A bout of volatility was witnessed in afternoon trade as key indices trimmed losses after hitting fresh intraday low in early afternoon trade. At 13:25 IST, the barometer index, the S&P BSE Sensex was down 298.69 points or 1.07% at 26,439.76. The losses for the Nifty 50 index were higher in percentage terms than those for the Sensex. The Nifty was currently down 97.20 points or 1.18% at 8,109.40. Domestic bourses fell today, 16 June 2016 as weakness in global stocks after the Bank of Japan and the US Federal Reserve decided to keep interest rates unchanged weighed on sentiment.
Earlier, after witnessing a lower opening, key indices had extended losses. 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 was settled 0.5% lower. 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. 1,704 shares declined and 668 shares rose. A total of 134 shares were unchanged. The BSE Mid-Cap index was currently off 0.75%. The BSE Small-Cap index was currently off 0.85%. The fall in both these indices was lower than the Sensex's decline in percentage terms.
Auto stocks declined. Mahindra & Mahindra (M&M) (down 0.8%), Ashok Leyland (down 3.88%), Eicher Motors (down 0.23%), Hero MotoCorp (down 1.02%), Bajaj Auto (down 1.74%) and Tata Motors (down 0.07%) declined. TVS Motor Company rose 0.03%.
Car maker Maruti Suzuki India lost 2.96% as the Japanese yen strengthened against the dollar. The Japanese yen surged against the dollar on global risk aversion generated by Brexit fears. The Japanese currency is perceived as a haven in times of global financial and global economic worries. 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 latest strength in the Japanese currency materialized after Japan's central bank the Bank of Japan (BOJ) voted to leave its monetary policy unchanged after a policy review. The BOJ voted to keep its annual asset-purchase target unchanged at 80 trillion yen (around $760 billion) a year and its deposit rate steady at minus 0.1%. The decision was on expected lines.
A strong yen adversely impacts Maruti Suzuki India's (Maruti) operating profit margin. Maruti pays royalty to its Japanese parent Suzuki Motor Corporation in yen terms for some of its earlier models. Maruti has reportedly started paying royalty to its Japanese parent in rupee terms on all new models from 1 April 2016. Maruti also has an exposure to the yen to the extent it imports raw materials from Japan.
Metal & mining stocks were mixed. JSW Steel (down 0.88%), Bhushan Steel (down 0.13%), Hindustan Copper (down 0.94%), Hindustan Zinc (down 1.17%), Tata Steel (down 0.88%), Steel Authority of India (Sail) (down 0.45%), and National Aluminum Company (down 0.48%) declined. Vedanta (up 0.58%), Hindalco Industries (up 0.91%), Jindal Steel & Power (up 0.08%), and NMDC (up 0.93%) gained.
High Grade Copper for July 2016 delivery was currently down 1.34% at $2.063 per pound on the COMEX.
Pricol rose 6.05% after the company said it sold its entire stake in its wholly-owned subsidiary, Integral Investments, for Rs 2.78 crore. The announcement was made after market hours yesterday, 15 June 2016. Integral Investments (IIL) is a non-banking financial company (non-deposit taking) registered with the Reserve Bank of India (RBI). Gross income from operation of IIL for the financial year ending Mach 2016 was Rs 10 lakh, which constituted 0.01% of the consolidated turnover of Pricol. None of the buyers of IIL are related parties and do not belong to promoter group companies, Pricol said. Accordingly, IIL is no longer a wholly-owned subsidiary of Pricol.
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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