Markets spooked as US poll heads for close finish

Sensex at near four-month low; FIIs pull out Rs 667 crore

The stock markets fell sharply on Wednesday as opinion polls predicted a close finish in the US presidential election.

The 30-share benchmark Sensex fell the most in three weeks to a near four-month low. The India VIX index, a gauge for market volatility, soared nearly seven per cent as investors feared an upset by Republican nominee Donald Trump.

The political uncertainty saw overseas investors pulling out Rs 667 crore from stocks.

The Sensex fell 349.4 points, or 1.25 per cent, to end at 27,527.22, its lowest level since July 8. The Nifty gave up 112.25 points, or 1.3 per cent, to end at 8,514, its lowest close since July 21. Both indices posted their biggest single-day losses since October 13.

Most Asian markets ended over 1 per cent lower while European markets were trading 0.5 per cent lower on opening. The sentiment saw crude oil dropping over one per cent and gold gaining around 0.8 per cent.

“There might be excessive volatility if Trump comes to power. There is a possibility of a huge sell-off in the US. For the Indian markets, too, this might be uncharted territory as we are likely to follow global cues. If Hillary Clinton wins with a significant majority, we can expect a good up-move,” said Raamdeo Agrawal, co-founder, Motilal Oswal Financial Services.

The financial markets were jolted after an ABC News-Washington Post poll released on Tuesday showed Trump with 46 per cent support to Clinton’s 45 per cent. The first ever lead in the poll saw unwinding of bets on Clinton’s victory.

“There might be a lot of volatility and uncertainty if Trump comes to power and it will take some time for market participants to digest his policies. Inflows into markets like India will be impacted if foreign funds want to reduce allocation to riskier assets,” said UR Bhat, managing director, Dalton Capital Advisors.

Central bank policy meetings also weighed on sentiment. The US Federal Reserve was to review its monetary policy later today, while the Bank of Japan kept its stimulus programme unchanged at its meeting yesterday.

The broader BSE Smallcap and Midcap indices fell 1.84 per cent each. There were two declining stocks for every one advancing on Wednesday.

Among Sensex companies, ONGC, fell 4.1 per cent and Reliance Industries declined 2.3 per cent as oil prices continued to slide. Tata Motors and the State Bank of India were among the other major losers, declining 3.2 per cent and 2.75 per cent, respectively.

 

The Sensex has come off around 5 per cent from its recent high of 29,045 in early September. Overseas investors have pulled out nearly $850 million since October, trimming their year-to-date investment to $6.75 billion.