Sensex, Nifty tread water near flatline; IT sheds 3% financials, auto up

Indian equity benchmark indices BSE Sensex and Nifty50 were trading lower on Wednesday, as investors awaited the US Federal Reserve’s policy decision announcement later in the day.

At around 10:00 AM, the BSE Sensex was up 15 points, or 0.02 per cent, at 83,094, while the Nifty50 was at 25,421, up 0.01 per cent.

On Tuesday in the domestic markets, benchmark equity indices, BSE Sensex and Nifty50, had ended with gains. The 30-share Sensex advanced 90.88 points or 0.11 per cent to 83,079.66, while the NSE Nifty50 added 34.80 points or 0.14 per cent to settle at 25,418.55.

That apart, India’s trade deficit widened to a 10-month high of $29.7 billion in August, as imports hit a record high of $64.4 billion on doubling gold imports. Exports contracted for the second month in a row to $34.7 billion due to softening oil prices and muted global demand.

Additionally, the country’s wholesale price index (WPI)-based inflation eased to a four-month low of 1.31 per cent on an annual basis in August, from 2.04 per cent in July, data released by the Ministry of Commerce and Industry showed on Tuesday.

Meanwhile, markets in the Asia-Pacific region opened mixed on Wednesday, following gains on Wall Street that saw both the S&P 500 and the Dow Jones Industrial Average record new highs.

Australia’s S&P/ASX 200 was down slightly, while Japan’s Nikkei 225 climbed 0.74 per cent and the broad-based Topix was up 0.48 per cent.

Mainland China’s CSI 300 was nearly flat, and the Taiwan Weighted Index was down 0.35 per cent.

South Korea and Hong Kong markets are closed today while markets in mainland China will resume trade after a three-day holiday there.

That apart, the US stock markets ended nearly flat after hitting record highs on Tuesday, while the dollar stood firm as strong economic data allayed fears of a slowdown and investors braced for the Federal Reserve’s expected move to cut interest rates for the first time in more than four years.

Signs of a slowing job market over the summer and more recent media reports had contributed in the past week to betting the Federal Reserve would move more drastically than usual at its meeting on Wednesday and shave off half a percentage point in policy rates, to head off any weakness in the US economy.

Data on Tuesday showed US retail sales rose in August and production at factories rebounded. Stronger data could theoretically weaken the case for a more aggressive cut.

Across the broader market, traders are still betting on a 63 per cent probability that the Fed will cut rates by 50 basis points on Wednesday and a 37 per cent probability of a 25 basis-point cut, according to CME Group’s FedWatch tool.

The S&P 500 rose to an all-time intraday high at one point in the session, but flattened in afternoon trading and closed 0.03 per cent higher at 5,634.58. The Dow Jones Industrial Average fell 0.04 per cent, to 41,606.18.

The tech-heavy Nasdaq Composite bucked the Wall Street trend to close 0.20 per cent higher at 17,628.06, while MSCI’s All-World index rose 0.04 per cent to 828.72.

The dollar perked up from its recent lows against most major currencies and stayed higher throughout the day.

Beyond the US, the Bank of England (BoE) and the Bank of Japan (BOJ) are also scheduled to meet this week to discuss monetary policy, but unlike the Fed, they are expected to keep rates on hold.

The two-year US Treasury yield, which typically reflects near-term rate expectations, rose 4.4 basis points to 3.5986 per cent, having fallen to a two-year low of 3.528 per cent in the previous session.

The benchmark 10-year yield rose 2.3 basis points to 3.644 per cent, from 3.621 per cent late on Monday.

Oil prices rose as the industry continued to survey the impact of Hurricane Francine on output in the US Gulf of Mexico. Meanwhile, the government in India slashed windfall tax on domestically produced crude oil to ‘nil’ per tonne with effect from September 18 on Tuesday.

US crude settled 1.57 per cent higher at $71.19 a barrel. Brent finished the day at $73.7 per barrel, up 1.31 per cent.
Spot gold slid 0.51 per cent to $2,569.51 an ounce, having touched a record high on Monday.