Nifty, Sensex Down Again on Global Bear Attack – Thursday closing report

We had mentioned in Wednesday’s closing report that Nifty, Sensex might head higher. However, thanks to a huge decline in US markets yesterday and Asian markets today, the major indices of the Indian stock markets suffered a severe correction on Thursday and closed with big losses over Wednesday’s close. On the NSE, there were 539 advances, 1,198 declines and 318 unchanged. The trends of the major indices in the course of Thursday’s trading are given in the table below:

 

 
International Monetary Fund head Christine Lagarde's comments that stock market valuations had been "extremely high", spurred a meltdown in the US markets overnight, spilling over to Asia on Thursday. In a volatile trading session on Thursday, the barometer index, Sensex, had crashed over 1,000 points at one point. Expectations that the US Federal Reserve would continue to tighten rates also hurt demand for the Indian currency and equities. Selling was witnessed in banking, IT (information technology), metals, auto and capital goods stocks. All 19 sector-based indices on the BSE, except the energy index, traded in the red.
 
The rupee plunged to a fresh low on Thursday, as Indian equities joined a global sell-off amid mounting concerns growth would slow in the face of a trade war between the United States and China. Concerns that the US Federal Reserve would continue to tighten interest rates amid strengthening economy and labour market also sparked fears about capital outflows, hurting the rupee.
 
Reliance Nippon Life Asset Management on Thursday announced it has received a mandate from the Employees' State Insurance Corporation (ESIC) to manage its funds. The fund manager received the mandate from ESIC after a competitive technical and financial bidding process. RNAM is currently managing, among others, funds of state-tun Employees' Provident Fund Organization and The Coal Mines Provident Fund Organization. As of June, the company had total assets worth Rs4.10 lakh crore under its management. The company’s shares closed at Rs153.00, down 0.91% on the NSE.
 
Automobile manufacturer Tata Motors launched the next generation of compact sedan -- Tata Tigor -- in both petrol and diesel variants. According to Tata Motors, the petrol variant is priced between Rs5.20 lakh and Rs6.65 lakh, while the diesel-powered version's cost ranges between Rs6.09 lakh and Rs7.38 lakh. "The compact sedan segment has been an important space for the customers seeking premium-ness at best value coupled with bold and attractive looks," Guenter Butschek, CEO and MD, Tata Motors said in a statement. Tata Motors shares closed at Rs182.50, down 3.31% on the NSE.
 
Automobile major Mahindra & Mahindra (M&M) launched the leasing service for retail buyers of its personal range of vehicles. According to the company, the lease rental service starts at Rs13,499 per month for KUV100NXT and Rs32,999 per month for XUV500. The lease offer will cater to individual leasing for working professionals and SMEs and will be available across 6 cities namely- Pune, Ahmedabad, Bangalore, Hyderabad, Mumbai and New Delhi in the first phase of launch. "In its next phase, the lease offering will be extended to 19 more cities across India. The lease offer will be available on Mahindra's personal portfolio of vehicles such as the KUV100, TUV300, Scorpio, Marazzo and XUV500," the statement said. Mahindra & Mahindra shares closed at Rs730.00, down 4.46% on the NSE.
 
Kakinada SEZ, a subsidiary of GMR Infra, signed an MoU with the Andhra Pradesh Gas Development Corporation to get access to piped domestic natural gas for its upcoming 10,500-acre zone. The company’s shares closed at Rs15.90, down 3.05% on the NSE.
 
Aurobindo Pharma has received final approval from the US FDA (Food & Drug Administration) to manufacture and market Azithromycin Oral Suspension 100, a generic version of Pfizer’s Zithromax® oral suspension. The drug is used to treat mild to moderate infections. The company’s shares closed at Rs751.00, down 3.67% on the NSE.
 
The top gainers and top losers of the major indices are given in the table below:
 
 
The closing values of the major Asian indices are given in the table below:
 
 

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Global Selloff Hits India as GDP, Cos negotiate rough outlook
When the US sneezes the world catches a cold. This was amply demonstrated on Thursday as US stocks plunged overnight, sending other markets, including others across Asia reeling. 
 
Dow Jones and Nasdaq fell 3.3% and 4% respectively. Indices in Asia too plunged, with Japan’s Topix falling as much as 3.5%, Hong Kong’s Heng Seng 3.9%, Korea’s Kospi 3.5%, Shanghai 4.4% and Australia 2.5%. 
 
Sensex fell as much as 1,037 points, to the lowest level in six months, pared losses to trade about 2.5% lower than its previous closing. All but one of the 30 Sensex stocks fell. Expectation of subdued earnings growth in the quarter ended 30th September is adding to the nervousness as is outflow of funds by foreign investors and liquid funds managed by mutual funds. TCS, the biggest by market capitalisation, will report earnings later today.
 
The International Monetary Fund (IMG) lowered India’s GDP growth outlook to 7.3% from 7.4%. Rising global crude oil prices is expected to push up critical fuel costs and inflation, causing spending cuts by consumers and rising input costs for companies. While the RBI held its repo rate earlier this month, bankers expect it to make up later with rate increase. 
 
Christine Lagarde, managing director, IMF said at the Fund’s annual meeting at Bali today that the outlook for global economy had deteriorated to “drizzling, though not yet a downpour” from “clouds hovering” six months ago and “sun shining, fix the roof” about a year back. 
 
Rising rates and trade war with China is causing concerns US companies may get hurt, affecting growth. Comment by President Donald Trump complaining that the US Federal Reserve was raising rates too fast, added to the nervousness, triggering a selloff. 
 
“I think the Fed has gone crazy,” US media cited Trump as saying. Trump’s frustration stems from rising cost of funds just when the world’s largest economy is picking up with low unemployment rate. 
 
Adding to it is the concern that US-China trade war could hurt earnings of US manufacturing and technology companies. A tit-for-tat increase in tariff between the world’s two biggest economies could increase the cost for consumers and also push up inflation and interest costs. 
 
Impact of the trade war and increase in tariffs comes as the US Federal Reserve increased its key rates four times in 2018 and forecast it will raise rates another three times in 2019. Yield on the benchmark 10-year U.S treasury traded at 3.15%. The 10-year treasury rose to a high of 3.27% earlier this month, climbing about 100 basis points over the past 52 months. 
 
China’s $13.5 trillion economy and a population of 1.4 trillion makes it one of the world’s leading consumer and producer of commodities, and manufactured products. Likewise the $21 trillion US economy is globally the most dominant. A trade and tariff war between the two giants could impact earnings of companies across the globe. 
 
Rising US yields has also prompted foreign portfolio investors (FPI) to pull out their investments from emerging markets including India. FPIs have pulled out Rs80,227 crore from India since 1 January 2018, according to data compiled by NSDL. FPIs invested a net Rs2,00,048 crore in 2017, and pulled out a modest Rs23,079 crore in 2016. 
 
Calling it a tough month for equities, Adrian Mowat, chief emerging market equities strategist at JP Morgan told a local TV channel that stocks in emerging markets are not offering much value. 
 
Yet, Ajay Srivastava, managing director of Dimensions Consulting said in a televised interview that while it was not a bull market by any measure, still investors should avoid selling.
 
Impending national elections, accelerating inflation, likely increase in interest rates and widening of current account deficit and fiscal deficit could spoil India’s growth. 
 
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COMMENTS

Anand Vaidya

4 days ago

Quote: "China’s $13.5 trillion economy and a population of 1.4 trillion makes it"

Hmmm. China has 1.4 TRILLION population? I thought China has 1.4 Billion only...

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