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Sharp sell-off drags markets down; Sensex closes with 1% losses
Oct-17-2018

A huge reversal in gaining trend seen on the markets on Wednesday, as both the larger peers, Sensex and Nifty halted three-day winning streak to settle the session on pessimistic note. The markets made a firm opening, as the World Economic Forum (WEF) in its latest Global Competitiveness Report for 2018 ranked India the 58th most competitive economy. As per the report, India's rank rose by five places from 2017, the largest gain among G20 economies. Traders’ sentiments got boost with the Reserve Bank of India’s (RBI) forecast that the share of investments in gross domestic product (GDP) will rise to 33% by FY23 from 31.4% recorded in the last fiscal, suggesting that the upturn in the current investment cycle that started in FY17 could last for five more years. Some support also came after a latest commerce ministry study showed that the extra US tariffs on its imports from China in the ongoing trade war have opened a window of opportunity for India to push for higher exports in 171 items - ranging from textiles to marine products - with additional outbound shipment potential of up to $8.7 billion a year.

However, in the second half of the session, the key indices gave up all of their gains to enter into red terrain, amid sharp sell-off by traders. The trade was also got hit by reports that the share of foreign portfolio investments (FPI) in domestic capital markets through participatory notes (P-notes) hit a nearly nine-and-a-half year low of Rs 79,548 crore in September 2018. Adding some anxiety among the investors, Commerce and industry minister Suresh Prabhu said that India is the ‘worst sufferer’ of declining trade and slow global economic growth as the country has a huge stake and its share in world trade is rising. Some cautiousness also came after Niti Aayog CEO Amitabh Kant said that the country needs to work a lot on exports and gender parity so as to grow at 9-10% annually in the next three decades, ensuring that India has growth with equity. Separately, Finance Minister Arun Jaitley has said that India needs strong and decisive leadership at the Centre to promote growth, get rid of poverty and transform the country into a developed nation.

On the global front, European markets were trading in green, despite Germany's economic confidence weakened in October. As per survey data from the Centre for European Economic Research, or ZEW, the economic sentiment index fell sharply by 14.1 points to (-) 24.7 in October. Besides, Germany's import prices rose at a steady pace in August. The figures from Destatis showed that import prices advanced 4.8% year-on-year in August, the same pace of increase as seen in July. Further, Asian markets ended higher, even though China's inflation rose to a 7-month high in September on higher energy prices. The data from the National Bureau of Statistics revealed that consumer prices advanced 2.5% year-on-year in September, in line with expectations but faster than the 2.3% rise in August. This was the highest increase since last February. Nonetheless, inflation remains well below the government's full year-target of around 3%.

Finally, the BSE Sensex plunged 382.90 points or 1.09% to 34,779.58, while the CNX Nifty was down by 131.70 points or 1.24% to 10,453.05.

The BSE Sensex touched a high and a low of 35,605.43 and 34,727.16, respectively and there were 7 stocks advancing against 24 stocks declining on the index.

The broader indices ended in red; the BSE Mid cap index slipped 2.23%, while Small cap index was down by 2.21%.

The only gaining sectoral index on the BSE was FMCG up by 0.11%, while Realty down by 3.17%, Auto down by 3.00%, Oil & Gas down by 2.42%, Industrials down by 2.29% and Consumer Disc down by 2.23% were the top losing indices on BSE.

The top gainers on the Sensex were ITC up by 1.34%, Coal India up by 1.28%, Wipro up by 1.20%, Infosys up by 1.16% and Hindustan Unilever up by 1.08%. On the flip side, Yes Bank down by 6.85%, Adani Ports & SEZ down by 5.41%, Maruti Suzuki down by 3.79%, Tata Motors down by 3.40% and Tata Steel down by 3.39% were the top losers.

Meanwhile, Commerce and Industry Minister Suresh Prabhu has warned that the decline in the world trade along with the slowing global economy will have negative impact on all nations including India. He pointed out that India will be worst hit if global trade falls as the country has huge stake and its share in the world trade is also increasing. Besides, he stressed that slowing global economy is an anxiety for India as it has the potential to become $5 trillion economy before 2025 and $10 trillion before 2035.

The minister’s statement assumes significance as India’s exports declined, for the first time this financial year, by a moderate 2.15 percent to $27.95 billion in September, due to a fall in shipments of key sectors such as engineering and gems and jewellery. He said that his ministry has set up a high-level think tank to suggest the government to promote exports and navigate through these global situations. He added that the ministry has identified products and countries to promote exports.

Prabhu further informed that they have also prepared a well thought action plan for achieving $5 trillion economy and added that $1 trillion would come from manufacturing, $3 trillion from services sector and $1 trillion from agriculture. Talking about ease of doing business, he hinted that India has improved its ranking in the World bank’s doing business index. He said “You will have a good news when World Bank will release its report”. He also said that the report is scheduled to be released this month.

The CNX Nifty traded in a range of 10,710.15 and 10,436.45. There were 8 stocks in green as against 42 stocks in red on the index.

The top gainers on Nifty were HCL Tech up by 1.85%, Wipro up by 1.68%, Coal India up by 1.57%, Infosys up by 1.47% and ITC up by 1.20%. On the flip side, Indiabulls Housing Finance down by 14.27%, Bajaj Finance down by 6.97%, Yes Bank down by 6.39%, Adani Ports & SEZ down by 5.80% and BPCL down by 5.51% were the top losers.

European markets were trading mostly in green; UK’s FTSE 100 gained 14.53 points or 0.21% to 7,073.93 and France’s CAC added 3.33 points or 0.06% to 5,176.38, while Germany’s DAX was down by 46.71 points or 0.4% to 11,729.84.

Asian markets ended mostly in green on Wednesday after US shares posted their biggest gain in six months overnight following strong earnings from major financial and health care companies as well as encouraging reports on the US economy. Japanese shares ended higher, continuing its recovery from last week’s sharp downturn with a turnaround by Wall Street peers lifting technology stocks. Further, Chinese shares closed higher ahead of third-quarter GDP and September activity data, due on Friday. Meanwhile, Hong Kong markets were closed for the Chung Yeung Festival.

Asian Indices

Last Trade           

Change in Points

Change in %

Shanghai Composite

2,561.61

15.28

0.60

Hang Seng

-

-

-

Jakarta Composite

5,868.62

67.80

1.16

KLSE Composite

1,740.59

3.75

0.22

Nikkei 225

22,841.12

291.88

1.28

Straits Times

3,071.10

36.79

1.20

KOSPI Composite

2,167.51

22.39

1.03

Taiwan Weighted

9,979.14

-1.96

-0.02
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