Sensex tanks 624 pts, Nifty below 10,950; key factors that weighed on D-Street

Lack of clarity on the government’s booster package for capital markets weighed on D-Street.
NEW DELHI: Equity benchmarks Sensex and Nifty tumbled in Tuesday's trading session dragged by auto, telecom and banking stocks as investors turned cautious due to the absence of any significant fiscal stimulus from the government to arrest an economic downturn.

Sensex slumped 624 points, logging one of the biggest drops of this calendar, as weak global cues added to domestic woes to intensify selling. Had it been not for the surge in RIL shares, Sensex would be down almost 1,000 points, potentially recording the worst daily fall of the year.

A major crash in Argentina's peso triggered risk aversion globally, driving investors to safe harbours like bonds.

Analysts said investors were disappointed that no concrete action had been taken so far, despite assurances some corrective actions from the Finance Minister and the Prime Minister’s Office (PMO) to revive the sluggish economy.

Finance Minister Nirmala Sitharaman gave no indication at last Friday’s meeting with foreign portfolio investors that she would withdraw a budget proposal to impose a surcharge on income-tax, analysts said.

Also government data on Friday showed India's industrial production growth slipped to a four-month low of 2 per cent in June, mainly due to poor performance of mining and manufacturing sectors further dented investors sentiment.

Analysts expect volatility to persist as the market is expected to be driven largely by macroeconomic data and government measures to support growth and FPI’s tax issues in the holiday-shortened week.

Here are the key factors that weighed on Dalal Street:

Uncertainty over govt relief timeline: The market was still waiting for any followup on the likely capital markets booster package by the government. The disappointment was visible across on social media platforms.

Market expert Sandip Sabharwal tweeted, "Markets continue to crash as (there is) no visible action except for some statements, which doesn't change anything. Subdued economic growth conditions will eventually lead to big job losses. It is time for action."

"Huge diff in an industrial slowdown (which is a sad fact and on which govt needs to act) and value due to falls assuming the end of the road," tweeted value investor Safir Anand.

In a later tweet he said: "The stock market shows that talk will not matter unless there is action."

Weakness in Argentina’s peso sends rupee lower: A sharp plunge in Argentina Peso weighed on currency markets across Asia. The rupee fell 38 paise to hit a low of 71.15 during the session. Even a statement by the People's Bank of China, suggesting that China’s yuan was an appropriate level could not lift the sentiment.
Argentina Peso slumped 30 per cent in overnight trade after voters snubbed the incumbent government by giving the opposition a surprisingly bigger-than-expected victory in Sunday's primary election. Singapore cutting its full-year growth forecast added pressure in the region.

Weak IIP numbers: Weak factory output numbers released on Friday added to investor woes. India's industrial production growth slipped to a four-month low of 2 per cent in June, mainly due to poor performance of mining and manufacturing sectors. Factory output, as measured by the Index of Industrial Production (IIP), had expanded by 7 per cent in June 2018. Capital goods segment, which is a barometer of investment, saw a contraction of 6.5 per cent in June compared to 9.7 per cent growth a year ago. Investors were also bracing for CPI numbers due for Monday.

European data, S&P futures: A data suggesting investors' view of the German economy, the largest economy in Europe, fell to its lowest since December 2011 amid concerns about the US-China trade conflict, the chance of a disorderly Brexit and a possible competition among countries to devalue their currencies. German DAX fell 1 per cent. Other European markets were down up to 1.2 per cent.

A 0.4-per cent drop in S&P stock futures were hinting at a weak start for the US stocks.

Market at a glance
BSE Sensex tumbled 624 points, or 1.66 per cent, to 36,958 while NSE’s Nifty ended at 10,925, down 183.80 points or 1.65 per cent.

In the 30-pack Sensex, 27 stocks ended in the red and three in the green with YES Bank finishing as the worst performer and RIL the best. M&M, Bajaj Finance, Bharti Airtel and Maruti Suzuki joined YES Bank on the losers’ list, slipping up to 11 per cent.

Sun Pharma and Power Grid were among other Sensex stocks that advanced.

The BSE Midcap index declined 2.35 per cent underperforming benchmark Sensex while the BSE Smallcap index ended 1.47 per cent lower.

BSE Telecom index recorded losses of 3.99 per cent followed by Auto, Capital Goods and Finance indices.

In terms of index contribution, RIL and Sun Pharma were the top support while HDFC twins, Infosys and ITC were the top drags on Sensex.

RIL was among the top gainers in the Sensex pack, witnessing the biggest single-day gain in a decade as investors cheered the company's largest FDI deal with Saudi Aramco, the roadmap to become a zero net-debt company by March 21, the unveiling of four new growth verticals and plans to unlock value in retail and telecom businesses.

Auto stocks witnessed severe selling pressure throughout the session, as SIAM data showed a 31 per cent drop in domestic passenger vehicle (PV) sales to 2,00,790 units in July from 2,90,931 units in the same period a year ago.

Analyst view
“Indian markets have been tagging along global markets in palpable risk-off sentiment due to multiple challenges of intensification of US-China trade war, selloff in Argentina and Hong Kong markets. Reliance stock’s best day in a decade performance on the back of pro-investor statements in its AGM couldn’t save the day for market,” said Jagannadham Thunuguntla of Centrum Broking.

Global markets
On the global front, Asian shares closed lower as fears of a drawn out China-US trade war, protests in Hong Kong and a crash in Argentina's peso drove investors to safe harbours like bonds, gold, and the yen. MSCI's broadest index of Asia-Pacific shares outside Japan skidded 1 per cent. Chinese stocks fell 1 per cent, while Hong Kong's main market index tumbled 1.7 per cent to a seven-month low.

European stocks opened and traded lower in morning trade as Italy and Argentina's political uncertainty and persistent unrest in Hong Kong dented investor sentiments.




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