 "Sensex recovers 1350 points as markets shrug off Trump victory; demonetisation weighs")
Benchmark share indices staged a sharp recovery in the latter half of the trading session as the market took Donald Trump's victory in its stride while the surprising demonetisation move by the government dampened investor sentiment.
The S&P BSE Sensex dropped 339 points to settle at 27,253 and the Nifty50 settled 112 points lower at 8,432. In the broader market, the BSE Midcap and Smallcap indices ended down 1.9%-2.7% each. Market breadth ended weak with 2143 losers and 626 gainers on the BSE.
Earlier, Indian shares plunged tracking a sell-off in global market after Donald Trump edged past Hillary Clinton in the race to the White House. The Sensex plunged 1,689 points to hit a low of 25,902 while the Nifty50 slumped 502 points to hit a low of 8,002 in opening trades.
However, markets recovered later after Hillary Clinton regained her lead over Donald Trump. Meanwhile, the selling pressure eased after markets factored in Donald Trump's victory.
MARKET OUTLOOK
Given the development, analysts say that the road ahead for the markets will depend on Trump's policies and their impact on trade and economy. They, however, caution against volatility and suggest investors should only make fresh investments from a long-term perspective.
“It is fair to say that the emerging market equities are more vulnerable to potential heightened trade fiction. After their very strong Brexit performance, we see EMs, especially Latin America at risk. We reduce our overweight stance on EMs to neutral,” he adds.
Motilal Oswal, chairman and managing director at Motilal Oswal Research, on the other hand, believes this volatility only gives an opportunity to long-term investors to commit more money to their equity investment as long term opportunity in India looks very promising. The banning of large denomination currency may be a bit painful in the shorter term, he says, but is definitely better for long-term in terms of better tax compliance, control on corruption as well as inflation.
US ELECTIONS
Republican presidential candidate and billionaire Donald Trump stunned the world after defeating Democratic presidential candidate Hillary Clinton by a wide margin in a fiercely contested and debated presidential campaign over the past few months. Donald Trump will be sworn in as the 45th President of the United States in January 2017.
In his victory address to the nation after he was delcared as the winner, President-elect Donald Trump said that America has great potential and the urgent task is to build infrastructure. He also said he expects to have great realtionships with other nations adding that he will deal fairly with all nations.
DEMONETISATION
In an effort to curb black money and counterfeiting the government in a surprising move announced the demonetisation of Rs 500 and 1,000 currency notes with effect from midnight Tuesday. The Rs 1000 currency note will be scrapped and the Reserve Bank of India will issue new series in denominations of Rs 500 and Rs 2,000 on November 11, 2016.
Customers can deposit any amount of the invalid currency in their bank accounts till December 30 and also exchange them for lower currency denominations at special counters at banks and post offices till November 24 but with limit of Rs 4,000 in a day.
Banks will open additional counters and work extra hours beginning Thursday to help people exchange Rs 500 and Rs 1000 notes that have been declared invalid from midnight on Tuesday.
Finance Minister Arun Jaitley said that people with black money are worried and political funding would be impacted following the move to scrap existing Rs 500 and Rs 1000 currency notes.
BUZZING STOCKS
Export-led stocks such as IT and pharma were the most active as the US election results started trickling in. Sun Pharma and Dr Reddy's Labs ended up 5% each. Among others, Aurobindo Pharma, Natco Pharma and Torrent Pharma ended up 1%-2% each. Lupin ended up 1.5%. The drug major today reported a 57.75% rise in its consolidated net profit to Rs 662.19 crore for the second quarter ended September 30, mainly on account of robust sales.
For the $150 billion IT services industry a Trump victory will only add to its woes and challenges the industry is facing on growth due to automation and technology disruption. Further, President-elect Donald Trump in his election campaign said he would bring back jobs to the US.
TCS, Infosys, Wipro and HCL Technologies which earn most of their revenues from exports to the US ended down 1.6%-5.6% each.
Apart from IT and pharma, realty stocks witnessed a sell-off as the demonetisation move would impact the real estate sector the most with large scale non-banking transactions associated with the industry.
NBCC, Unitech, DLF, Indiabulls Real Estate, HDIL and Oberoi Realty ended down 6%-17% each.
GOLD
Gold prices surged to Rs 31,750, the highest level in 3-years after the government crackdown on Rs 500 and Rs 1000 currency notes to curb black money while rally in global prices following Donald Trump's victory in the US elections also weighed on sentiment.
The S&P BSE Sensex dropped 339 points to settle at 27,253 and the Nifty50 settled 112 points lower at 8,432. In the broader market, the BSE Midcap and Smallcap indices ended down 1.9%-2.7% each. Market breadth ended weak with 2143 losers and 626 gainers on the BSE.
