 "Sensex slumps 514 points on near-term growth concerns")
Indian shares slumped on Tuesday amid fears over contraction of growth in the near term post demonetisation while rising US bond yields sparked concerns over foreign capital outflows.
The S&P BSE Sensex ended down 514 points at 26,305 and the Nifty50 settled 188 points lower at 8,108. In the broader market, BSE Midcap and Smallcap ended down 4%-5% each. Market breadth ended weak with 2351 losers and 349 gainers on the BSE.
“Markets fell sharply, on expectations that there will be an impact on the consumption sector because of the Government’s demonetization drive. Banking stocks did well on expectations of a reduction in cost due to the significant increase in the deposits of the banks. The recent initiatives from the Government will likely provide some headwinds to the economic growth in the short term but will accelerate growth in the long term. The longer term scenario for equity markets has turned bullish and it will likely become one of the better performing asset classes over the medium term.” said Dipen Shah, Senior Vice President & Head PCG Research, Kotak Securities.
Markets were closed for trading on Monday on account of Guru Nanak Jayanti
Economy
India's wholesale price index-based inflation eased to a four-month low of 3.39% in October from 3.57% in September even though the rate of price rise was up slightly in both manufactured and fuel items comprising almost 80 per cent of the index. This meant it was mainly food products which pulled down inflation.
"The price rise as indicated by this index had moderated at 3.4% compared with September. However, we do expect this rate to be between 3.5-4% for the rest of the year. The inflation numbers this year so far have been in the lower range compared with the build-up over March which is higher at 4.3% with primary articles witnessing increase of 6.4% and fuel products 8.6%. Some moderation could be expected on food side due to the good harvest. Fuel inflation however would continue to be elevated," says Anushka Sawarkar, Associate Economist, CARE Ratings.
FIIs
Foreign institutional investors were sellers in equities worth over Rs 4,000 crore in the past three trading sessions. On Friday, they sold shares worth Rs 1,493 crore, as per provisional stock exchange data.
Global
The 10-year US benchmark bond yields have been on the uptick after President-Elect Donald Trump announced increase in fiscal spending on infrastructure while inflation pressures also raised prospects of a rate hike by the US Federal Reserve sooner than expected.
President-Elect Donald Trump post the historic win in a fiercely contested and debated US presidential elections said that he would increase fiscal spending on infrastructure.
Asian markets ended mixed with Nikkei and Shanghai Composite ending flat with negative bias while Hang Seng and Straits Times ended up 0.5% each.
European stocks were trading mixed with Germany's DAX marginally lower while CAC-40 and FTSE-100 were trading with marginal gains.
Demonetisation
Consumption-led sectors such as fast moving consumer goods and consumer discretionary were the most hit because cash comprises a significant percentage of the transacted value while non-banking finance companies and realty sectors were also among signifcant losers.
Sector Watch
In the consumption-led segment, auto and financials were among the top losers. Auto stocks came under pressure amid fears of demand slowdown following the government's move on demonetisation while bank shares weakened as surge in deposits and weak demand for credit is likely to hurt margins going forward.
The decline in the markets was led by Tata Motors which slumped over 7% after it reported lower-than-expected net profit. The auto major reported consolidated profit after tax of Rs 848 crore for the September quarter, riding on robust sales of its British arm Jaguar Land Rover across various overseas markets.
Other losers include, Maruti Suzuki, Hero MotoCorp and Bajaj Auto which ended down 3%-4% each.
Private lenders were the top losers in the financials space with Axis Bank, ICICI Bank and HDFC Bank down 1%-3% each.
In the consumer durables segment, Whirlpool, Blue Star and Symphony slumped 3%-7% each. Among others, Dabur, Asian Paints, Godrej Consumer dropped over 3% each. FMCG major ITC slipped in late trades to end nearly 3% lower.
Jewellery shares were among the most hit post the demonetisation of Rs 500 and Rs 1000 currency notes with consumers generally paying in cash for their purchases. PC Jeweller slumped over 15% while Titan, Thangamayil Jewellery, Gitanjali Gems ended down over 3% each.
Non-banking finance companies also witnessed sharp erosion in their stock prices because of the demonetisation.
“The recent move by Government of India to demonetize the Rs 500 and Rs 1,000 currency notes is expected to significantly deter the malpractices supported by cash economy and fake currencies,” Dewan Housing Finance said in a statement.
Manappuram Finance, Can Fin Homes, Shriram City Union Finance, Bharat Financial Inclusion, Muthoot Finance, Capital First, JM Financial, GIC Housing Finance, Gruh Finance, DHFL, Bajaj Finance and Bajaj Finserv ended down 5%-18% each.
Earnings Impact
Bank of Baroda ended over 5% higher after the state-owned bank reported over four-fold jump in net profit at Rs 552 crore for the quarter ended September 30, 2016 (Q2FY17). The bank had posted a profit of Rs 124 crore in the same quarter last fiscal.
Hindalco Industries gained over 5% after the company reported over three-fold jump in standalone net profit at Rs 440 crore for the quarter ended September 30, 2016 (Q2FY17), on back of strong operational performance. The company had profit of Rs 123 crore in the same quarter last fiscal.
Suzlon Energy gained over 5% after the company announced a turnaround in its second quarter earnings.Consolidated net profit for the quarter ended September 2016 was at Rs 238 crore, against a loss of Rs 202 crore in the same quarter last year. Consolidated revenue for the quarter was higher by 57% at Rs 2,746 crore compared to last year's quarter.
