Global worries and lower than expected GDP & core sector data hit Dalal Street on Tuesday. Equity benchmark indices crashed more than 2 percent on fears of slowdown in China, the world’s second largest economy. All sectors ended in the red with banks being worst hit.
The 30-share BSE Sensex crashed 586.65 points to 25,696.44 after hitting day’s low of 25579.88 (down 703 points). The 50-share NSE Nifty closed below the 7800-mark, losing 185.45 points to 7785.85 after seeing an intraday low of 7746.50.
The broader markets too declined 2 percent each. The market breadth was also weak as about 2081 shares declined against 604 shares advanced on the Bombay Stock Exchange.
Foreign institutional investors offloaded Rs 675.32 crore worth of equity shares today (as per NSE’s provisional data), in addition to more than Rs 17,500 crore worth of shares sold in August (the highest ever monthly sale by FIIs at least in last 10 years). However, domestic institutional investors bought Rs 681.93 crore worth of shares.
Market experts feel this is the right time to accumulate quality stocks as they believe India’s fundamentals are strong and China will have less impact on global economy, though consistent selling pressure may drag Nifty to 7500 level.
Sanjay Dutt, Quantum Securities does not think there is any real cause for worry, especially for India because the fundamentals in India, as well as the world are getting better.
According to him, this is a broader market correction and not a bear market.
JPMorgan’s chief Asian and emerging market equity strategist Adrian Mowat said market watchers are overestimating the impact of China’s economic slowdown on emerging markets.
China slowdown fears dragged global markets as China’s official manufacturing PMI fell to 49.7 in August from 50 in July. The final Caixin/Markit manufacturing PMI also came in at a dismal – 47.3 in August, down from 47.8 in July. All Asian markets ended lower with the Nikkei tumbling 3.8 percent followed by Shanghai (down 1.3 percent) and Hang Seng (down 2.2 percent).
Deep cuts were also in European markets with the France’s CAC, Germany’s DAX and Britain’s FTSE down 2-2.5 percent (at 16 hours IST). Even sharp fall in US stocks futures pointed to a weak open on Wall Street. Dow Jones futures fell 2.5 percent.
Oil prices also declined on profit booking and China worries. Brent crude fell 2.4 percent to USD 52.8 percent and NYMEX crude dropped 2 percent to USD 48.2 a barrel. However, gold bucked the trend, up 0.9 percent to USD 1142.90 an ounce on safe haven demand.
Back home, first quarter (April-June) gross domestic product in fiscal year 2015-16 slipped from 7.5 percent in the previous quarter (January-March) to 7 percent, which was lower than a poll of economists at 7.5 percent. The eight core industries’ growth for the month of July was down to 1.1 percent (from 3 percent in June) dragged by decline in steel production and coal output.
Banks hit badly with the Bank Nifty falling 3.6 percent. HDFC Bank dropped 2.6 percent post 35-bp base rate cut. Nomura says HDFC Bank’s base rate cut at 9.35 percent is the lowest industry. If other commercial banks slash base rates so sharply, then their net interest margin may get hit in near-to-medium term, it added. Axis Bank was the biggest loser on Sensex, down 5.24 percent. SBI and ICICI Bank were down 2-3 percent.
Punjab National Bank lost 7 percent after Fitch Ratings downgraded viability rating by one notch to ‘bb’ to reflect the growing risk to the bank’s capital position from its mounting stock of stressed assets, which has risen at a faster rate than its capital replenishment. However, the rating agency affirmed the long term ratings on nine banks including SBI, Bank of Baroda, PNB, ICICI Bank and Axis Bank.
Auto stocks were in focus today post August sales data. Maruti Suzuki plunged 2.6 percent and Mahindra & Mahindra slipped 3.8 percent after lower than expected sales data. Maruti registered a 6.4 percent growth (against Nomura’s forecast of 9.2 percent growth), impacted fall in compact cars sales. M&M’s sales dropped 5.7 percent due to slowdown in tractors sales. Tata Motors plummeted 3 percent ahead of sales data.
Metals stocks, too, saw steep correction with the Vedanta, Hindalco, Tata Steel falling 4-5 percent.
Among others, HDFC, ITC, L&T, Lupin, Reliance Industries, ONGC and Bharti Airtel were down 2-3 percent while Sun Pharma bucked the trend, up 0.3 percent post completion of acquisition of Opiates business in Australia.
Downward revisions in motor fuel, cooking gas and aviation turbine fuel prices triggered selling in oil marketing companies stocks. IOC, HPCL and BPCL were down 2-3 percent as petrol prices cut by Rs 2 per litre and diesel by 50 paise a litre. Non-subsidised LPG cylinders are cheaper by Rs 26.