China heat spooks investors again; Sensex crashes 555 pts to end at 19-month low

Chinese stock market worries once again played havoc across the global equity indices, pulling down Indian markets too with the benchmark Sensex closing at 19-month low below the 25,000 mark today. [caption id=“attachment_2574570” align=“alignleft” width=“380”]  PTI[/caption] Lingering in negative territory through the trading session, panic struck the local markets after China for the second time in less than three days halted trading at its Shanghai Composite index, which crashed over 7 percent intra-day as the currency yuan went into a free-fall mode. Feeling the heat, local traders and domestic market participants also dumped stocks at will, with commodity-related stocks in the Sensex space taking a hard knock amid concerns over receding global input prices. Thursday, the 30-share BSE S&P Sensex, after hitting the day’s low of 24,825.70, down 580 points, ended the session at 24,851.83, down 554.50 points, or 2.2 percent from previous close. So far, in last four sessions, the Sensex has plunged a whopping 1,309 points, or 5.1 percent. The broader 50-stock Nifty also reeled under selling pressure and ended below the crucial 7,600-mark at 7,568.30, down 172.70 points, or 2.2 percent. Local currency market also witnessed bouts of volatility with rupee dropping 11 paise intra-day to touch a low of 66.94 against the dollar before recovering some ground to trade 5 paise lower at 66.88. Overseas investors continued to exit from emerging market economies, including India, having sold shares worth Rs 1,062 crore in past three days till Wednesday even as domestic institutional investors remained net buyers to the tune of Rs 367 crore. “Indian markets started on a weak note today on news that the trading in the Chinese markets was suspended, after the indices fell by 7% in early trade. This was the second time that market’s circuit breaker was triggered. The sharp sell-off in Chinese markets was prompted by the People’s Bank of China (PBOC) who set the yuan midpoint at 6.5646 per dollar, 0.5% weaker than Wednesday’s rate, the biggest fall between daily fixings since the devaluation began in mid-August," said Sanjeev Zarbade, Vice President-Private Client Group Research, Kotak Securities. “Taking cues from the weak markets and likely softer demand, brent crude has fallen to $33.2 / barrel, which is good for the Indian economy, but bad for oil exporting countries. Even European markets opened in the red following the sell-off in the Asian markets,” said Zarbade. Other Asian indices such as China’s Hang Seng dropped 3.1 percent and Japan’s Nikkei shed 2.3 percent. European markets, too, were at the receiving end with key indices tumbling over 2-3 percent in intra-day trades. “We expect markets may find bottom at 7,500 levels and by Union Budget, we expect Nifty to touch 8,000, as India still remains one of the best performing economies among its global peers,” said Ambareesh Baliga, independent market analyst. “Today’s fall was mostly triggered by Chinese stock market crash, and Indian markets cannot be insulated from it as China is world’s second largest economy and its impact will be felt. But with Indian government looking to push infrastructure spending further and Budget in next one month’s time, we expect some strong measures which would provide buying opportunity for long-term investors,” said Baliga. Several frontline old economy stocks took severe pounding. Shares of BHEL tanked nearly 7 percent to Rs 153.85, Tata Steel crashed 6.8 percent to Rs 250.10, Tata Motors plunged 6.1 percent to Rs 343.20, Axis Bank shed 5 percent to Rs 409.35, Maruti declined 4.7 percent to Rs 4,266.55 and ONGC lost 4.5 percent to Rs 226.70. Other laggards such as SBI, Adani Ports, L&T, Bajaj Auto, Hindustan Unilever and NTPC ended over 2-3 percent lower.