Nightmarish session on D-street; Nifty slips below 8000

Indian equity benchmarks started the new week on a disturbing note as they went on to extend the declining streak for the third successive session as market participants resorted to hefty across the board profit taking. The frontline indices shaved off about one and half percent and breached 25,800 (Sensex) and 7,950 (Nifty) levels on the downside. The big selloff in the local market can be attributed to a couple of factors, such as the political situation which seems to be deteriorating and puts a question mark on GST if this Parliament session gets into a logjam. The second part is the impact of demonetisation on the economy. A private report has stated that India's economic growth is expected to fall by up to 1 percentage points over the next 12 months in the wake of demonetisation, while longer-term gains will depend on follow-up reforms. The recent selling by the foreign portfolio investors (FPIs) of Indian stocks also weighed on sentiment. Foreign investors have pulled out close to $ 3 billion from the Indian capital market this month so far on lingering concerns over the government’s demonetisation decision and fears of a rate hike by the US Federal Reserve. According to data, net withdrawal by FPIs from equities stood at Rs. 9,841 crore during November 1-18, while the same from the debt market was Rs 9,720 crore during the period under review, translating into a total outflow of Rs 19,561 crore ($ 2.89 billion). Adding anxiety among market participants, rupee was hovering around its Brexit lows to 68.23/$. It hit its lowest level since June 1 against dollar as sentiment turned bearish on combination of growing US rate hike expectations and stunning dollar run.

On the global front, Asian equity markets ended mostly in green on Monday, as the yuan's weakness as well as the dollar's continued strength against the yen supported shares in China and Japan. However, Trump's unexpected election victory has led to a major reprising of assets, with investors rushing to buy US stocks and the dollar, while dumping bonds and emerging market assets. Meanwhile, European stocks moved mostly lower in cautious trade as losses in the banking and healthcare sectors offset gains among commodity-related stocks.

Back home, the benchmarks got off to a somber opening, extending the downtrend for the third straight session as pessimistic sentiments prevailed in most of the Asian markets. Thereafter, the key indices failed to show any kind of fervor due to lack of encouraging leads. The selling pressure accentuated in the mid afternoon trades as investors took to across the board risk aversion. Eventually the NSE’s 50-share broadly followed index Nifty, took a cut of about one and half percent to settle below the crucial 7,950 support level, while Bombay Stock Exchange’s Sensitive Index, Sensex slipped by over three hundred points and closed below the psychological 25,800 mark. Moreover, the broader markets too failed to show any kind of fervor and closed with losses of over two percent. On the BSE sectoral space, the high beta - realty and Metal pockets remained among top laggards in the space as they got lacerated by over three percent while sectors like PSU, Auto and Banking too got pounded heavily in the session. The market breadth remained pessimistic as there were 408 shares on the gaining side against 2223 shares on the losing side while 147 shares remained unchanged.

Finally, the BSE Sensex declined 385.10 points or 1.47% to 25765.14, while the CNX Nifty dropped 145 points or 1.80% to 7,929.10.

The BSE Sensex touched a high and a low of 26270.28 and 25717.93, respectively and there were just 5 stocks on gainers side against 25 stocks on the losers side on the index.

The broader indices made a negative closing; the BSE Mid cap index ended lower by 2.80%, while Small cap index was down by 3.16%.

The top losing sectoral indices on the BSE were Realty down by 4.71%, Metal down by 3.34%, PSU down by 3.25%, Auto down by 3.25% and Bankex down by 2.89%, while there were no gainers on BSE sectoral front.

The top gainers on the Sensex were Wipro up by 1.04%, TCS up by 0.44%, Sun Pharma up by 0.36%, Reliance Industries up by 0.34% and ONGC up by 0.15%. On the flip side, SBI down by 6.51%, Power Grid down by 3.57%, Tata Steel down by 3.52%, Maruti Suzuki down by 3.46% and Mahindra & Mahindra down by 3.16% were the top losers.

Meanwhile, ratings agency, Care Ratings in its latest report has estimated that Goss domestic product (GDP) growth is likely to be affected by 0.3- 0.5 percent due to demonetization in the current fiscal. Recently, the government had decided to withdraw Rs 500 and Rs 1,000 currency notes from the circulation and introduced new Rs 500 and Rs 2,000 notes. Prior to governments this move, rating agency had estimated a GDP growth of 7.8 percent for 2016-17.

The report noted that this move is expected to have a significant effect on the economy, particularly on the GDP growth prospects as various sectors would tend to get affected differentially on this score. According to CARE Ratings services sector would be impacted most from the move, mainly on account of losses in trade, hotel and transport, among others, due to the volume of cash transactions involved in these economic activities. It added that these losses can’t be recovered in the next quarter due to their inherent nature. The agency also said that SMEs will have a major problem in adjusting production schedules as both payments and receipts flow are in cash given their structures.

For the manufacturing sector it said that demand side issues would exist till such time that conditions stabilise and could get reversed in the fourth quarter. Hence, Industry is also expected to be impacted which will be more significant in the first 2-3 weeks post the decision. In a positive note, the agency added that banking sector will gain from the move due to the increase in deposits, which will be somewhat countered by a slowdown in other sectors like real estate. Further it said that agriculture is expected to be least impacted with major shock being absorbed in the first 2-3 weeks itself as there have been issues in sales at mandis due to the current cash crunch.

The CNX Nifty traded in a range of 8,102.45 and 7,916.40. There were 9 stocks in green against 42 stocks in red on the index.

The top gainers on Nifty were Bharti Infratel up by 1.96%, Wipro up by 1 %, ONGC up by 0.84%, Reliance Industries up by 0.54% and TCS up by 0.23%. On the flip side, Bank of Baroda down by 8.79%, SBI down by 6.27%, Eicher Motors down by 6.04%, Yes Bank down by 5.57% and Hindalco down by 5.38% were the top losers

The European markets were trading in red; UK’s FTSE 100 decreased 11.86 points or 0.18% to 6,763.91, Germany’s DAX decreased 52.36 points or 0.49% to 10,612.20 and France’s CAC decreased 16.56 points or 0.37% to 4,487.79.

Asian equity markets ended mostly in green on Monday, although the yuan's weakness as well as the dollar's continued strength against the yen supported shares in China and Japan. Chinese stocks rose to a fresh 10-month high led by blue-chips, but gains were limited as some investors remained sceptical that the uptrend could extend further. Meanwhile, Japan's Nikkei rose gaining for a fourth day after a further weakening in the yen boosted overall sentiment, while mining stocks staged a rally thanks to rising oil prices. Though, Seoul shares retreated on institutional selling on expectations of faster-than-expected Federal Reserve interest rate increases.