Markets post second-biggest fall of 2018 on trade war, TDP no-trust vote

Tata Motors fell 3.7%, the most among Sensex components, followed by Asian Paints which fell 3.1%

The benchmark Nifty on Friday posted its second-worst single-day fall of 2018 due to global and domestic political concerns. 

The escalation of the war of words between the US and China, the world’s two largest economies, sparked fears of a global trade war. This, coupled with a no-confidence notice against the Narendra Modi-led government, weighed on investor sentiment. 

US President Donald Trump’s new adviser sought a “coalition” of allies to act against China and the latter hit back, saying the US should “work hard and complain less”. The escalation forced International Monetary Fund (IMF) Managing Director Christine Lagarde to urge the two nations to not be sucked into a global trade war. This resulted in most Asian markets ending with losses. India was one of the worst-performing markets globally on Friday. 

The Nifty 50 index ended 1.6 per cent lower to close at 10,195.15, the biggest fall since February 2, while the Sensex closed at 33,176, down 510 points or 1.51 per cent, the most since February 6. Shares of companies in export-oriented sectors such as automobiles, pharmaceuticals, technology and oil bore the brunt of this. 

Tata Motors fell 3.7 per cent, the most among Sensex components, followed by Asian Paints, which fell 3.1 per cent. All 19 BSE sectoral indices ended with losses; the metal and oil & gas indices were the worst performers, falling over 2 per cent each. Major metal company stocks fell around 2 per cent each. 

“The market slid on investors’ caution amid uncertainties around global trade and domestic politics. Volatility in global markets brought the benchmark indices towards their 200-day moving averages,” said Vinod Nair, head of research, Geojit Financial Services.

Domestic and foreign investors were net sellers on Friday. Domestic institutional investors (DIIs) sold shares worth Rs 7.7 billion, while their foreign counterparts sold shares worth Rs 1.5 billion. 
 

Market participants fear the bourses could trade weak as investors may pull money out from the secondary market to invest in a slew of initial public offerings (IPOs) lined up over the next two weeks. At least half-a-dozen IPOs will be launched before March 31. These IPOs are likely to cumulatively mop up over Rs 130 billion ($2 billion). 

“Our markets are underperforming due to a combination of factors such as a big IPO pipeline, an uncertain political scenario and risk to earnings growth next year. The pressure is visible across sectors such as banking, automobiles and energy. We expect the markets to remain soft,” said Hemang Jani, head (advisory), Sharekhan.

Both benchmark indices have come off over 8 per cent from their 2018 highs. On a year-to-date basis, the Nifty is down 3.2 per cent while the Sensex has fallen 2.6 per cent.