Pain returns: Sensex ends 587 pts down on global selloff; investors lose Rs 2 lakh cr

Mumbai: Shares once again went into a tailspin on Tuesday leaving investors in a fix, as the domestic economy’s dismal first quarter GDP data and weak Chinese manufacturing numbers intensified worries that the world’s second largest economy could be in for more disappointment going ahead on the growth front. In addition, with the depreciating Yuan in the face of global headwinds, investors across Asia and Europe turned more risk-averse and exited stocks at will.[caption id=“attachment_2411524” align=“alignleft” width=“380”] Worried investor. Reuters[/caption] Back home, the 30-share benchmark BSE S&P Sensex plunged 703 points intra-day before wrapping up the session below the 26,000-mark at 25,696.44, down 586.65 points, or 2.2 percent over previous close. The broader CNX Nifty ended below 8,000-mark at 7,785.85, down 185.45 points, or 2.3 percent. Market breadth ended extremely weak, with 2,093 stocks falling against 595 advances on BSE. Across Asia, key Chinese indices the Shanghai Composite Index fell 1.2 percent, Hang Seng shed 2.2 percent and Japan’s Nikkei plunged 3.8 percent at close. European markets, too, came under the grip of Chinese economic slowdown and key gauges were down around 2-3 percent in mid-day trades. While the Chinese stock market crash followed by its rapidly deteriorating economic health, the new set of numbers announced today further validates the lingering pain in the dragon nation’s growth prospects. Fresh Chinese manufacturing data showed its official Purchasing Managers’ Index (PMI) fell to 49.7 in August from the previous month’s reading of 50.0, the weakest showing in three years. Separately, the private Caixin/Markit China Manufacturing Purchasing Managers’ Index (PMI) showed a final reading of 47.3 in August, the lowest since March 2009, a Reuters report showed. Sanjeev Zarbade, vice president, private client group research, Kotak Securities, said, “Today’s markets began on weak global cues as the US markets had closed lower yesterday amid continued uncertainty about China and the Fed. European markets also fell yesterday over continuing concerns on China and on uncertainty over what the US Fed will do in the next FOMC meeting. China’s official PMI also indicated a contraction in activity, giving credence to fears of slowdown. Apart from global cues, Indian equities were buffeted by lower than expected GDP data and disappointing sales numbers of Maruti and M&M. The banking sector stood out in terms of losses in today’s markets. In such volatile times for the global markets, investors should focus on quality stocks for bargain hunting.” On Monday, post the market close, government released data that showed the GDP grew at 7 percent during the April-June quarter, which was below the 7.4 percent median estimates of economists polled by Reuters. Although today’s fall was the second-biggest over the past one week when the Sensex crashed over 1,600 points on Monday, domestic traders were poorer by Rs 2.04 lakh crore following the today’s near-about 600 points slump. Alex K Mathews, head of research at Geojit BNP Paribas Financial Services, said, “World is worried about the falling Chinese economy. Also, India’s GDP numbers also fell below the estimates which also dampened the sentiment today. With monsoon showing no signs of improvement and key reforms taking back seat for a while, the overall market mood may not change in the near term.” While global economy continues to remain challenging, overseas investors maintained their bearish stance and pulled out funds from the domestic equity markets. On Monday, FIIs provisionally sold shares worth Rs 551 crore, taking their total net outflows to Rs 17,203 crore in August. “FIIs have been selling heavily and that is putting immense pressure on the domestic markets. They are taking more Put option exposure in the near term, which shows that they are bearish on the markets. Also, US may hike rates any time during the year is also prompting FIIs to trim exposure in emerging markets,” said Dipen Shah, senior vice president at Kotak Securities. In the wake of frenzied selling pressure, investors cut their holdings in banking, auto, metals and realty shares. Among the laggards in Sensex space, shares of Axis Bank tumbled 5.2 percent to Rs 480.15, Hindalco shed 5.2 percent to Rs 75.90, Tata Steel dropped nearly 4 percent to Rs 216.20, BHEL dropped 3.9 percent to Rs 217.65, Vedanta dipped 3.8 percent to Rs 94.85 and M&M fell 3.8 percent at Rs 1,176.80. Others such as Lupin, SBI, Tata Motors, ITC, Coal India, L&T, HDFC, Cipla and HDFC Bank ended over 2-3 percent lower.