Amidst the Centre’s demonetisation move to curb black money, bear markets went berserk and crashed the BSE Sensex nearly 699 points on Friday. The bourse, however, witnessed the biggest one-day fall in 9 months and closed at a four-month low of 26,819, while NSE Nifty went below the 8,300-mark on various factors such as fear of outflows from emerging markets due to Donald Trump’s win, lower Asian stocks, increase in US bond yields and the weak earnings from country’s largest lender SBI which declared its second quarter results on Friday.
Besides, the rupee also scripted its second biggest single-day crash this year, breaching the 67-mark to end at over three-month low level of 67.25 against the US currency on fears of capital outflows amid resurgent dollar overseas. The home currency ended with a steep loss of 62 paise at 67.25 per dollar -- the weakest closing since July 26 when it had closed at 67.27.
Also, the investors’ sentiment was also impacted given the scrapping of Rs 500 and Rs 1000 notes by the Government on Tuesday, following which stocks from the real estate, gems & jewellery and consumption related segments continued to weigh on the overall market.
Dealers, however, feel that the sudden steep fall of domestic stocks could be attributed to Trump’s impending reforms, which may spark outflows from emerging markets. “A massive selloff in domestic equities which tumbled to multi-month lows on the back of roller-coaster global markets further added to the woes of local unit,” they said, adding that the dollar strengthened against the major world currencies on speculation that the policies of US President-elect would be inflationary leading to rise in interest rates which could hit capital flows to emerging markets like India.
“As far as domestic equities are concerned, the overnight recovery was short-lived as investors surrendered on Thursday’s gains digesting the Government’s move to demonetise the higher-value notes coupled with a slew of other negative factors like lower Asian stocks and increase in US bond yields due to Trump’s win,” said a dealer.
Investors appeared to be cautious on fears that US President-elect Trump’s planned huge spending policies would be inflationary that may lead to US interest rate hike and dent the appeal of emerging markets.
“As euphoria surrounding the US election settled, prospects of outflows from emerging markets to the US, anticipating reform measures from Trump, and rise in US treasury yields has resulted in sharp sell-off in Asian markets. The anticipated rise in spending in the US has also upped the ante for FOMC rate hike in December,” said Anand James, Chief Market Strategist, Geojit BNP Paribas Financial Services ltd.
“Besides, profit-booking ahead of long weekend also exaggerated the fall in Indian markets. Banks resisted for most part of the day, before giving in after SBI announced Q2 results,” he added.
Investors’ concern was further besieged by weak quarterly earnings in index heavy-weights and other sector specific developments. Weak earnings from country’s largest lender SBI and other bluechip companies added to the selling pressure. SBI on Friday reported a massive 99.6 per cent dip in consolidated net profit at Rs 20.7 crore for the September quarter. Reacting to the numbers, the lender’s shares slumped 3.09 per cent.
The Sensex opened gap-down at 27,344.85 and drifted lower to 26,777.18 before closing at 26,818.82, showing a fall of 698.86 points, or 2.54 per cent. This was the lowest closing level for the benchmark index as it had ended at 26,999.72 on June 30 this year.
The Nifty also dropped 229.45 points, or 2.69 per cent, to end at over four-month low of 8,296.30 after trading between 8,460.60 and 8,284.95. It had finished at 8,287.75 on June 30 this year.
Meanwhile, foreign portfolio investors (FPIs) sold shares worth Rs 733.49 crore till last Thursday, as per provisional data. Overseas, Asian markets ended lower as US bond yields soared. European shares were also lower with indices in UK and France were down in their early deals.
Back home, the broad market depicted weakness. There were more than four losers against every gainer on BSE. As many as 2,198 shares fell and 489 rose. A total of 143 shares remained unchanged. The BSE Mid-Cap index provisionally fell 3.62 per cent. The BSE Small-Cap index provisionally fell 3.42 per cent. The decline in both these indices was higher than the Sensex’s decline in percentage terms.