Sensex tanks 500 points; Nifty falls 150 pts on US Fed comments

The S&P BSE Sensex hit a fresh intraday low on Thursday as selling pressure intensified with the gap-down opening of European peers. The global markets rattled in trade after the US Federal Reserve Chairman Ben Bernanke said that the Fed could begin to taper down its key stimulus program later this year.

At 01:50 pm, the 30-share index was at 18,758.60, down 487.10 points or 2.53 per cent. It touched a high of 19,069.20 and a low of 18,744.36 in trade today.

The Nifty was at 5,666.60, down 155.65 points or 2.67 per cent. It touched a high of 5,755 and a low of 5,660.05 in trade today.

The S&P BSE Midcap Index was down 1.77 per cent and the S&P BSE Smallcap Index declined 1.65 per cent.

The S&P BSE Realty Index was down 4.79 per cent, the S&P BSE Metal Index was 4.57 per cent lower, the S&P BSE Bankex declined 3.73 per cent and the S&P BSE Power Index was down 3.03 per cent. 

Jindal Steel (7.73 per cent), DLF (7.27 per cent), Hindalco (6.52 per cent), Jaiprakash Associates (6.39 per cent) and Tata SteelBSE -5.52 % (6.17 per cent) were among the top Nifty losers. 

Sun Pharmaceuticals (1.12 per cent) and Ambuja Cements (0.16 per cent) were the only index gainers. 

The European markets, as expected, opened with a gap-down on concerns of gradual withdrawal of US bond program. The FTSE 100 was down 1.66 per cent, the CAC 40 was 2.34 per cent lower and the DAX declined 1.94 per cent. 

Tourism Finance Corporation rises on plans to seek banking licence

 Tourism Finance Corporation of India has rallied 10% to Rs 24.65 in otherwise weak market after the public sector financial institutional said that it is submitting application for securing a bank licence after its board approved the same.

“In terms of the approval by the board of directors, is submitting application with Reserve Bank of India (RBI) for banking licence” Tourism Finance Corporation of India said in a regulatory filing.

The company is promoted by a clutch of public sector institutions, including IFCI, SBI and Life Insurance Corporation of India.

The stock opened at Rs 24.75 on NSE and has seen a combined 205,897 shares changing hands on the counter in early morning deal son NSE and BSE.

Falling rupee hurts debt market

The falling rupee might continue to keep foreign investors away from Indian debt in the near future. In the past month, these investors sold debt of Rs 18,345 crore ($3.19 billion) and the trend is likely to continue until the rupee shows stability. It has plunged 7.1 per cent in the past month and is near its all-time (intra-day) low of Rs 60.06.

As compared to debt, equities have witnessed lower selling pressure. Foreign investors have sold equity of only Rs 1,374 crore in June. Global uncertainties have seen them taking a breather from buying Indian equities lately and lack of buying from domestic institutions has resulted in lacklustre markets. Foriegn institutional investors (FIIs) are said to be taking a wait and watch approach, looking for cues from the Fed's meeting tomorrow.    

But it's the redemptions in the debt segment that has the government worried. Bond experts say the biggest factor which has driven away foreign investors has been the volatile rupee. The cost of holding domestic bonds has increased, as foreign investors pay more towards higher hedging due to the rising foreign exchange risk. Foreign investors also see payouts from their Indian domestic holdings shrink when the rupee falls.

Indian debt yields are higher than in other emerging markets but the high returns might not be attractive enough against a falling rupee. Says Kaustubh Kulkarni, head of local currency debt, Standard Chartered India: “The current market dislocation is temporary and is happening due to volatility in the forex market. The rupee movement can significantly dent a bond investor's profit.”

Emerging market bonds have seen sharp redemptions of about $4.5 billion in the past month as investors worry the liquidity provided by the US Fed through its quantitative easing could taper off. Treasury yields in the US have increased, sparking a further exodus from emerging markets.  The difference in yields between the US 10-year Treasury and the Indian 10-year G-sec has reduced from 5.46 per cent to 5.09 per cent in the past month.

This has led to foreign investors rebalancing their debt portfolios towards developed markets. They were also sitting on large bond gains due to the cut in interest rates in domestic markets. Says Kulkarni: “Foreign investors had made a decent amount of profit on the corporate bond front and this is why they rebalanced. It's a relative value play that bond investors are looking at, after seeing forward yields and local bond yields.”

India's debt market share is less than five per cent of emerging markets’ debt; the impact of selling Indian debt in the local market has hardly affected yields.

Shares seen opening lower on Fed statement

Indian stocks are likely to open lower tracking weak global cues.  

Benchmark US share indices ended 1 per cent lower on Wednesday after the Fed said that it would start curtailing its monetary stimulus measures if the economy  continues to recover.

Japan’s  Nikkei was trading lower on Thursday tracking overnight losses on Wall Street after the Fed suggested that it would tone down its stimulus . The Nikkei was down 0.9 per cent while Straits Times was down 1.4 per cent and Kospi Composite eased 1.3 per cent.

At 8:10 hrs Indian Standard Time the SGX Nifty was down 70 points at 5,745. Meanwhile, investors are eyeing China factory data to be released later today.

According to technical experts, the 20-DMA is at 5,918, while the 50-DMA is at 5,914. One should wait for a clear breakout from the consolidation range of 5,740-5,870 before taking a fresh position. Today, the Nifty is likely to seek support around 5,805-5,790, while face resistance around 5,840-5,855..

Eurocopter and Ramco sign partnership agreement to offer cloud-based maintenance information systems for helicopters.

The board of S Mobility has approved buy back through open market purchase through Stock Exchange mechanism at a price not exceeding Rs. 75/- per share for an aggregate amount not exceeding Rs. 60 crores.

Tata Steel has signed a 5-year contract with Safran Group to supply them aerospace steels.

Cadila Healthcare’s US arm has lost a patent infringement battle after a US court ruled in favour of Japan’s Takeda Pharma for Cadila’s  proposed generic gastric relief drug.

Wipro is understood to have bagged a large IT outsourcing five year contract worth around $500 million from Citigroup.