North Korea tensions spook markets

Sensex, Nifty drop 0.6%

The Indian markets on Monday fell along with other global markets as investors turned cautious after North Korea tested a nuclear bomb on Sunday and South Korea detected the dictatorship’s preparations for a possible intercontinental ballistic missile launch. The benchmark Sensex and the Nifty index fell 0.6 per cent each. Most Asian and European markets, too, fell over 0.5 per cent. Foreign institutional investors (FIIs) pulled out nearly Rs 874 crore from the domestic market, extending their two-day selling to over Rs 1,600 crore.

The India VIX index, a gauge for market volatility, spiked 13 per cent, indicating more turbulence.

“We have to see what the US does in response to this act by North Korea and the consequences thereafter. Market reaction is more knee-jerk as India remains resilient and will be the least affected by the event,” said Gaurang Shah, head investment strategist at Geojit Financial Services.

The Sensex closed at 31,702.25, with 23 of its 31 components posting losses. The Nifty ended at 9,912.85, with 40 of its 51 components ending with losses. Among the worst Sensex performers were Adani Ports, which fell 2.6 per cent, Infosys, which declined two per cent and Hero MotoCorp, which fell 1.8 per cent. Among the gainers, were Coal India which added 3.4 per cent and Sun Pharma, which rose 2.8 per cent.

North Korea’s claimed test of a hydrogen bomb, its first nuclear test since US President Donald Trump took office, represents an escalation of risk after Kim Jong-un’s regime fired a missile over northern Japan last week and issued a warning about containing US forces on Guam. Trump threatened to increase economic sanctions and halt trade with any nation doing business with the North Korean regime, and his defence chief said the US has “many military options”.

“It seems that the traders’ community across the globe is quite baffled because of the in-and-out nature of the recent geopolitical developments. The nuclear test by North Korea early in the morning spooked global markets. This certainly had a rub-off effect on our markets as we saw Nifty tumbling more than 120 points from the day’s high. However, a modest recovery in the second half trimmed some portion of losses to conclude a tad above the 9,900 mark,” said Sameet Chava, chief analyst-technical and derivatives, Angel Broking.