Global turmoil leads to sharp swings in commodities, equities.
The equity and commodity markets saw sharp swings on Monday as a crisis of confidence continued to haunt players amidst the global turmoil.
In the international commodities market, gold tumbled more than $100 intra-day before recovering in afternoon trade to recoup most of the lost ground. Spot gold closed the day lower by 2.44 per cent at $1,616.38.
Similarly, silver fell more than 16 per cent to $26.09 in initial trade before recovering to $30.14 — down 3.24 per cent. In the last three days, silver has plunged 30 per cent.
David Thurtell, an analyst with Citigroup, said, “The fall in commodity prices is a result of investors’ fear of the worst. We are in a free fall and there’s no one wanting to step in and make a stand.”
High volatility was seen in the stock markets as well. The Bombay Stock Exchange Sensex dipped as much as 280 points before recovering to close 0.69 per cent or 111 points. At the National Stock Exchange (NSE), the 50-share NSE Nifty index ended 0.7 per cent lower at 4,835.40. The NSE Volatility Index or VIX hit the highest this calendar year at 35.43.
“We expect the market to remain volatile till there is an end to the Europe problem. That decision is getting postponed and the uncertainty is going up day-by-day,” said Neeraj Dewan, director at Quantum Securities. “We are just tracking the global markets. Since Europe and US futures turned positive, there was short-covering,” he added.
Given the fall in commodity markets, metal and mining shares were among the worst hit after copper futures in Shanghai and London crashed as fears of a Greek default caused panic about a possibly sharp slowdown in global demand for industrial metals.
Shares of non-ferrous metal producers Hindalco and Sterlite Industries dropped close to near two-year lows and ended down 3.9 per cent and 4.3 per cent, respectively. State-run Coal India, the world’s largest coal miner, lost 5.2 per cent. The rupee also continued to be volatile. According to Clearing Corporation of India data, the rupee opened lower at 49.66 a dollar from the previous close of 49.43 at the Interbank Foreign Exchange market. It touched a low of 49.78 in intra-day trading in line with sluggish local stocks.
| SEE-SAW TRADE | |||||
|
Open |
High |
Low |
Last price |
% chg* | |
| Gold Spot ($/oz) | 1,656 | 1,664 | 1,532 | 1,616 | -2.44 |
| Silver Spot ($/oz) | 31.06 | 32.36 | 26.09 | 30.14 | -3.24 |
| Bloomberg European Dated Brent | 105.94 | 107.63 | 104.01 | 106.54 | -0.09 |
| BSE Sensex | 16,209.19 | 16,209.19 | 15,801.01 | 16,051.1 | -0.69 |
| NSE Nifty | 4,878.60 | 4,879.80 | 4,758.85 | 4,835.4 | -0.66 |
| Rupee Spot | 49.66 | 49.78 | 49.34 | 49.46 | 0.05 |
| * Over previous close; Source: Bloomberg Compiled by BS Research Bureau | |||||
To counter the negative sentiment, CME Group, the largest bullion trading platform globally, raised the margin requirements on gold and silver trading, after the morning crash in prices.
The minimum cash deposit for gold futures will rise 21 per cent to $11,475 per 100-ounce contract at the close of trading on Monday, while the minimum cash deposit for silver was raised to 15.6 per cent to $24,975. Following that, the Multi Commodity Exchange has also increased its value at risk-based margin to 8.5 per cent from four per cent earlier.
According to Gnanasekar Thiagarajan, director of Commtrendz Research, “Industrial commodities hit the block before recovering a bit on marginal interest by investors to book afresh on lows. So, this trend of volatility with a downward bias is likely to continue.”
