MGL will not get any proceeds from the IPO. The IPO opens for bidding on 21 June 2016 and concludes on 23 June 2016. The price band for the IPO has been set at Rs 380 to Rs 421 per share. GAIL (India) and BG Asia Pacific Holdings Pte (BGAPH) hold about 4.44 crore shares each in MGL, constituting 45% stake each. The Maharashtra state government holds the remaining 10% stake. MGL is one of the largest city gas distribution companies in India.
Power generation stocks fell. Reliance Infrastructure (down 1.23%), Torrent Power (down 0.35%), Reliance Power (down 1.23%), Jaiprakash Power Ventures (down 0.6%) and Adani Power (down 1.49%) edged lower. JSW Energy (up 2.56%), CESC (up 0.88%), NHPC (up 0.41%) rose.
NTPC slipped 1.72%. Coal India fell 0.44%. NTPC said that pursuant to joint venture agreement dated 16 May 2016 signed with Coal India, a Joint Venture Company in the name of "Hindustan Urvarak & Rasayn Limited", with 50:50 shareholding by NTPC and Coal India has been incorporated on 15 June 2016. The joint venture company will take up revival of Gorakhpur and Sindri plants of Fertilizer Corporation of India by setting up ammonia urea plants at each locations.
Tata Power Company fell 0.92%. Tata Power Company announced that Tata Power Renewable Energy (TPREL), a wholly owned subsidiary of the company, successfully issued and allotted guaranteed, unsecured, non-cumulative, redeemable, taxable, listed, rated non-convertible debentures of Rs 575 crore on private placement basis. The NCDs will carry a spread of 0.14% above 6 month marginal cost of lending rate (MCLR) of HDFC Bank payable semi annually and are guaranteed by the company. The proceeds from the NCDs will be primarily used to prepay existing higher cost debt in TPREL. The guarantee agreement has been entered to guarantee payment obligation of TPREL pursuant to the NCDs. The guarantee is capped at Rs 625 crore and will fall off once the NCDs are fully repaid. This will create contingent liability not exceeding Rs 625 crore for the company. The announcement was made after market hours yesterday, 15 June 2016.
Ujjivan Financial Services fell 2.24% after the Reserve Bank of India placed restrictions on further purchases of shares of the company by registered foreign portfolio investors. The Reserve Bank of India (RBI) yesterday, 15 June 2016, notified that the aggregate foreign shareholdings through foreign institutional investors (FII)/registered foreign portfolios investors (RFPIs)/foreign direct investment (FDI)/non-resident Indians (NRI)/American depository receipts (ADR)/global depository receipts (GDR)/persons of Indian origin (PIO) in Ujjivan Financial Services has crossed the permissible limit. Hence no further purchase of shares of this company would be allowed through stock exchanges in India on behalf of FII/RFPI/FDI/NRI/ADR/GDR/PIO.
Lux Industries rose 3.06% after the company announced 15 June 2016 as the commercial operation date (COD) of its Dankuni plant near Kolkata, West Bengal. The announcement was made after market hours yesterday, 15 June 2016.
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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