Earlier, Indian shares plunged tracking a sell-off in global market after Donald Trump edged past Hillary Clinton in the race to the White House. The Sensex plunged 1,689 points to hit a low of 25,902 while the Nifty50 slumped 502 points to hit a low of 8,002 in opening trades.
However, markets recovered later after Hillary Clinton regained her lead over Donald Trump. Meanwhile, the selling pressure eased after markets factored in Donald Trump's victory.
MARKET OUTLOOK
Given the development, analysts say that the road ahead for the markets will depend on Trump's policies and their impact on trade and economy. They, however, caution against volatility and suggest investors should only make fresh investments from a long-term perspective.
“We went into this event underweight equities. We were concerned about the potential impact this election could have on risk assets. We were also concerned that the markets had become complacent over those risks. We now move this negative view to neutral. In other words, we are taking advantage of the weakness and the over-reaction by the markets and upgrading our stance to neutral from underweight. We believe the selling is more sentiment driven and will have a finite lifespan,” said John Woods, chief investment officer for Asia Pacific (APAC) at Credit Suisse.
“It is fair to say that the emerging market equities are more vulnerable to potential heightened trade fiction. After their very strong Brexit performance, we see EMs, especially Latin America at risk. We reduce our overweight stance on EMs to neutral,” he adds.
Analysts at Morgan Stanley Investment Management led by Jonathan F Garner expect the equity markets to continue to correct lower on uncertainty, in particular in the key area of trade policy and the future composition of the Federal Open Market Commiteee (FOMC).
“Central banks were key players in stabilising markets after the Brexit vote, and they could be again, although this is arguably a bigger shock to expectations for the world's largest economy. In Asia, we suspect Japan, Korea and Taiwan will be most negatively impacted, due to a combination of openness to trade, stock market exposure to export sectors and current security relationships with the US. We expect Shanghai A, India, ASEAN and Russia to be more defensive,” they add.
Motilal Oswal, chairman and managing director at Motilal Oswal Research, on the other hand, believes this volatility only gives an opportunity to long-term investors to commit more money to their equity investment as long term opportunity in India looks very promising. The banning of large denomination currency may be a bit painful in the shorter term, he says, but is definitely better for long-term in terms of better tax compliance, control on corruption as well as inflation.
US ELECTIONS
Republican presidential candidate and billionaire Donald Trump stunned the world after defeating Democratic presidential candidate Hillary Clinton by a wide margin in a fiercely contested and debated presidential campaign over the past few months. Donald Trump will be sworn in as the 45th President of the United States in January 2017.
In his victory address to the nation after he was delcared as the winner, President-elect Donald Trump said that America has great potential and the urgent task is to build infrastructure. He also said he expects to have great realtionships with other nations adding that he will deal fairly with all nations.
DEMONETISATION
In an effort to curb black money and counterfeiting the government in a surprising move announced the demonetisation of Rs 500 and 1,000 currency notes with effect from midnight Tuesday. The Rs 1000 currency note will be scrapped and the Reserve Bank of India will issue new series in denominations of Rs 500 and Rs 2,000 on November 11, 2016.
Customers can deposit any amount of the invalid currency in their bank accounts till December 30 and also exchange them for lower currency denominations at special counters at banks and post offices till November 24 but with limit of Rs 4,000 in a day.
Banks will open additional counters and work extra hours beginning Thursday to help people exchange Rs 500 and Rs 1000 notes that have been declared invalid from midnight on Tuesday.
Finance Minister Arun Jaitley said that people with black money are worried and political funding would be impacted following the move to scrap existing Rs 500 and Rs 1000 currency notes.
BUZZING STOCKS
Export-led stocks such as IT and pharma were the most active as the US election results started trickling in. Sun Pharma and Dr Reddy's Labs ended up 5% each. Among others, Aurobindo Pharma, Natco Pharma and Torrent Pharma ended up 1%-2% each. Lupin ended up 1.5%. The drug major today reported a 57.75% rise in its consolidated net profit to Rs 662.19 crore for the second quarter ended September 30, mainly on account of robust sales.
For the $150 billion IT services industry a Trump victory will only add to its woes and challenges the industry is facing on growth due to automation and technology disruption. Further, President-elect Donald Trump in his election campaign said he would bring back jobs to the US.
TCS, Infosys, Wipro and HCL Technologies which earn most of their revenues from exports to the US ended down 1.6%-5.6% each.
Apart from IT and pharma, realty stocks witnessed a sell-off as the demonetisation move would impact the real estate sector the most with large scale non-banking transactions associated with the industry.
NBCC, Unitech, DLF, Indiabulls Real Estate, HDIL and Oberoi Realty ended down 6%-17% each.
GOLD
Gold prices surged to Rs 31,750, the highest level in 3-years after the government crackdown on Rs 500 and Rs 1000 currency notes to curb black money while rally in global prices following Donald Trump's victory in the US elections also weighed on sentiment.