Nifty continues to remain weak, even though it may put in an oversold bounce later on Friday
We had mentioned in Wednesday’s closing report that Nifty, Sensex rallies may be short-lived and that Nifty may be headed below 7,700. The Indian stock markets suffered a sharp correction due to negative news from China and the major indices fell by over 2% from Wednesday’s close. The trends of the major indices during Thursday’s trading are given in the table below:
Panic selling triggered by a plunge in Chinese markets, coupled with rising geo-political tensions and upcoming US macro-economic data, dented Indian equity markets on Thursday. This led to the S & P BSE Sensex receding close to its 52-week low on a closing basis. The bellwether indices opened on a negative note following a rout in the Asian markets which was triggered by accelerated devaluation of the Chinese yuan, disappointing domestic macro-data and global uncertainties. Commodity prices, too, plunged as the economy of the world's largest consumer namely China struggled. The benchmark Shanghai Composite Index declined 7% within just 29 minutes, which led to a halt in trading, as the circuit breaker mechanism was triggered. The Chinese markets' fall impacted other global bellwethers, including the Japanese and Australian indices, which reacted negatively.
A weak rupee and increase in selling activity by foreign portfolio investors (FPIs) also subdued sentiment. According to data with stock exchanges, FPIs had divested Rs242.48 crore on Wednesday. Market observers pointed out that volumes continued to rise in the sell-off, affirming the weak sentiment. Geo-political tensions in the Middle East and North Korea testing a thermo-nuclear device on Wednesday eroded investors' confidence. Besides, caution prevailed over the upcoming domestic macro-data on industrial output, retail inflation and the third-quarter earnings results which start coming in from January 12. The markets seemed to have ignored the positives, especially the release of latest FOMC (Federal Open Market Committee) meeting minutes which indicated that the US Fed might delay another round of rate hike.
The S&P BSE market breadth favoured the bears -- with 2,189 declines and 636 advances. Sector-wise, automobile, capital goods, banking, healthcare and oil and gas indices stocks came under selling pressure.
A minimum dividend of 30%, declaration of special dividend and issue of bonus shares are the new guidelines from the central government as the owner for central public sector enterprises (CPSE). The department of economic affairs under the union ministry of finance in its office memorandum on 5 January 2016, said as a majority owner of CPSEs, the central government has decided on the new dividend policy. According to the new policy, a CPSE will declare an annual dividend of 30% of profit after tax (PAT) or 30% percent of the central government's equity whichever is higher; declaration of special dividend as a return for its equity investments; and issue of bonus shares by companies having large cash reserves. According to the department, the companies will have to look at market borrowings for capital investments so as to leverage the favourable debt-equity ratio. The economic affairs department also said market borrowing for capex would enforce more professionalism in the CPSEs. The new dividend policy seeks to increase the dividend income for the central government from the earlier rates of 20% of PAT or 20% of equity whichever is higher.
The government is mulling selling part of its stake in the nation's third-biggest private sector lender, Axis Bank, Newschannel reported on Thursday. The government is considering the sale to meet its asset sales target, Newschannel tweeted its newswire report which cited unnamed sources. At the current market price, the government's about 11.6% stake is worth around $1.8 billion. Axis Bank shares closed at Rs409.35, down 4.98% on the BSE.
Nearly 340,000 bank employees across the country will strike work on January 8 to protest the implementation of the new Career Progression Scheme (CPS), a leader of the All India Bank Employees' Association (AIBEA) said here on Thursday. He said the strike will be in protest against the violation of the bilateral settlement by five associate banks of the State Bank of India (SBI), namely State Bank of Mysore, State Bank of Patiala, State Bank of Hyderabad, State Bank of Bikaner and Jaipur and State Bank of Travancore.
The World Bank has cut the global growth forecast for 2016 to 2.9%, saying that weak growth among major emerging markets will weigh on the global scenario during the year. In its Global Economic Prospects Report issued on Wednesday, the Washington-based institution expected the world economy to grow 2.9% in 2016, 0.4% lower than the bank's forecast in June 2015, but higher than the estimated 2.4% growth in 2015, Xinhua news agency reported. Developing economies are forecast to expand by 4.8% in 2016, less than expected earlier but up from a post-crisis low of 4.3% in the year just ended; advanced economies are expected to grow 2.1% this year, also lower than its June forest but up from the estimated 1.6% increase in 2015.
"The January Global Economic Prospects tells us that if 2015 was a disappointing year for the world economy, 2016 is the risky year," said Kaushik Basu, World Bank Group vice president and chief economist, at a media briefing. "The global economy, in particular the emerging economies could hit a road bump." Downside risks, including slower growth, financial stress around the US Federal Reserve tightening cycle, weak commodities prices, and heightened geopolitical tensions, have become increasingly centred on emerging and developing countries, said the report.
The emerging economies seem to be coming apart, with Brazil and Russia expected to remain in recession in 2016, while China and India forecasted to grow around 7% China is forecasted to grow 6.7% in 2016 and 6.5% in 2017, lower than the estimated 6.9% growth in 2015. In 2016, the global growth, the emerging market growth in particular, will depend on continued momentum in high income countries, the stabilisation of commodity prices, and China's gradual transition toward a more consumption and services-based growth model.
The central parity rate of the Chinese currency, the renminbi or yuan, depreciated to its weakest point in nearly five years, new data showed on Thursday. The yuan's central parity rate lost 332 basis points to 6.5646 against the US dollar on Thursday, the lowest level since March 18, 2011, data from the China Foreign Exchange Trading System (CFETS) showed, reports Xinhua. As of the end of 2015, the CFETS exchange rate composite index, which measures the yuan's strength relative to a basket of 13 foreign currencies, stood at 100.94, up 0.94% from the end of previous year. In China's spot foreign exchange market, the yuan is allowed to rise or fall by 2% from the central parity rate each trading day. The central parity rate of the yuan against the US dollar is based on a weighted average of prices offered by market makers before the opening of the interbank market each business day.
The US stocks suffered big losses on Wednesday as rising geopolitical tensions and sinking oil prices weighed on investor sentiment. The Dow Jones Industrial Average slumped 252.15 points, or 1.47%, to 16,906.51. The S&P 500 dropped 26.45 points, or 1.31%, to 1,990.26. The Nasdaq Composite Index lost 55.67 points, or 1.14%, to 4,835.77. Wall Street was nervous after the North Korea announced it successfully carried out its first hydrogen bomb test Wednesday. Over the weekend, Saudi Arabia cut off diplomatic ties with Iran after angry protesters stormed its embassy in Tehran, the capital of Iran, to protest against Saudi's execution of prominent Shiite cleric Sheikh Nimr Baqir al-Nimr. Analysts said the heightened geopolitical tensions sent traders scurrying from stocks into safe haven assets. Also, oil prices hit their lowest level in more than 11 years on Wednesday as the US crude output of last week increased unexpectedly, which in turn dampened market sentiment. Dragged by plummeting oil prices, the energy sector, the biggest laggard among the S&P 500's ten sectors, slumped 3.62% on Wednesday.
The top gainers and top losers of the indices are given in the table below:
The closing values of the major Asian indices are given in the table below: