Intraday recovery witnessed in early afternoon trade proved short-lived as key benchmark indices weakened once again in afternoon trade. The barometer index, the S&P BSE Sensex, was down 156.02 points or 0.75%, off about 315 points from the day's high and up close to 60 points from the day's low. The market breadth, indicating the overall health of the market, was negative. Investor sentiment was hit adversely after the US Federal Reserve after a two-day monetary policy meeting on Wednesday, 18 December 2013, announced plans to cut its monthly bond purchases to $75 billion from $85 billion, taking its first step toward unwinding the unprecedented stimulus put in place to help the US economy recover from the worst recession since the 1930s. The decision of the US central bank triggered fears of slowdown in inflow from foreign institutional investors in India. Fed's bond-buying program had become a source of funds for investment in Indian as well as other emerging markets in recent years.
The reduced availability of cash in the global financial system could temper the flow of foreign money into India, which has been one of the biggest beneficiaries of foreign capital. Foreign institutional investors (FIIs) have purchased shares worth a net Rs 106674.30 crore in 2013 so far (till 17 December 2013). FIIs had bought shares worth a net Rs 128359.80 crore in calendar 2012.
Shares of car maker Maruti Suzuki India edged higher as the Japanese yen touched a five-year low against the dollar overnight on the US Federal Reserve's decision to reduce monetary stimulus for the US economy. Realty stocks also dropped. Metal stocks edged higher.
Volatility ruled the roost in early trade as the key benchmark indices reversed direction after a firm opening. The Sensex fell below the psychological 21,000 level soon after breaching that level at the onset of the trading session. Key benchmark indices extended initial losses in morning trade. Weakness persisted on the bourses in mid-morning trade. Key benchmark indices trimmed losses in early afternoon trade after Finance Minister P. Chidambaram said that India is better prepared to deal with any consequences of the US Federal Reserve's move to reduce monetary stimulus. Intraday recovery witnessed in early afternoon trade proved short-lived as key benchmark indices weakened once again in afternoon trade.
At 13:20 IST, the S&P BSE Sensex was down 156.02 points or 0.75% to 20,703.84. The index lost 213.83 points at the day's low of 20,646.03 in morning trade. The index jumped 157.59 points at the day's high of 21,017.45 in early trade, its highest level since 12 December 2013.
The CNX Nifty was down 52.95 points or 0.85% to 6,164.20. The index hit a low of 6,150.70 in intraday trade. The index hit a high of 6,263.75 in intraday trade, its highest level since 12 December 2013.
The market breadth, indicating the overall health of the market, was negative. On BSE, 1,164 shares declined and 986 shares rose. A total of 173 shares were unchanged.
Among the 30-share Sensex pack, 20 stocks declined and rest of them gained.
ICICI Bank (down 3.13%), L&T (down 2.79%) and HDFC (down 2.74%) edged lower from the Sensex pack.
ONGC reversed initial upmove in volatile trade. The stock was off 3.15% at Rs 272.15. The stock hit a high of Rs 283 and low of Rs 272 so far during the day.
Shares of car maker Maruti Suzuki India edged higher as the Japanese yen touched a five-year low against the dollar overnight on the US Federal Reserve's decision to reduce stimulus for the US economy. The stock was up 1.05% at Rs 1,747.60. The yen's weakness could reduce import costs for Maruti as the car major sources a large portion of its parts from Japan.
Most auto other stocks were in red. Mahindra & Mahindra (M&M) (down 0.58%), Tata Motors (down 0.22%) and Ashok Leyland (down 0.63%) declined.
Shares of two wheeler makers were mostly lower. Bajaj Auto (down 1.17%) and Hero MotoCorp (down 0.99%) fell.
TVS Motor Company rose 2.16%.
Most realty stocks also dropped. HDIL (down 2.81%) and Unitech (down 1.97%) declined. Sobha Developers rose 1.07%.
DLF shed 1.78%. The realty major announced after market hours on Wednesday, 18 December 2013, that post completion of all the conditions precedent including regulatory approvals, DLF has completed the sale of its 74% stake in the insurance joint venture with Prudential Financial, Inc. of USA to Dewan Housing Finance Corporation (DHFL) and its group entities. The transaction is in line with DLF's ongoing strategy to divest non-core businesses.
