Markets slide on oil, election uncertainty; HDFC, Bajaj Finance stocks fall

The Sensex fell 346 points or 0.98% to end at 34,813, while the Nifty ended at 10,482, down 103 points

The benchmark indices fell on Monday by nearly a per cent — reversing the gains made last week — as the rise in oil price and election uncertainty weighed on sentiment. Domestic investors were seen booking profits after a 5 per cent rebound in the market, from its eight-month low last month.

The Sensex fell 346 points or 0.98 per cent to end at 34,813, while the Nifty ended at 10,482, down 103 points, or 0.97 per cent. The India Vix index, a gauge for market volatility, shot up 9 per cent to 19.4.

Domestic institutional investors (DIIs) were net sellers to the tune of Rs 10.7 billion, while foreign portfolio investors (FPIs) bought shares worth Rs 8.3 billion, continuing their recent buying streak.

Market participants said the increase in oil prices following the Organization of the Petroleum Exporting Countries’ (Opec) decision to cut supply dampened domestic investors’ mood. Oil prices jumped 2 per cent after Opec said output could be cut by 1 million barrels per day.

“The run-up in the market was mostly because of oil prices falling. If there is a cut in production, things will look gloomy,” said U R Bhat, managing director, Dalton Capital Advisors. 

Ahead of the supply cut announcement by Opec, oil prices had slipped into bear market territory, sliding 20 per cent from their four-year high last month.

Experts said uncertainty on the outcome of the polls in five states, which kick-started on Monday, are also a key worry for the market.

“Markets will be volatile until we have the outcome for the 2019 General Elections. The outcome of state elections will be a cue to what could happen next year. As of now, it seems like a closely contested fight in each state. It will not be a clean sweep for either of the parties,” Gaurang Shah, chief investment strategist, Geojit BNP Paribas.

Barring five, all Sensex constituents fell. Automobile shares were the biggest losers, followed by financials. 

Tata Motors fell 4.84 per cent, Hero Motocorp declined 3.8 per cent and Maruti Suzuki fell 2.6 per cent.

Experts said investors were concerned about the growth of the domestic automobile industry, following the spike in oil prices and tighter regulations surrounding insurance and emissions.

Shares of financial companies traded weak as investors continued to fret over the fallout of the liquidity crunch. Shares of HDFC fell 1.2 per cent, Bajaj Finance 4 per cent and Srei Infrastructure Finance by nearly 6 per cent. 

In a note, UBS said it expects the issues in the financial sector to cause a general liquidity squeeze in the near-term. “While the improvement in banks’ balance sheet might help banks gain market share in 2019, the overall credit conditions are likely to see only limited upside,” the note said.