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Indian markets catch Trump cold; Nifty falls 1%, Sensex closes 200 pts down

Rising streak snaps on concern about US presidency's rising troubles

Pavan Burugula & Puneet Wadhwa  |  Mumbai/New Delhi 

Indian markets catch Trump cold; Nifty falls 1%, Sensex closes 200 pts down

After record highs for consecutive sessions, the Indian stock market's benchmark indices closed lower on Thursday. While the S&P lost 224 points or 0.7 per cent to close at 30,434, the 50 on the National Stock Exchange closed at 9,429, down 96 points or one per cent.

Market participants said the fall was due to global cues. There was a sell-off in the on Wednesday over concerns that newly elected President might even be impeached. The broader here saw a steeper fall, with the midcap and smallcap indices losing a little more than two per cent each.

The Nifty's volatility index, VIX, jumped almost 11 per cent to close at 11.7850. It had recently hit all-time lows on buoyant investor sentiment. Thursday's rise shows investors are now worried about the global developments.

The doesn't look positive from a perspective, say participants. And, could have a serious overhang on all global Trump is under further scrutiny for allegedly asking then Federal Bureau of Investigation head, James Comey, to 'let go' of an investigation into the former national security advisor. The former FBI chief is to testify to the legislature there on Wednesday.

"If the global were to fall sharply, say with the S&P hitting 2,100, developments in the can trigger a sell-off across these. Having said that, I will not write off the 'Trump trade' at this point. However, if the event does last long, it will dent our inflows and impact flows from domestic investors," says Tirthankar Patnaik, Strategist at Japan-based Mizuho Bank.

In recent months, across the world have been rising on hopes that Trump's policies would revive the economy. Global markets, including emerging ones, have seen good gains. Analysts believe the will remain choppy till the former FBI chief concludes his testimony.

From a medium to longer term perspective, the monsoon and revival in corporate earnings would be important.

Interestingly, there was a noticeable gap in the fall witnessed by the two major benchmark indices, and This divergence is due to the Nifty's higher weightage to banks and lower weight to defensives such as information technology (IT) and pharmaceuticals. At Wednesday's closing, IT and pharma together had a weight of 17.3 per cent in the against 16 per cent in Further, banks have 24.67 per cent weight in the Nifty, against 22.7 per cent in the

The top three IT were up by one to 3.5 per cent on Thursday, lending support to the broader indices. TCS and Wipro went up by 3.5 per cent and 3.3 per cent, respectively, best gainers among constituents. This also helped the TCS stock again move above a Rs 5 lakh crore market capitalisation.

Shares of Tata Motors and Axis Bank, which fell 2.6 per cent and 2.1 per cent, respectively, were the worst in the

Experts say the are somewhat precarious, as the benchmarks have rallied significantly since the beginning of 2017. Both and are up by a little more than 20 per cent since January, globally the best performing equity indices. Valuations have become expensive. Foreign institutions have bought equities worth about $6.4 billion (Rs 41,600 crore) in the year so far; while domestic mutual funds have put in a little more than Rs 24,000 crore.

"don't like uncertainty and the development in the has created nervousness. If the situation aggravates and prolongs, we can see the 50 slip to 9,200 levels, a good support level. If this is breached on the downside, the next support levels are below 9,000," says U R Bhat, managing director, Dalton Capital Advisors.

Most of the also ended weaker on Thursday. The Nikkei, Straits Times, Hang Seng and Taiwan Weighted slipped 0.4-1.4 per cent lower.
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