Markets crash like house of card in last leg of trade

The November series futures and options contract expiry day turned out to be a shocker for the Indian markets as benchmarks, after showing some recovery in early afternoon session, crashed like house of card in the last leg of trade, with investors offloading their positions an hour before the F&O contract expiry. Sentiments remained dismal from start of the session as the upbeat US economic data released on Wednesday strengthened the prospects for higher US interest rates. The minutes from the US Federal Reserve’s November policy meet, showed Fed policymakers appeared confident on the eve of the US Presidential election to hike interest rates soon. On the domestic front, sentiments got hit after the rupee crashed to nearly 39-month low of 68.84, plummeting by another 28 paise against the US dollar on Thursday amid sustained foreign fund outflows and the greenback's surge in overseas markets. Foreign Institutional Investors (FIIs) have withdrawn over Rs 3,700 crore from equity markets this week. Also, the much-awaited Goods and Services Tax (GST) Council meeting, slated for Friday, was postponed by a week that too adversely impacted the sentiments. Adding anxiety among market participants, Commerce and Industry Minister Nirmala Sitharaman said that economic output in the current quarter may get affected, with the government’s demonetization drive temporarily hitting commercial activities in some sectors.  Goldman Sachs has forecasted a deceleration in India’s GDP growth to 6.8% this fiscal, down from 7.6% last financial year, due to demonetisation of Rs 500 and Rs 1000 currency notes. According to the global financial services major, post the dramatic currency reform the liquidity shortage would be a significant constraint on domestic activity, which in turn would affect GDP growth. Meanwhile, Consumer products companies such as Britannia, Parle Products, Dabur and Emami have started cutting their production as sales have slowed down significantly in the aftermath of the demonetisation drive. Dabur CEO Sunil Duggal said sales were down 20% over last week, which has resulted in the supply chain automatically calibrating production. Emami Director Harsha V Agarwal, too, said the company has started making adjustments to align production with demand. 

On the global front, Asian markets ended mostly lower on Thursday as upbeat economic data strengthened the prospects for higher US interest rates, while the dollar's bull-run continued as US bond yields hovered near multi-year highs.  Investors fear that higher interest rates in the US will spark capital outflows from the emerging equity markets.  Among the Asian markets, South Korea, Hong Kong, Taiwan, Indonesia and Malaysia edged lower. Chinese shares closed almost flat as the yuan hit an eight-year low after China's central bank weakened the yuan's reference rate to beyond 6.9 to the dollar, while Japanese market ended higher helped by hopes for better exporters' earnings as the dollar jumped against the yen. Meanwhile, European counterparts were trading with a positive bias, remaining within a recent range, as a boost from chemical and insurance companies was partly offset by weak telecoms and utilities.

Back home, the local benchmark got off to a gap down opening, in tandem with the somber sentiments prevailing in Asian markets. Thereafter, the frontline indices tried paring the early losses and crawled towards the neutral line. But the key gauges could not succeed as selling pressure at higher levels brought the indices to intraday lows in final hour of the session.  Eventually the NSE’s 50-share broadly followed index Nifty, suffered around a percent laceration to settle below the crucial 8000 support level, while Bombay Stock Exchange’s Sensitive Index Sensex got obliterated by about two hundred points and closed below the psychological 25,900 mark. However, broader markets managed to outperform the larger peers as the BSE’s midcap and smallcap indices settled with moderate losses. On the BSE sectoral space, Banking, Auto and Realty did the maximum damage as they went home with huge losses. However, information technology pocket showed some resilience and attracted buying interests since rupee depreciated considerably against the American greenback. A weak rupee boosts revenue of IT firms in rupee terms as the sector derives a lion's share of revenue from exports.

The market breadth remained optimistic as there were 1341 shares on the gaining side against 1215 shares on the losing side while 168 shares remained unchanged.

Finally, the BSE Sensex declined by 191.64 points or 0.74% to 25860.17, while the CNX Nifty dropped 67.80 points or 0.84% to 7,965.50.

The BSE Sensex touched a high and a low of 26049.14 and 25810.97, respectively and there were 10 stocks on gainers side against 20 stocks on the losers side on the index.

The broader indices made a negative closing; the BSE Mid cap index ended lower by 0.13%, while Small cap index was down by 0.11%.

The top gaining sectoral indices on the BSE were IT up by 1.23%, Metal up by 1.22%, TECK up by 0.73% and PSU up by 0.07%, while Bankex down by 1.45%, Auto down by 1.34%, Realty down by 1.25%, Consumer Durables down by 0.85% and Oil & Gas down by 0.78% were the top losing indices on BSE.

The top gainers on the Sensex were Power Grid Corpn. up by 1.92%, TCS up by 1.91%, Bajaj Auto up by 1.69%, Tata Steel up by 1.50% and Infosys up by 1.33%. On the flip side, Tata Motors down by 3.89%, Axis Bank down by 2.59%, Sun Pharma down by 2.49%, Mahindra & Mahindra down by 2.41% and GAIL India down by 2.18% were the top losers.

Meanwhile, supporting the government’s surprise decision to withdraw high-denomination bank notes of Rs 500 and Rs 1,000, Niti Aayog CEO Amitabh Kant has said that India is moving towards a totally formalized economy that will bring huge gains in the long-term.  He said that 'There are long-term gains for the country (from demonetisation). The country will move towards a totally digitised payment economy. It will move towards formalised economy.'

The Niti Aayog CEO added that it is a massive and unparalleled thing that would create some short-term issues but in the long-term there would be huge gains. He further added that India is moving from non-formal economy to a formal economy, therefore the people should have patience and faith.

Earlier, the Vice Chairman of NITI Aayog, Dr. Arvind Panagariya too had said that the crackdown on black money by demonetization will bring down the inflation. The move will ensure that transactions will now go much more through the banking system which will ensure transparency. In order to curb corruption, the government on November 8, had declared demonetization of Rs 500 and Rs 1,000 note replacing them with new Rs 500 and Rs 2,000 notes.

The CNX Nifty traded in a range of 8,024.85 and 7,952.55. There were 19 stocks in green against 32 stocks in red on the index.

The top gainers on Nifty were Hindalco up by 3.74%, Bank of Baroda up by 2.78%, TCS up by 2.26%, ACC up by 2.17% and Power Grid up by 1.84%. On the flip side, Tata Motors down by 4.19%, Tata Motors - DVR down by 3.66%, ZEEL down by 3.41%, Sun Pharma down by 2.75% and Eicher Motors down by 2.51% were the top losers.

The European markets were trading mostly in green; Germany’s DAX increased 13.88 points or 0.13% to 10,676.32, France’s CAC increased 7.83 points or 0.17% to 4,537.04, while UK’s FTSE 100 decreased 11.07 points or 0.16% to 6,806.64.

Asian equity markets ended mostly in red on Thursday on worries about a looming Fed rate hike. Minutes from the Fed's November meeting released on Wednesday showed that policymakers appeared confident on the eve of the US presidential election that the US economy was showing strength to justify an increase in short-term interest rates relatively soon. The dollar firmed up in Asian trading as a slew of upbeat US data and hawkish Fed minutes reinforced investor expectations that the Federal Reserve is on track to raise its benchmark interest rate in December. Chinese shares closed almost flat as the yuan hit an eight-year low after China's central bank weakened the yuan's reference rate to beyond 6.9 to the dollar. Meanwhile, Japanese shares ended higher helped by hopes for better exporters' earnings as the dollar jumped against the yen.