The benchmark Sensex and Nifty slid to their lowest close in nearly four and a half months, mirroring the weakness in Asian shares as concerns that Donald Trump taking over as US President, led to fears of higher interest rates, triggering capital outflows from riskier bets such as emerging markets.
Earlier in the day, BSE’s 30-share Sensex fell as much as 2.69% or 740.50 points to 26,777.18 points, while NSE’s Nifty 50-share dropped 2.82% or 240.80 points to 8,284.95 points. Sensex closed 2.54% or 698.86 points lower at 26,818.82 points, its lowest close since June 29.
Nifty shed 2.69% or 229.45 points to close at 8,296.30 points, its lowest close since June 30.
Market breadth was in favour of bears as losers were nearly five times the gainers on the BSE. “Risk-off trade is on,” said Ajay Bodke, chief executive officer (CEO) and chief portfolio manager, portfolio management services, at securities house Prabhudas Lilladher, pointing to the anxiety in world markets over Trump’s surprise election.
“The US bond yields have risen sharply. Trump’s announcement of massive push to the US economy, has led to fears that it will stoke inflation in future. The dollar is strengthening and money is moving out of emerging assets,” said Bodke.
The dollar index, which measures the value of the greenback relative to a basket of six major currencies, was up 0.09%. It advanced for fifth straight sessions and rose 1.9% during this period.
On the domestic front, the rupee fell as much as 0.9% in the day against the US dollar at 67.22, the lowest level since August 22. “On the domestic front, there are understandable concerns on the short-term impact on aggregate demand in the consumer-focused sectors due to the demonetization move. In recent times, most portfolios had gravitated towards consumer-focused companies,” added Bodke.
Among the emerging markets, India is one of the few economies where domestic consumption forms 70% of GDP, while in case of other emerging markets, net exports are a biggest chunk of GDP, he pointed “Once the semblance of sanity returns, money should start returning to India,” said Bodke. Volatility jumped with NSE’s VIX or volatility index - spiking 12.34%, to 17.37, the level last seen on September 29. Consumer-focused companies led the losses on the bourses, with the respective sectoral indices leading the losses, on fears that the demonetisation move will hurt consumption in the near term.
BSE Auto index and BSE Consumer Discretionary Goods & Services index led the losses with 4.53% and 4.30% decline respectively. Mahindra & Mahindra fell the most among Sensex stocks. It closed 6.02% lower even as the country’s top utility vehicle maker said its net standalone profit rose 27% at Rs1,163.27 crore for quarter ended September.
The country’s largest lender State Bank of India slid 3.09% after it said its net profit for the September quarter fell 34.6% from a year-ago period as provisions against bad loans doubled from last year. Sun Pharmaceutical Industries led the gains for Sensex.
Its shares rose 3.30% after the pharmaceutical maker said late on Thursday its fiscal second-quarter profit more than doubled as it received $45mn in milestone payments from a partner.
Meanwhile the rupee yesterday closed near 15-week low against the US dollar, tracking the losses in Asian currencies and global equity markets on the speculations of aggressive interest rate hike by the Federal Reserve under the newly elected US president Donald Trump.
The rupee closed at 67.25 a dollar —a level last seen on July 26, down 0.92% from its previous close of 66.63. The home currency opened at 67.10 against the US dollar and touched a low of 67.25. So far this year, it fell 1.6%.
“Rupee has come under pressure from outflows, anticipating Trump’s measures to spark asset growth in US assets. This would also mean that FOMC is better poised to raise rates. FIIs being consistently on the selling side, for most of the days since October had been putting Rupee under pressure, but it could regain some losses on the back of PM’s demonetisation drive”, said Anand James, Chief Market Strategist, Geojit BNP Paribas.
“RBI is reported to have sold dollars to arrest volatility, which had softened the falls early in the day, but the extended sell off in equities, put additional pressure on rupee, aggravating weakness,” James added
Asian currencies closed weaker. Indonesian rupiah was down 1.8%, Malaysian ringgit 1.42%, South Korean won 1.24%, Taiwan dollar 0.84%, Philippines peso 0.63%, Thai baht 0.17%. However, Japanese yen up 0.47%, China Offshore spot 0.21%, Singapore dollar 0.08%.
The government will issue Index of Industrial Production (IIP) for September. According to Bloomberg estimates, IIP will be at 1% in September against 0.7% a month ago.
The government will also issue Wholesale Price Inflation (WPI) and Consumer Price Inflation (CPI) data for October on Tuesday. According to Bloomberg estimates, WPI will be at 3.69% in October against 3.57% a month ago. CPI will be at 4.12% against 4.31% a month ago.
The benchmark 10-year government bond yield closed at 6.726%, compared to Thursday’s close of 6.661%. Bond yields and prices move in opposite directions.
Foreign institutional investors (FIIs) have sold $501.60mn in debt and bought $6.51bn in equity till date this year. The dollar index, which measures the US currency’s strength against major currencies, was trading at 98.765, down 0.03% from its previous close of 98.785.