‘Great fall of China’ stocks sends Indian equities south (Weekly Review)

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Mumabi, Jan 9 (IANS) A ‘Made-in-China’ economic crisis, coupled with geo-political tensions and a slump in commodity prices, plunged Indian equity markets to one of their steepest weekly falls.

Both the bellwether indices of the Indian equity markets lost over 4 percent each during the just-concluded weekly trade.

The barometer 30-scrip sensitive index (S&P Sensex) of the Bombay Stock Exchange (BSE), receded by a staggering 1,226.57 points or 4.68 percent to 24,934.33 points from its previous weekly close at 26,160.90 points.

Similarly, the wider 50-scrip Nifty of the National Stock Exchange (NSE) declined during the week under review. It ended lower by 361.85 points or 4.54 percent to 7,601.35 points.

Both the bellwether indices fell in four out of five trading sessions during the week under review. The panic selling dragged down the barometer index to a new 52-week low during the intra-day trade on January 7.

The broader markets, too, declined in line with the headline indices as profit booking was seen across sectors and stocks.

Hardest hit were the auto and banking indices which witnessed the maximum draw down, with slide of 7 percent and 5.5 percent, respectively. All other indices fell around 4 percent each.

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The rout even drowned the scrips of 123 companies to their 52-week lows since the start of 2016.

Notwithstanding this, market observers painted an even grimmer picture and predicted that 200 more companies could touch their 52-week lows in the coming week.

The Indian bellwethers were pulled down by the Chinese economic crisis, which was triggered by lower-than-expected macro data points and an accelerated devaluation of the yuan.

The hydrogen bomb test by North Korea and geo-political concerns in the Middle East also sent he Indian equities south.

Vaibhav Agarwal, vice president and research head at Angel Broking, said: “Markets corrected sharply this week with losses of more than two percent in two trading sessions led by the slowdown concerns in China and the devaluation of the yuan.”

“The sharp carnage on the global equities front on account of geo-political risks posed by North Korea’s latest nuclear test and tensions in the Middle East led Indian bourses to post sharp losses of more than 4 percent in the week gone by,” Gaurav Jain, director with Hem Securities told IANS.

In addition, volatility spiked as more investors returned after the year-end holiday season.

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“Volumes picked up in the correction, confirming the bearishness dominant at the moment, portending to further corrections in the coming trading sessions,” Nitasha Shankar, vice president for research at YES Securities, elaborated.

Figures from the stock exchanges showed that the volumes in cash markets across key bellwether indices were in the range of Rs.20,000-22,000 crore from Rs.15,000-16,000 crore a week ago.

However, markets seemed to have ignored the positives, especially the release of the minutes of the latest FOMC (Federal Open Market Committee) meeting which indicated that the US Fed might delay another round of rate hikes.

Even the fact that international oil prices tumbled to under $30 per barrel or the central government’s effort to reach out to the opposition to break the parliamentary impasse on the Goods and Services Tax (GST) Bill, did not elicit a positive response from the markets.

“The FOMC minutes showed concerns about slowing inflation, suggesting that it may be less inclined to soon raise rates. However, this failed to enthuse markets as they were spooked by sharp falls in Chinese equities,” Anand James, co-head, technical research desk with Geojit BNP Paribas Financial Services, told IANS.

“The finance minister’s comments that reform measures would continue soothed sentiments mid-week, but were swept aside by ripple effect of China events,” James added.

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Besides, caution prevailed over the upcoming domestic macro-data on industrial output, retail inflation and the third-quarter earning results that will start rolling in from January 12.

Moreover, a weak rupee and increased selling activity by foreign portfolio investors (FPIs) subdued sentiment.

According to data with stock exchanges, FPIs had divested Rs.3,550.74 crore, while domestic institutional investors (DIIs) bought stocks worth Rs.1,480.82 crore.

On a weekly basis, the rupee weakened by 50 paise to 66.64 (January 8) to the dollar from its previous close of 66.14 to a greenback (January 1).

Nevertheless, markets got a slight respite on Friday after China decided to put quick-fixes to its falling markets such as the suspension of the circuit-breaker system which halted trading twice this week.

The Chinese administration raised the guidance rate for the yuan and asked state-controlled funds to buy equities.

“The steps taken by the Chinese government, coupled with value buying at lower levels, stemmed the selling pressure a bit on the last trading session of the week,” Agarwal added.

(Rohit Vaid can be contacted at [email protected])

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