Global equities sell-off: Sensex recoups after 1,200-point fall; RBI policy meet holds key for markets today

Mumbai: The bears were unleashed in the Indian equity markets for the sixth consecutive session on Tuesday following a massive global sell-off, which marked the steepest intra-day fall of the key equity indices -- with the Sensex shedding a staggering 1,200 points before recovering by over 700 points -- in almost two-and-a-half years. At their lowest points, the two main indices of the Indian equity market -- S&P BSE Sensex and NSE Nifty50 -- plunged by around 3.30 percent each.

The Indian indices receded in-line with their global peers -- Nikkei, Hang Seng, Shaghai, Taipei, Seoul and Singapore -- all of which ended lower following an overnight downward correction in Dow Jones by over 1,100 points. However, the free fall was arrested and somewhat reversed by value buying towards the end of the trade session. The barometer 30-scrip Sensitive Index (Sensex) of the BSE recovered by over 700 points from its day's low at 33,482.81 points.

The Sensex closed at 34,195.94 points -- down 561.22 points or 1.61 percent -- from its previous close at 34,757.16 points. Similarly, the wider Nifty50 of the National Stock Exchange bounced back over 200 points from its day's low to close trade at 10,498.25 points -- down 168.30 points or 1.58 percent. "Tracking global sell-off, both the Nifty and Sensex fell nearly 3.5 percent (intra-day), their biggest fall since August 2015," Dhruv Desai, Director and Chief Operating Officer of Tradebulls, told IANS.

"Overnight, the Dow Jones fell over 1,100 points, its biggest fall since six-and-half years after US wage data on Friday pointed to quickening inflation which may lead to higher rates by the US Federal Reserve," he added. Besides Tuesday's fall, India's key stock exchanges have dipped by almost five percent since the Union Budget presentation on February 1, 2018. The Sensex fell by 1,769.08 points and the Nifty50 by 529.45 points during the last four sessions.

Reuters image.

Reuters image.

"Markets continued to correct sharply on Tuesday. A bounce back from the lows helped to curb the losses," Deepak Jasani, Head, Retail Research, HDFC Securities, told IANS. "Weakness in global equity markets added to the selling pressure in the Indian markets," he added. Market observers pointed-out that factors like the budgetary proposal to tax long-term gains on shares and concerns over the central government's fiscal prudence measures amplified the global downturn.

Vinod Nair, Head of Research, Geojit Financial Services, said: "Global sell-off due to spike in global bond yield resulted a knee-jerk reaction in the domestic market. We are seeing an extended impact in the domestic market post the LTCG and fiscal deficit turmoil." "However, towards close market recouped some losses led by value buying on account of earnings growth expectations. Anxiety about RBI policy and global market movement may influence investors to stay sideline."

On the currency front, the Indian rupee weakened by 18 paise to 64.24 against the US dollar from its previous close at 64.06. "The global reflation cycle of higher risk assets, higher EM currencies and higher interest rates have hit a pause. As result, Rupee too has reversed and depreciated against USD," Anindya Banerjee, Deputy Vice President for Currency and Interest Rates with Kotak Securities, told IANS.

"As long as the risk-off phase continues, we can expect USD/INR to head higher. In Wednesday's RBI decision, we expect RBI to maintain a hawkish tone, with no change in rates. It is imperative that RBI maintains its tone as hawkish, otherwise Rupee can face further selling pressure, due to risk to real interest rate outlook."

In terms of investments, provisional data with the exchanges showed that foreign institutional investors sold scrips worth Rs 2,326.10 crore, while domestic institutional investors purchased stocks worth Rs 1,699.74 crore. According to Anita Gandhi, Whole Time Director, Arihant Capital Markets, the recent correction in the equity markets will help to bring in valuations to the realistic level for new entrants and long-term players.

"Equity markets started on negative note with weak global cues and a sharp fall in the Dow Jones. Negative closing for two previous trading sessions had a cascading impact on the leveraged positions. The fall has been sharper than rise," said Gandhi. "However, this correction will be helpful in bringing valuations to the realistic and attractive level for the new entrants, as well as for long term players."

Sector-wise, all the 19 sub-indices of the BSE closed in the negative territory led by S&P BSE consumer duarbles index which plunged by 570.27 points, followed by auto index by 442.57 points, banking index by 379.60 points and capital goods index by 215.78 points.

Major Sensex losers on Tuesday were: Tata Motors, down 5.45 per cent at Rs 374.45; Tata Motors (DVR), down 4.71 per cent at Rs 208.50; Tata Consultancy Services, down 3.58 per cent at Rs 2,995.35; Kotak Bank, down 2.70 per cent at Rs 1,033.55; and Infosys, down 2.62 per cent at Rs 1,108.45. The only gainer on the BSE was Tata Steel which rose a tad 0.06 per cent to close at Rs 664.95.


Updated Date: Feb 07, 2018 07:29 AM

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