India : Sensex, Nifty decline on dollar strength after Fed rate hike
Benchmark indices closed lower amid consolidation on Thursday, weighed by dollar strength after US Federal Reserve expectedly raised interest rate by 25 basis points and anticipated three hikes next year.The 50-share NSE Nifty failed to hold 8200 level, falling 28.85 points to close at 8153.60. The 30-share BSE Sensex was down 83.77 points at 26519.07 while the broader markets outperformed benchmarks.
After digesting the Fed rate hike and hawkish rate outlook, the market is expected to be rangebound in near term due to lack of domestic as well as global cues. Volumes may be thin going ahead in current month on likely lower FIIs activity due to Christmas holidays and vacation. Analysts don’t expect major slide in the market as valuations are attractive after recent fall. With Federal Reserve meet, all major events for the year are over now.
Ken Peng of Citi Private Bank believes that near-term risks are significant for emerging markets but the Indian market is looking attractive at current levels and could give 5-10 percent returns over the next one year.
According to Mixo Das of Nomura, emerging markets are likely to underperform the developed markets in near term as US economy strengthening in 2017 will have a negative impact on emerging markets. Nomura continues to be overweight on India among the Asian markets and does not expect much downside from here on.
The US Federal Reserve on Wednesday hiked headline interest rate for the second time in the current decade by 25 basis points from 0.5 percent to 0.75 percent, signalling the likely recovery in US economy. It has anticipated three rate hikes each in 2017, 2018 and 2019.
The hawkish outlook of three rate hikes in 2017 against two hikes anticipated in Fed’s September meeting pushed the dollar to its highest level since January 2003, which resulted in rupee weakness.
The rupee declined 40 paise to 67.83 against the US dollar.
European stocks were mixed after Federal Reserve rate decision. Germany’s DAX and France’s CAC were up 0.7 percent while Britain’s FTSE was down 0.3 percent at the time of writing this article. Asian markets ended mostly lower with the Hong Kong’s Hang Seng falling 1.8 percent. Gold fell to over 10-month low, down nearly 3 percent after hawkish rate outlook from the Fed.
Back home, the rally in technology stocks on hopes of likely economic revival in the US in 2017 arrested the market fall. Nifty IT index gained 0.66 percent as TCS rose over 2 percent and Wipro advanced 0.33 percent. Infosys fell 0.6 percent on profit booking.
Axis Bank jumped 2 percent despite sources told CNBC-TV18 that the Income Tax department conducted a search operation at bank’s Delhi branch due to irregularities in exchanges and deposits.
ONGC was up 1.35 percent after the stock adjusted for bonus issue in the proportion of one share for every two shares held. Bajaj Auto gained a percent after the two-wheeler maker launched its new bike Dominar 400cc with the price of Rs 1.36-1.50 lakh and aimed to sell 2 lakh units of this bike in a year.
Sun Pharma was the biggest loser among Sensex 30 stocks, down 4.4 percent. US Department of Justice has filed charges against two executives of Heritage Pharma (former CEO and the President) for participating in price fixing related to two drugs – Doxycycline Hyclate (acne drug) and Glyburide (diabetes).
Credit Suisse says neither Sun Pharma nor its subsidiary Taro Pharma feature in these two drugs but given the large extent of the price increase benefit at Taro, and both Taro and Sun Pharma getting a subpoena, it thinks it is likely that the Department of Justice Investigation will remain an overhang for stocks of both Sun and Taro.
ITC, Tata Motors, NTPC, Bharti Airtel and Cipla slipped 1-2 percent while SBI gained 0.9 percent.
In the broader space, Mandhana Retail was locked at 5 percent upper circuit after ace investor Rakesh Jhunjhunwala picked up 12.74 percent stake in the company through off market transaction on Wednesday. Parent company Mandhana Industries also jumped 20 percent, rising for third consecutive session.
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