Most metal stocks gained. Hindalco Industries (up 0.93%), Hindustan Zinc (up 1.67%), JSW Steel (up 0.22%), Bhushan Steel (up 0.28%), Jindal Steel & Power (up 1.81%) and Sesa Sterlite (up 1.91%) gained.
National Aluminum Company dropped 0.13%. Tata Steel fell 0.83%. Hindustan Copper shed 0.52%.
In the foreign exchange market, the rupee edged lower against the dollar as the Federal Reserve's move to cut its bond-buying program rekindled concerns of slowing foreign inflows. The partially convertible rupee was hovering at 62.275, compared with its close of 62.09/10 on Wednesday, 18 December 2013.
India is better prepared to deal with any consequences of the US Federal Reserve's move to reduce monetary stimulus, Finance Minister P. Chidambaram said in a statement today, 19 December 2013. "(The) government is of the view that the markets had already factored in the US Federal Reserve's decision and therefore is not likely to be surprised by these moderate changes," Chidambaram said in a written statement released by his office. Chidambaram also spoke to Reserve Bank of India Governor Raghuram Rajan on Thursday morning to discuss the Fed tapering, the statement added.
The Government of India on Wednesday, 18 December 2013, approved the enhancement of the bilateral currency swap arrangement between the Reserve Bank of India (RBI) and Bank of Japan from $15 billion to $ 50 billion. This measure will further strengthen the bilateral financial cooperation between Japan and India, the Ministry of Finance said in a statement.
Asian markets edged higher on Thursday, 19 December 2013, after the US Federal Reserve expressed enough confidence in the US labor market to taper asset purchases while still promising to hold interest rates close to zero in the world's biggest economy. Key benchmark indices in Taiwan, Japan, Indonesia and South Korea rose by 0.05% to 1.74%. Key benchmark indices in China, Hong Kong and Singapore fell by 0.1% to 1.07%.
The Bank of Japan's (BoJ) two-day monetary policy meeting begins today, 19 December 2013. The Japanese central bank currently buys more than 7 trillion yen ($67.6 billion) of Japanese Government Bonds (JGBs) every month in its bid to stoke inflation.
Trading in US index futures indicated that the Dow could drop 35 points at the opening bell on Thursday, 19 December 2013. US markets soared with the Dow Jones Industrial Average and the S&P 500 closing at all-time highs on Wednesday as markets interpreted the Federal Reserve's decision to begin the tapering of bond purchases in January as confidence in the underlying strength of the economy and welcomed its commitment to low rates for a considerable time.
The Federal Reserve on Wednesday took the first step to exiting from its controversial bond-buying program, showing greater confidence that the US economy will grow faster and hiring will pick up over the next year. Starting in January, the Fed will reduce the pace of asset purchases to $75 billion from $85 billion a month. And if the economy improves at the pace the Fed expects, outgoing Chairman Ben Bernanke said in a press conference that he could foresee the bond-purchase program coming to an end by late next year. "We are hopeful the economy will continue to show progress," Bernanke said, and return to a "more normal" path of growth. The central could taper at each meeting if the economy continues to improve. He didn't rule out pausing if the economy stumbles or tapering more quickly if growth surprises to the upside.
The Fed split the reduction in asset purchases evenly between Treasurys and mortgage-backed securities. It will now purchase $40 billion per month of Treasurys, down from $45 billion, and $35 billion of mortgage-related securities, down from $40 billion.
In an effort to keep market rates stable, the Fed stressed that it will be in no hurry to raise short-term interest rates. The central bank added new language that it plans to maintain the target Fed funds rates "well past the time that the unemployment rate declines below 6.5%".
The US Senate on Wednesday, 18 December 2013, cleared and sent to President Barack Obama a $1.01 trillion budget deal, lowering the US deficit over 10 years and easing $63 billion in automatic spending cuts. The plan keeps in place about half of the reductions known as sequestration for next year, and about three-quarters of the planned cuts for 2015.
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