North Korea heat spooks Indian market

Sensex, Nifty fall for 4th day on FII pull-out; Rs 5 lakh cr m-cap eroded this week

The Indian market fell for the fourth day in a row on Thursday as simmering geopolitical tensions over North Korea and weak corporate earnings made investors a lot more anxious.

The benchmark BSE Sensex and the NSE (National Stock Exchange) Nifty fell over 0.8 per cent, extending their four-day decline to 2.5 per cent. The mid-cap and small-cap indices saw deeper cuts at 3.2 per cent and 4.6 per cent, respectively, and over five per cent each so far this week. The four-day decline has pulled down India’s market capitalisation (m-cap) by over Rs 5 lakh crore.

The Sensex lost 266 points, or 0.84 per cent, to close at 31,531.3, while the Nifty closed at 9,820.25, down 87.8 points, or 0.89 per cent.
 

“The tension between the US and North Korea is giving jitters to investors across the globe, as the two leaders exchange threats on a global platform. It was another day of losses on the bourses as negative global cues and some profit-taking dragged the indices lower,” said Karthikraj Lakshmanan, senior fund manager (equities) at BNP Paribas Mutual Fund.

Most global equity markets fell close to one per cent on Thursday following North Korea’s plan to strike the US military base in Pacific territory of Guam. On the other hand, safe haven assets like gold, bond and US dollar were seen gaining. Foreign institutional investors on Thursday pulled out Rs 1,170 crore from the Indian market, while their domestic counter provided a buying support to the tune of Rs 821 crore.

“A technical correction might be underway as risk-averse sentiment dominates global equities amid geopolitical tensions. The market still needs to see how US President Donald Trump will eventually deal with his advocating ‘fire and fury’ against North Korea’s threat,” Margaret Yang, strategist at CMC, told Bloomberg.

All the sectoral indices, barring information technology, ended with losses on Thursday. The realty and health care indices were the worst performers.
 

“Selling was witnessed across the board and most sectoral indices ended with deep cuts. However, a technical bounce in the last half an hour helped the benchmark to trim some loss. We may see some bounce after the recent slide but sustainability at higher levels seems difficult,” said Jayant Manglik, president (retail distribution) at Religare Securities.

“The mid-cap and small-cap counters are facing excessive selling pressure and we suggest avoiding any fresh buying until market stabilises,” he added. The market breadth remained hugely negative with only 303 advancing stocks and 2,274 declining of the 2,683 stocks traded on the BSE. Tata Motors declined the most (8.6 per cent) among the Sensex components after the company reported disappointing June-quarter financials. Other Sensex losers are Dr Reddy’s Laboratories (4.8 per cent) and Sun Pharmaceutical Industries (3.1 per cent). The India VIX index, a measure of volatility, rose a further 2.6 per cent to 13.8. The index has seen a sharp spike this week, indicating further volatility in the market.

“The market is likely to remain under pressure and any intra-day bounce back towards 9,850-9,900 on the Nifty is likely to get sold into. On the flip side, we will not be surprised to see this corrective move getting extended towards 9,760-9,700 in a day or two. Traders are advised to remain light and avoid taking undue risks as individual stocks may continue correcting in the next few days,” said Sameet Chavan, chief analyst (technical and derivatives) at Angel Broking.