The S&P BSE Sensex ended down 514 points at 26,305 and the Nifty50 settled 188 points lower at 8,108. In the broader market, BSE Midcap and Smallcap ended down 4%-5% each. Market breadth ended weak with 2351 losers and 349 gainers on the BSE.
“Markets fell sharply, on expectations that there will be an impact on the consumption sector because of the Government’s demonetization drive. Banking stocks did well on expectations of a reduction in cost due to the significant increase in the deposits of the banks. The recent initiatives from the Government will likely provide some headwinds to the economic growth in the short term but will accelerate growth in the long term. The longer term scenario for equity markets has turned bullish and it will likely become one of the better performing asset classes over the medium term.” said Dipen Shah, Senior Vice President & Head PCG Research, Kotak Securities.
Markets were closed for trading on Monday on account of Guru Nanak Jayanti
Economy
India's wholesale price index-based inflation eased to a four-month low of 3.39% in October from 3.57% in September even though the rate of price rise was up slightly in both manufactured and fuel items comprising almost 80 per cent of the index. This meant it was mainly food products which pulled down inflation.
"The price rise as indicated by this index had moderated at 3.4% compared with September. However, we do expect this rate to be between 3.5-4% for the rest of the year. The inflation numbers this year so far have been in the lower range compared with the build-up over March which is higher at 4.3% with primary articles witnessing increase of 6.4% and fuel products 8.6%. Some moderation could be expected on food side due to the good harvest. Fuel inflation however would continue to be elevated," says Anushka Sawarkar, Associate Economist, CARE Ratings.
FIIs
Foreign institutional investors were sellers in equities worth over Rs 4,000 crore in the past three trading sessions. On Friday, they sold shares worth Rs 1,493 crore, as per provisional stock exchange data.
Global
The 10-year US benchmark bond yields have been on the uptick after President-Elect Donald Trump announced increase in fiscal spending on infrastructure while inflation pressures also raised prospects of a rate hike by the US Federal Reserve sooner than expected.
President-Elect Donald Trump post the historic win in a fiercely contested and debated US presidential elections said that he would increase fiscal spending on infrastructure.
Asian markets ended mixed with Nikkei and Shanghai Composite ending flat with negative bias while Hang Seng and Straits Times ended up 0.5% each.
European stocks were trading mixed with Germany's DAX marginally lower while CAC-40 and FTSE-100 were trading with marginal gains.
Demonetisation
Consumption-led sectors such as fast moving consumer goods and consumer discretionary were the most hit because cash comprises a significant percentage of the transacted value while non-banking finance companies and realty sectors were also among signifcant losers.
Sector Watch
In the consumption-led segment, auto and financials were among the top losers. Auto stocks came under pressure amid fears of demand slowdown following the government's move on demonetisation while bank shares weakened as surge in deposits and weak demand for credit is likely to hurt margins going forward.
The decline in the markets was led by Tata Motors which slumped over 7% after it reported lower-than-expected net profit. The auto major reported consolidated profit after tax of Rs 848 crore for the September quarter, riding on robust sales of its British arm Jaguar Land Rover across various overseas markets.
Other losers include, Maruti Suzuki, Hero MotoCorp and Bajaj Auto which ended down 3%-4% each.
Private lenders were the top losers in the financials space with Axis Bank, ICICI Bank and HDFC Bank down 1%-3% each.
In the consumer durables segment, Whirlpool, Blue Star and Symphony slumped 3%-7% each. Among others, Dabur, Asian Paints, Godrej Consumer dropped over 3% each. FMCG major ITC slipped in late trades to end nearly 3% lower.
Jewellery shares were among the most hit post the demonetisation of Rs 500 and Rs 1000 currency notes with consumers generally paying in cash for their purchases. PC Jeweller slumped over 15% while Titan, Thangamayil Jewellery, Gitanjali Gems ended down over 3% each.
Non-banking finance companies also witnessed sharp erosion in their stock prices because of the demonetisation.
“The recent move by Government of India to demonetize the Rs 500 and Rs 1,000 currency notes is expected to significantly deter the malpractices supported by cash economy and fake currencies,” Dewan Housing Finance said in a statement.
Manappuram Finance, Can Fin Homes, Shriram City Union Finance, Bharat Financial Inclusion, Muthoot Finance, Capital First, JM Financial, GIC Housing Finance, Gruh Finance, DHFL, Bajaj Finance and Bajaj Finserv ended down 5%-18% each.
Earnings Impact
Bank of Baroda ended over 5% higher after the state-owned bank reported over four-fold jump in net profit at Rs 552 crore for the quarter ended September 30, 2016 (Q2FY17). The bank had posted a profit of Rs 124 crore in the same quarter last fiscal.
Hindalco Industries gained over 5% after the company reported over three-fold jump in standalone net profit at Rs 440 crore for the quarter ended September 30, 2016 (Q2FY17), on back of strong operational performance. The company had profit of Rs 123 crore in the same quarter last fiscal.
Suzlon Energy gained over 5% after the company announced a turnaround in its second quarter earnings.Consolidated net profit for the quarter ended September 2016 was at Rs 238 crore, against a loss of Rs 202 crore in the same quarter last year. Consolidated revenue for the quarter was higher by 57% at Rs 2,746 crore compared to last year's quarter.