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Informist, Thursday, Dec. 19, 2024

By Anjana Therese Antony

MUMBAI – The US Federal Reserve's hawkish comments on interest rates next year came as a bolt from the blue for investors who were expecting aggressive rate cuts. Against the previous guidance of a 100-basis-point reduction in the federal fund rate in 2025, a reduction of 50 bps is now expected, according to the Summary of Economic Projections released along with the policy statement. The central bank also said the economic outlook is uncertain, though recent data show inflation progressing towards the Fed's target of 2% and economic activity expanding at a solid pace. "The current undertone is bearish... I don't see major positives till we see how earnings turn out," the head of research of institutional desk at a domestic broking firm said.

The bearish approach can be attributed to a number of factors, including depreciation of the rupee, continued selling by foreign institutional investors, slowdown in domestic economic growth, and now the likely slower pace in reduction of interest rates by some global central banks, analysts said. They also said that FIIs were probably net sellers Thursday, too. Till Wednesday this week, FIIs net sold equities worth more than INR 80 billion. Adding to the woes was the depreciation of the rupee, which hit its record closing low of 85.07 against the dollar. Traders added short positions in the derivatives segment of the Nifty 50 on expectations of a further fall. 

On Thursday, the Nifty 50 ended 1% lower at 23951.70 points and the BSE Sensex closed 1.2% lower at 79218.05 points. The near-term support for the 50-stock index is pegged at 23900-23870 points and resistance at 24000-24150 points, according to technical and derivatives analysts at two broking firms.

The shock from the US had a ripple effect on shares of Indian information technology companies, which declined sharply. IT stocks had been major gainers in the previous session. The monetary policy decision in the US affects Indian IT companies as they have major exposure to the US and earn more than half of their revenue from clients in that country. The Nifty IT was the major sectoral laggard Thursday and ended 1.3% lower, with most constituents in the red. The fall in IT stocks contributed to a fall of 0.2% in the Nifty 50 index. The five IT stocks in the Nifty 50 together have the second highest weightage of 13.76% in the benchmark index.

The Fed's comments of slower-than-expected rate cuts also dented sentiment towards banking and financial services companies in India. The hawkish views, coupled with the likely slower growth in loans and margins in the December quarter, weighed on these stocks. Except for certain private banks and some insurance players, valuations are expensive for non-banking financial services and some public-sector players. 

With the market seeing a major fall, investors turned their focus to defensive stocks such as healthcare and pharmaceuticals. The Nifty Healthcare and Nifty Pharma indices were the only sectoral gainers Thursday, closing higher by 1.3% and 1.7%, respectively. Among large-cap peers, Apollo Hospitals Enterprise, Sun Pharmaceutical Industries, Cipla, and Dr. Reddy's Laboratories closed 1.2-3.9% higher and were the top four gainers in the Nifty 50, though not in that order.

Among specific stocks, Asian Paints was the second-biggest laggard in the Nifty 50 and closed 2.3% lower at INR 2,291.85 on the National Stock Exchange after two top executives resigned from the company, effective immediately, without serving their notice period. The stock fell for the fourth consecutive session Thursday. 

Among new listings, Inventurus Knowledge Solutions closed 47.5% higher at INR 1,960.85 after listing at INR 1,900 on the NSE. The company had raised INR 13.80 billion through an initial public offering of 10.37 million shares.

* Of the Nifty 50 stocks, 14 rose and 36 fell

* Of the Sensex stocks, 3 rose and 27 fell

* On the NSE, 1,095 stocks rose, 1,706 fell, and 76 were unchanged

* On the BSE, 1,680 stocks rose, 2,315 fell, and 100 were unchanged

* Nifty IT: down 1.3%; Nifty Financial Services: down 1.2%; Nifty Pharma: up 1.7%

BSE                                               NSE

Sensex: 79218.05, down 964.15 points or 1.2%      Nifty 50: 23951.70, down 247.15 points or 1.02%

End

US$1 = INR 85.07

Edited by Rajeev Pai

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