 "Market tumbles on US rate hike, weak Chinese data")
Resuming after a two-day holiday, Indian markets fell sharply after minutes of the US Federal Reserve (US Fed) meeting suggested an imminent rate hike in December and weak Chinese export data raised global growth concerns. The India VIX index, a gauge for market volatility, rose 10 per cent as participants braced for more sharp moves amid the September quarter results season. The benchmark Sensex lost 439 points or 1.56 per cent to close at 27,643.11, its lowest since July 11. The Nifty 50 index closed at 8,573, down 135.45 points or 1.56 per cent, steepest in two weeks. The broader BSE Mid-Cap and Small-Cap indices too lost 1.5 per cent each and there were over two stocks declining for every one advancing on the BSE.
Shane Oliver, head of investment strategy, AMP Capital, said the US Fed was on track for a December rate increase and the volatility in the markets would continue for the next few months because of global triggers.
“We remain cautious on shares in the short term as event risk remains high for the months ahead, including the ongoing debate around the US Fed and ECB (European Central Bank), issues around Eurozone banks, the US election on November 8,” Oliver said. However, he added that the markets would rebound over the next year, helped by positive valuations and continuing easy global monetary conditions.
Shane Oliver, head of investment strategy, AMP Capital, said the US Fed was on track for a December rate increase and the volatility in the markets would continue for the next few months because of global triggers.
“We remain cautious on shares in the short term as event risk remains high for the months ahead, including the ongoing debate around the US Fed and ECB (European Central Bank), issues around Eurozone banks, the US election on November 8,” Oliver said. However, he added that the markets would rebound over the next year, helped by positive valuations and continuing easy global monetary conditions.
Foreign portfolio investors (FPIs) sold equities worth Rs 911 crore on Thursday and their domestic counterparts provided counter buying worth around Rs 600 crore, stock exchanges’ data showed.
Selling by foreign investors comes amid a government-appointed Special Investigation Team (SIT) on black money seeking details of investors coming through the participatory note (P-note) route.
Banking and financial services stocks were the top losers as their sectoral indices declined by about two per cent each. Among the Sensex constituents, Adani Ports was the biggest loser as its shares fell around 4.7 per cent. Shares of ICICI Bank, HDFC, Reliance Industries, and Bharti Airtel lost around three per cent each. Shares of TCS, India’s largest IT firm, declined 2.2 per cent ahead of Q2FY17 results announcement. Another IT giant, Infosys, is scheduled to announce its results on Friday.
Investor sentiment was hit after minutes of the US Fed meeting showed the decision to keep rates unchanged in September was a “close call” as officials supporting an increase worried that waiting too long could send the economy into a recession. Risk appetite took a further beating after China’s exports for September fell about 10 per cent year-on-year, while imports shrank 1.9 per cent, indicating weak demand and increased concerns about yuan, which has depreciated sharply against dollar in the past few days.
The India VIX index ended at 15.4, up eight per cent. Market participants said the upcoming earnings season would be a key test for equities from the domestic front as markets have been anticipating a revival in corporate earnings. “While the pace of (earnings) recovery is uneven, there are reasons to be positive in the medium term – reform impact, likely consumption uptick, peaking in the NPL cycle and increasing RoEs (return on equity),” said Surendra Goyal, head of India equity research, at Citi India, in a note to investors, where the brokerage maintained year-end target of 30,000 for the Sensex. All the major Asian indices, except China’s Shanghai Composite, declined in the range of 0.7 per cent to 1.7 per cent.
Chinese markets, however, closed flat as export data emerged after market hours. European benchmarks also opened 0.5 per cent to two per cent lower on Thursday.
