Global risk aversion pulls down equity markets

Draft CAG report and roll back of rail fares hurt sentiment on Dalal Street

Key market indices slumped on Thursday amid risk aversion in global markets after services and output in the euro area shrank more than expected.

Outcry over a reported $211-billion revenue loss from the sale of coalfields and roll back of most rail fare hikes also dampened sentiment.

The Bombay Stock Exchange (BSE) benchmark, the Sensex, tumbled 2.3 per cent, or 405.24 points, to 17,196.47, in what was the biggest one-day fall for the 30-stock index since February 27. At the National Stock Exchange (NSE), the 50-stock Nifty index fell 2.5 per cent, or 136.50 points, to end at 5,228.45.

“Weak European markets, uninspiring economic data from Germany, depreciation of the rupee and concerns arising out of the news articles about the CAG report were the likely reasons for the fall,” said Dipen Shah, head (fundamental research), Kotak Securities. 

The rupee ended at 51.17/18 to the dollar, after sliding to as low as 51.28 earlier, a level not seen since January 16. It had closed at 50.66/67 yesterday.

Germany and France, the euro zone’s leading economies, reported unexpected contraction in manufacturing activity, sending Markit's Composite PMI for the region down to 48.7 in March from 49.3 in February. A reading 50 is viewed as a contraction.

Major European markets were trading with sharp losses at 7:00 pm IST. While France’s CAC 40 was down 1.41 per cent, Germany’s DAX had fallen 1.27 per cent.  

Reliance Industries dropped 4.15 per cent to Rs 736.50, ICICI Bank declined 3.84 per cent to Rs 899.45 and L&T shed 3.8 per cent to Rs 1,297.25. The three contributed 150 points to the Sensex’s total losses.

Among the major sectoral losers on the BSE, the realty index lost 4.25 per cent, power fell 3.6 per cent and Bankex gave up 3.41 per cent.   

Market breadth was extremely weak on BSE, with 2,019 stocks declining compared to 879 advancing.

“The draft CAG report and fare roll back are damaging the Indian government’s credibility further, which is spooking foreign institutional investors,” Nirmal Jain, chairman and managing director at brokerage IIFL (India Infoline), told Reuters. FIIs bought Indian shares worth Rs 246.6 crore on Thursday, according to provisional data on the BSE website.

Earlier, Asian markets ended mixed after Japan posted an unexpected trade surplus and a survey showed that China’s manufacturing may contract this month. Japan’s Nikkei 225 rose 0.4 per cent, Hong Kong’s Hang Seng gained 0.2 per cent, China’s Shanghai Composite Index fell 0.1 per cent and South Korea’s Kospi ended almost flat.