Global markets sneeze; Sensex catches a cold, slumps 689 points

The rupee declined 0.7% to close at 70.17 compared to the previous day's close of 69.69

The domestic stock market fell sharply on Friday amid losses across global equities, after an increase in interest rates by the US Federal Reserve, despite a worsening economic outlook, hurt risk appetite.
 
The benchmark Sensex fell 689 points, or 1.9 per cent, to end at 35,742, and the Nifty 50 ended at 10,754, down 197.7 points, or 1.81 per cent. The biggest single-day fall in nearly two weeks erased all the gains made during the week.
 
The rupee declined 0.7 per cent to close at 70.17 compared to the previous day’s close of 69.69.
 
The already weak investor sentiment got a fresh jolt following the threat of a US government shutdown. Most Asian equities fell after the Dow Jones index tumbled 2 per cent and the technology-focused Nasdaq index briefly entered bear market territory on Thursday night.
 
“The Indian market was resilient during the last week, despite the weakness in global equities. This couldn’t have continued for too long. We cannot walk away from global factors,” said Andrew Holland, CEO, Avendus Capital. On Wednesday, the Fed lifted rates despite cutting growth estimates for 2019. Although the rate hike was on expected lines, investors were hoping that the central bank will go slow on further rate increases in view of rise in market volatility and deterioration in the economic outlook.
 
Investors feared the possibility of a US government shutdown would weigh on US growth.
 
“Global markets have seen a sell-off on fears of slowing growth and the rate hike, although the Indian markets have been surprisingly resilient, despite domestic surprises like the state election results, resignation of (Urjit Patel as) RBI governor, and a spate of farm loan waivers announced by various states,” said Vinod Karki, head – strategy, ICICI Securities.
 
The benchmark indices had gained nearly 5 per cent after gaining for seven straight sessions to Wednesday. On Thursday, markets had ended flat despite a sell-off in global markets.
 
“India’s positivity stems from a sharp correction in crude oil prices and optimism from RBI’s steps on boosting liquidity in the system. However, it will be difficult for this outperformance to continue if global equities continue to sell off,” said Karki. The India Vix, a gauge for market volatility, surged nearly 12 per cent on Friday as the sharp sell-off caught market players off guard.
 
Domestic institutional investors (DIIs) pulled out nearly Rs 5 billion even as overseas investors were marginal buyers. “We believe that volatility would be a new norm for the Indian markets in the short term given the global and domestic developments. However, the long-term outlook remains positive,” said Arun Thukral, MD & CEO of Axis Securities.
 
Reliance Industries, Infosys, and TCS were the biggest drag on the index, each falling nearly 3 per cent. State-owned NTPC and Coal India were the only gaining stocks in the 30-share Sensex. The broader markets slightly outperformed the benchmarks and there were two declining stocks for every one advancing on the BSE.
 
On a year-to-date basis, the Sensex is up 5 per cent in local currency terms. In dollar terms, the index is down 5 per cent, thanks to a 10 per cent slide in the rupee. Overseas investors have pulled out nearly $5 billion from the domestic market. However, they are net buyers to the tune of $500 million in December.