We had mentioned in Wednesday’s closing report that Nifty, Sensex were in no-man’s land. The major indices of the Indian stock markets suffered a minor correction on Thursday and closed with small losses over Wednesday’s close. The trends of the major indices in the course of Thursday’s trading are given in the table below:
Following their global peers, the Indian equity markets fell during the mid-afternoon session on Thursday, a day after the US Federal Reserve hiked its benchmark rates. The rate-hike assumes significance as it is expected to lead FPIs (Foreign Portfolio Investors) away from emerging markets such as India, and is also expected to dent business margins as access to capital from the US will become expensive. Consequent to the late-night US rate hike, the Asian markets traded broadly in the red and eroded Indian investors' confidence in the highly expensive conditions in the domestic stock markets. Selling pressure was witnessed in banking, oil and gas and capital goods stocks. On the NSE, there were 837 advances, 805 declines and 311 unchanged.
The US Federal Reserve on Wednesday raised its benchmark interest rates for the third time since December and unveiled plans to start trimming its balance sheet, even as news of the Fed's relatively hawkish stance provoked caution in early trading in the Indian equity markets, which were trading flat on Thursday morning. "In view of realised and expected labour market conditions and inflation, the FOMC (Federal Open Market Committee) decided to raise the target range for the federal funds rate to 1% to 1.25%," the American central bank said in a statement after concluding its two-day monetary policy meeting. This rate is a 25 basis points increase over the current one of 0.91%.
Expressing confidence that the US economy is recovering, the Federal Reserve said America's labour market has "continued to strengthen" and economic activity has been "rising moderately" so far this year. Employment gains have been moderate but solid, on average, since the beginning of the year, and the unemployment rate has declined. Household spending has picked up in recent months, and fixed investment by business has continued to expand. The statement also said inflation "has declined recently" and in the next 12 months "is expected to remain somewhat below 2% in the near term".
As per data made available, the previous rate hike by the US central bank in May had a 0.77% upward impact on the BSE Sensex, while the decision to hold rates in March was impacted by 0.64%. However, the recent US rate hike has belied fears of capital outflows from India, with foreign funds continuing to pump in huge liquidity into the stock market. Riding on ample liquidity and confidence of the global fund managers, India's market capitalisation has crossed a massive $2 trillion. In fact, such volumes have also provoked calls for caution in handling inflows.
Two- and three-wheeler major Bajaj Auto on Wednesday said that it has reduced the prices of its bikes by up to Rs4,500 with immediate effect, in order to pass on the expected GST price advantage to its customers. "The savings will range up to Rs4,500 depending on the model and the state in which the motorcycle is purchased," the company said in a statement. According to the company, the post-GST benefits will vary for each state and differ across motorcycle models. "With GST implementation just around the corner, we felt that it would be appropriate to pass on this significant savings to customers," said Eric Vas, President, Motorcycle Business, Bajaj Auto. After the GST is implemented from July 1, motorcycles with more than 350 cc engines will attract a 28.84% tax, while mid-segment and high-end luxury cars will call for a tax incidence of 32.2%. The company’s shares closed at Rs2,810.00, down 0.54% on the BSE.
Taking higher haircuts is the way forward for resolving the bad loans of banks, UCO Bank MD and CEO RK Takkar said on Wednesday. "We may have to take some haircuts. The banks will be prepared for that and moving forward. I think that's the way things have to move. Most of these (non-performing assets) accounts will be having 40 per cent provisions, so the only issue that comes is for the banks to take higher haircuts," Takkar told BTVi in an interview. The Reserve Bank of India (RBI) has given banks a time frame of six months to resolve their bad loan cases, apart from the 12 identified by its Internal Advisory Committee, failing which the cases will have to be dealt with through the insolvency route. "Banks will be examining each NPA case during the six months. It is also to put pressure on the promoters," Takkar said. "It has to be done within six months. The only option left after that will be liquidation," he said. The RBI on Tuesday identified for insolvency proceedings 12 accounts totalling 25% of the non-performing assets (NPAs), or bad loans, of the banking system. The Bank Nifty closed at 23,391.75, down 0.46% on the NSE.
Indians working overseas sent home $62.74 billion last year, an increase of 68.6% in the last decade, according to a UN agency. India received the most overseas remittances last year, a report by the International Fund for Agricultural Development (IFAD) issued here on Tuesday said. The money sent by Indians overseas amounted to 3.3% of India's gross domestic product, the report said. Gulf countries were the primary destination for Indian workers going abroad, with the US as a "popular destination". The data is likely to indicate stability of the Indian rupee against the US dollar and British pound sterling and ensure that there is hardly any volatility in the Indian stock markets on account of foreign institutional investors.
The top gainers and top losers of the major indices are given in the table below:
The closing values of the major Asian indices are given in the table below: