Sensex at 1-year low, as markets fall again

Little effect of China rate cuts on investor sentiment

Indian stocks fell again on Wednesday to their lowest in a year despite the Chinese government’s new measures to assuage worries over the slowdown in the country.

The benchmark Sensex ended 318 points, or 1.2 per cent, lower at 25,714.66 — its lowest close since August 12, 2014.

The 50-share Nifty lost 88.8 points, or 1.1 per cent, to 7,791.85. Two-thirds of its components ended the day losing value.

Trading was marked by high volatility, with the August series derivatives contracts set to expire on Thursday.

The rupee, too, weakened slightly, ending at 66.14 compared to the previous day’s close of 66.1.

 

Global investor sentiment remained weak as the move of the People’s Bank of China to cut borrowing costs and reserve ratios failed to stem the decline in the stock market. China’s benchmark Shanghai Composite Index ended 1.3 per cent lower to 2,927.3.

Investors worldwide are yet to come to terms with the prospects of slowing growth in the world’s second-biggest economy and the biggest contributor to the global growth.

The India VIX index, a gauge of market fear, cooled off slightly. But it traded at an elevated level of 25.5, indicating uncertainty and high volatility.

“Expecting more from the index this year is optimistic. A time correction is already underway and we could see a sharper participation on the price front,” said Harendra Kumar, managing director — institutional equities, Elara Capital, in a note. “A more accommodative rate cycle and latent recovery in earnings would buoy return expectations next year, but that is the next year’s story.”

The Indian markets are down nearly seven per cent in local currency terms and 10 per cent in dollar terms so far in 2015. Foreign investors continued to dump Indian stocks taking this week’s selling tally near the Rs 10,000 crore-mark. According to provisional data by exchanges, foreign institutional investors (FIIs) sold shares worth Rs 2,346 crore, after pulling out more than Rs 7,000 crore in the previous two sessions.

“The broader concerns behind the emerging market outflows (weak EM growth, commodity price downside and looming Fed rate hikes) are likely to remain in the play until either China data decisively strengthens or Fed hikes are pushed off the horizon,” said Nomura in a note on the ASEAN markets.

Domestic institutions continued to remain strong buyers, providing the much-ended counterbalance to FII selloff. On Thursday, domestic institutions bought stocks worth nearly Rs 1,900 crore.

Mutual fund houses are witnessing strong investor inflows following the sharp six per cent correction on Monday.

“The market fall has been due to global macroeconomic concerns but when the dust settles India is most likely to stand out as an investment opportunity,” said Aashish Somaiyaa, chief executive, Motilal Oswal AMC.